What’s next for government aid as US economy stutters

What’s next for government aid as US economy stutters

Republicans have proposed an additional $1tn coronavirus aid package but Democrats want further spending and reject several measures included in the plan.

The US has already spent more than $2.4tn on pandemic relief measures targeting businesses and households, yet economists had warned all along that much more would be necessary before the country was out of the woods economically. To this end, Senate Republicans have proposed an additional $1tn aid package which includes $100bn for schools and stimulus payments of up to $1,200 to most Americans. Senator Mitch McConnell called it a “tailored and targeted” response to the challenge posed by COVID-19 and its fallout. Democrats have called it “totally inadequate.”

Controversially, the proposal would reduce a currently $600 weekly unemployment benefit supplement to $200 until states can set up a more targeted system that replaces 70% of a person’s previous wage. Senator McConnell insisted Republicans aim to continue the unemployment supplement, which expires this week, but argued that “we have to do it in a way that does not slow down reopening,” a veiled reference to the fact that an estimated two thirds of recipients are getting more from unemployment than they did working.

In addition to money for direct payments to families and schools, Republicans have said they want to put in place legislation to shield businesses from possible coronavirus health claims by workers.

The Democratic response

Senator Chuck Schumer, who leads Democrats in the Senate, said the Republican proposal was “too little, too late,” adding that the pandemic was a “serious, serious crisis” and the country was running out of time.

Democrats, who have proposed their own plan worth $3tn, want funding for local governments, which are facing budget shortfalls due to the decline in economic activity. Many Democrats also object to the unemployment benefit cut, which they want to see extended through to the end of the year, and reject the proposal by Republicans to shield businesses from liability. Some Republicans had proposed fast-tracking certain pieces of the legislation, an idea likewise rejected by the majority of Democrats and even GOP members who are worried about rising levels of government debt.

“The answer to these challenges will not simply be shovelling cash out of Washington,” Republican Senator Ted Cruz has said publicly. “The answer to these challenges will be getting people back to work.”

Everything right now is easier said than done for the US government.

The US economy has shed roughly 15 million jobs since February and the potential for recovery remains tentative as the number of infections continues to rise and restrictive measures are reintroduced in many places. Nearly one in five US workers is collecting unemployment benefits and more than half of adults live in households that have seen a drop in income, according to a survey by the US census. More government support is certainly needed, yet how long public spending can sustain the economy and how much longer the current crisis will last is unknowable right now.

The US, like the rest of the world, is grasping in the dark for solutions, and the absence of political consensus is only hurting the possibility of a speedier, more effective response.

2020-07-28T20:28:42+00:00

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Olivia Toledo
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