The impasse in U.S. Congress over renewal of the expiring programs that mitigated the economic impact of the COVID-19 pandemic threatens to undo the stimulus effect of the programs and exacerbate the economic damage from the lockdown, according to a newly released study.
The article, published Wednesday, was co-authored by Sherman Robinson, nonresident senior fellow at the Peterson Institute for International Economics (PIIE) and Raul Hinojosa-Ojeda, executive director of UCLA’s North American Integration and Development Center.
The two experts said if direct aid to households fall by 500 billion U.S. dollars, they estimate that the impact would be “a deeper recession,” a loss of GDP of 3.8 to 5 percent, and an associated 4 to 5 percent increase in the unemployment rate.
“U.S. policymakers should at least maintain the earlier levels of income support to prevent further induced economic damage. In the current depressed state of the economy, destimulation is a very poor policy choice,” they argued.
House Democrats unveiled a 3-trillion-dollar relief proposal in May, but didn’t gain support from the Republicans. Senate Republicans released their 1-trillion-dollar proposal in late July, just a few days before the extra 600-dollar weekly unemployment benefits expired.
Negotiations between Democratic leaders and White House officials collapsed last week, with both sides blaming each other for making little progress on the much-needed relief package.
“No family in middle America is saying: ‘Thank goodness the Democrats are blocking cash payments to me, money for my kids’ schools, and money for vaccines until Manhattan millionaires get a tax cut!” Senate Majority Leader Mitch McConnell, a Kentucky Republican, said on Twitter Thursday.
“What American families everywhere want is an outcome,” McConnell said.
House Speaker Nancy Pelosi, however, blamed the Republicans for “playing politics” and refusing to put families first. “It’s time for them to get serious, meet us halfway & come back to the negotiating table,” said the California Democrat.
In an attempt to circumvent Congress, U.S. President Donald Trump on Saturday signed a series of executive orders to extend certain COVID-19 economic relief, but they are unlikely to provide a meaningful boost to the overall economy.
U.S. House Speaker Nancy Pelosi speaks during her weekly press conference on Capitol Hill in Washington, D.C., the United States, on Aug. 13, 2020. The impasse in U.S. Congress over renewal of the expiring programs that mitigated the economic impact of the COVID-19 pandemic threatens to undo the stimulus effect of the programs and exacerbate the economic damage from the lockdown, according to a newly released study. (Photo by Ting Shen/Xinhua)
