(CBS News)– Hopes for another large round of federal assistance for Americans hurt by the coronavirus pandemic are reviving, with President-elect Joe Biden calling on Congress to “come together and pass a COVID-relief package.” With many pandemic aid programs running out of funding or set to expire in December, many laid-off workers, small businesses and others face the prospects of more financial hardship without further government help.
Although many analysts expect lawmakers to eventually set aside their partisan differences and pass another stimulus bill, the size and timing of a measure remain uncertain. Senate Majority Leader Mitch McConnell has signaled he backs another stimulus package, noting in a November 4 press conference that he would like an aid deal passed before year-end.
Even so, any package passed during the so-called “lame duck” session — before the newly elected members of the Senate and the House take their seats in January, along with Mr. Biden — is likely to be far smaller than the more than $2 trillion sought by Democrats, according to Wall Street analysts.
McConnell “will likely re-propose a plan he pushed in October. The McConnell plan was for $500 billion and included additional Paycheck Protection Plan funds,” noted Brian Gardner, chief Washington policy strategist at Stifel, in a research note.
Republicans may push for a smaller package given Pfizer’s announcement earlier this month that its human trials suggest its coronavirus vaccine is 90% effective at preventing COVID-19 infections, Gardner added. And on Monday, Moderna said its COVID-19 vaccine is 94.5% effective, according to preliminary data from the company’s ongoing study.
The availability of a vaccine would significantly boost hiring, incomes and other measures of economic growth, reducing the need for a massive stimulus bill, some GOP lawmakers contend.
According to experts, widespread distribution of an effective vaccine would reinvigorate parts of the economy that have been hard-hit by the pandemic, such as the airline and hospitality industries, and alleviate some of the need for government support. But such a rollout could take months, leaving millions of consumers and businesses hanging without help from additional government funding.
Already, there are signs that consumers may be paring spending as the surge in COVID-19 cases saps their confidence in an economic rebound, paired with a lack of fresh stimulus spending from Washington, D.C. Retail sales in the U.S. drew to a “near halt” in October, according to Oxford Economics senior U.S. economist James Watson, citing data from the U.S. Commerce Department released on Tuesday.
Walmart CEO Doug McMillon on Tuesday said it is “imperative” that lawmakers come together to pass another round of stimulus. “The increase in cases will put more pressure on small businesses that have been heavily impacted by the pandemic,” McMillon said in a conference call with analysts.
House Democrats and the Trump administration had found themselves divided on a number of issues, ranging from the size of the package to its priorities. Democrats are seeking funding to support states and local governments, which are facing massive budget shortfalls from the pandemic, as well as a restoration of $600 in weekly supplemental unemployment aid. Republicans argue that the latter provides a disincentive for people to return to work.
But Republicans and Democrats have signaled agreement on a handful of issues, such as replenishing the Paycheck Protection Program and to provide another round of stimulus funding for low- and middle-income families. The first round of stimulus checks provided up to $1,200 for single taxpayers and up to $2,400 for married couples, as well as $500 for most children.
While it’s likely that families will see another round of stimulus checks, don’t count on receiving them until early 2021, according to analysts.
“We see our current baseline assumption of a roughly $750 billion fiscal package legislated by [the first quarter of 2021] as reasonable,” noted Deutsche Bank analysts in a Friday research note.
The outlook for additional stimulus spending after President-Elect Biden is inaugurated on January 20 will depend on whether Republicans retain control of the Senate. If Democrats don’t succeed in the January 5 runoffs for two Georgia Senate seats, the Republicans will maintain control, making it less likely that a President Biden could pass and sign a major stimulus effort.
For months, Republicans and Democrats have disagreed on the size of the next stimulus package. McConnell had floated a slimmed-down proposal from Republicans, which carries a price tag of more than $500 billion. The Democrat-controlled House, meanwhile, had passed a $2.2 trillion stimulus bill in October, and the White House countered with a $1.8 trillion proposal.
House Speaker Nancy Pelosi rejected that $1.8 billion offer, arguing that it did not do enough on provisions such as testing and tracing and on funding for child care. Treasury Secretary Steven Mnuchin has said the administration’s priority is to use $300 billion left from the Coronavirus Aid, Relief and Economic Security, or CARES, Act to fund the Paycheck Protection Program with $130 billion, as well as to provide aid to the ailing airline industry.
Economists warn that failing to inject another dose of fiscal stimulus could stall the recovery, given the ongoing pandemic and economic headwinds. Job growth around the U.S. is slowing as big businesses continue to lay off workers, with the airline industry cutting tens of thousands of jobs last month.
“Without faster job growth — unlikely at this stage of the recovery — or increased fiscal aid, households, businesses and state and local governments will be increasingly susceptible to a deterioration of the health situation,” noted Gregory Daco, chief U.S. economist at Oxford Economics.
With the pandemic showing few signs of abating and earlier government aid now running out, many businesses and households are facing a financial crunch. One in three U.S. adults struggled to pay for basic expenses like food and rent at the end of September, according to the Center on Budget and Policy Priorities, a liberal-leaning think tank.
After the virus erupted in the U.S. this spring, the Coronavirus Aid, Relief and Economic Security Act had distributed some 160 million checks to Americans, offering cash payments of $1,200 for individuals and $2,400 for married couples, up to some income limits.
Another boost of $1,200 per adult would certainly help alleviate financial stress, yet that one-time payment would only go so far — a month’s rent, for instance, or help with groceries and other bills. As with the initial round of checks, they would be distributed to everyone earning less than $75,000 per single taxpayer or $150,000 per married couple, regardless of whether they lost work or income.
Economists say other relief policies have proved more effective at boosting the economy. For instance, an extra $600 in weekly unemployment pay helped bolster households that had suffered job or income losses — until it expired in July. In May alone, the program boosted personal income by $842 billion, according to the Economic Policy Institute. That money helped support local businesses, keeping the economy from collapsing under the impact of lockdowns.
Meanwhile, an extra $300 in weekly unemployment aid that Mr. Trump had ordered is already depleted in most states, according to UnemploymentPUA.com, which tracks the program. That effort, called Lost Wages Assistance (LWA), was created in August by tapping disaster-relief funds, but it only provides six weeks in extra jobless benefits.
“We estimate the expiry of the [LWA] program will create a $600 billion (annualized) income cliff leaving household income roughly 3% below its pre-Covid level in October,” Daco wrote. “With over 20 million individuals still claiming unemployment benefits, such a shortfall could have even deeper local consequences.”