US President-elect Joe Biden’s proposal to pour $1.9 trillion into a hobbled economy could lay the foundation for a surge in jobs and spending that many economists say is needed to avoid long-term damage from a record-breaking pandemic recession.
Analysts had already begun marking up their forecasts for economic growth this year after last week’s elections in Georgia delivered control of both houses of Congress to Democrats.
Many, though, had pencilled in smaller packages, more along the lines of the $892 billion stimulus passed in December.
Spending big on vaccine rollout, testing, and to shore up state and local governments on the frontlines of those efforts could help bring a swifter end to the country’s healthcare crisis, which remains at the root of the economic crisis.
The incoming Democratic administration’s proposed package provides targeted aid that economists say delivers the most effective economic boost, including an increase to the current extra weekly benefit to the unemployed, to $400 from $300.
It would also direct $170 billion toward reopening schools, the closure of which in many parts of the country has forced millions of workers, particularly women, to leave their jobs.
And it would put an extra $1,400 into the hands of most Americans – money that can be spent on rent or food for those who need it, or saved for a splurge on travel or dining out later in the year once wider vaccine distribution allows everyday life to get back closer to normal.
The new spending comes at a critical time for the world’s largest economy. A winter resurgence of COVID-19 sent a partially recovered labour market into reverse last month as employers shed 140,000 jobs, especially low-income positions in restaurants, bars and other high-touch service industries.
All told the new package, which must still be voted on by Congress, would bring to $5.2 trillion the total fiscal stimulus delivered to the US economy since the crisis began, equivalent to about a quarter of US annual economic output.
That is enough of a boost for the economy to recoup all its decline from the COVID-19 recession by the third quarter of this year, Moody’s economist Ryan Sweet estimates. But, he adds, “the recovery in the labour market will take longer.”❐
