With the outcome for a new COVID-19 financial stimulus package still in flux, concerns about the lasting economic damage have heightened the longer the legislative stalemate goes on.
The bill’s most recent incarnations have included targeted aid for American families and businesses. But Republicans and Democrats remain at odds about how much relief to deliver and which entities will receive it.
“The Administration and House Democrats are not focusing on an efficient response to the Covid-19 recession,” Wayne Winegarden, Ph.D., senior fellow in business and economics at the Pacific Research Institute, told the Northern California Record by email.
“An efficient response will not waste money by sending checks to people who still have their jobs. It would provide the resources necessary to keep the businesses and families afloat while the pandemic persists without the overly burdensome restrictions. The federal response also needs to focus on providing certainty to these impacted entities rather than focusing on reaching some arbitrary size threshold.”
The $500 billion bill voted on by the Senate on Oct. 21 included PPP funding, $300 weekly supplemental unemployment, and liability protections for businesses. But the vote was 51-44, less than the 60 it needed to pass.
“While perhaps a deal will not be forthcoming until after the election, eventually a deal will be made,” Winegarden said. “It will likely spend a lot of money on programs that will be ineffective, but will also provide the necessary resources to keep key families and businesses afloat. This assistance will be too late for too many businesses and families, however.”
As the initial CARES (Coronavirus Aid, Relief, and Economic Security) Act funding has expired, more businesses have had to permanently close.
“The economic consequences from the recession will be worse and the adverse impacts on the economy and individuals will be longer-lasting than they could have been,” Winegarden added.
Meanwhile, Winegarden noted, California’s economy and state budget have become more volatile.
“During economic expansions, the state’s economy grows faster than the nation and state budget revenues grow robustly, but during recessions the state’s economy contracts more sharply and budget revenues crash, leading to excessively large budget deficits that persist for many years. This pattern is continuing during the current recession,” Winegarden said.
“For California, this means that the adverse economic consequences from the federal government’s inept response to the recession will be magnified. The budget deficit will get worse over the next couple of budget cycles, and the job market will remain anemic for longer than the national market.”
The long-run fiscal stimulus also could be addressed through industry-specific relief.
“Politicians must stop thinking about the relief package from the perspective of a demand stimulus,” Winegarden said. “People have lost their jobs because the pandemic has led to business restrictions and changed people’s spending patterns. People working in the hospitality industry and other service-based industries have suffered the most. The best way to help these people is to ensure an effective safety net. Spending should solely be focused on achieving this goal to ensure that the long-term budget costs are contained and that adequate resources are available to achieve this purpose.”