According to a forecast by Moody’s Analytics, the U.S. economy is heading for another recession in the new year unless legislators pass another major stimulus package soon, while economists continue to express concerns about the impasse in Washington.
According to the New York Times, president-elect Joe Biden’s advisers are circulating projections by Moody’s economist Mark Zandi that show that the economy will contract in early 2021 if Republicans and Democrats don’t break the deadlock that has so far prevented another round of stimulus packages in the midst of the COVID 19 pandemic. The analysis from Moody’s projects shows that the unemployment rate would rise again to about 10 percent without significant federal assistance.
” The pandemic is raging and it is starting to do damage again,” Zandi told The Times.
Many other economists have been urging Congress for months to take action and adopt further stimulus measures.
“There is a real concern that the economy could falter or even shrink in this anxious time of transition to widespread availability of vaccines. The heavy economic toll of the ongoing pandemic on people’s jobs and incomes and the loss of employers could continue for some time,” Mark Hamrick, a senior economic analyst for Bankrate, said in an email to Washington Newsday.
“A gnawing source of uncertainty is the fate of any federal legislation designed to prevent millions of Americans from suffering a loss of unemployment benefits, which could mean the difference between feeding themselves and staying in their homes in the coming weeks,” Hamrick explained.
Even as new applications for unemployment benefits turned out slightly better than expected, economists reacted with concern, according to a report released Thursday morning by the Department of Labor. The analysts had expected about 780,000 new applications for unemployment benefits, but instead the report showed about 712,000 for the week ending November 28.
“I think it’s pretty bad. I mean, I’m glad it turned out better than expected, but this is still worse than the worst week ever before COVID came,” Austan Goolsbee, an economics professor at the University of Chicago who chaired the Council of Economic Advisors of former President Barack Obama, told CNBC’s Squawk Box on Thursday.
“We have thousands of people dying unnecessarily [from the pandemic], and now we’re going to threaten the livelihoods of millions of people and millions of businesses will close,” Goolsbee said, pointing out that the pandemic is growing nationwide and that leaders are introducing or considering new blocking measures. “I really hope that Congress will be able to do something and come together and get some relief.
Biden and Democratic leaders on Wednesday threw out their support for a $908 billion proposal to boost the economy, far less than they were pushing for before the election. The bill was tabled by a group of nine senators, including four Republicans, four Democrats and one independent senator, in an effort to break the deadlock that Congress has been in since the summer. A group of Republicans and Democrats from the Committee of Problem Solvers in the House of Representatives also supported the proposal.
But Senate Majority Leader Mitch McConnell, a Republican from Kentucky, rejected the bipartisan efforts when the proposal was unveiled on Tuesday. McConnell supported a more targeted and smaller package that would cost about $500 billion or $600 billion.
The bipartisan bill provides for an additional $300 in weekly unemployment benefits for unemployed Americans. In addition, it would provide nearly $300 billion in assistance to small businesses through the Paycheck Protection Program, about $82 billion in education, $26 billion in nutritional support and $45 billion in transportation. Another $16 billion would be spent on COVID-19 testing, contact tracing and distribution of outstanding vaccines. Legislation would not provide for another round of $1,200 checks to verify incentives, as was included in the $2 trillion Coronavirus Assistance, Support and Economic Security (CARES) bill in March.
“The agreement must be finalized and passed quickly, with Senator McConnell, along with spokesman Pelosi, passing legislation to promote unemployment benefits and other assistance. There is absolutely no reason why this assistance should have been left by the wayside for so long,” said Andrew Stettner, a senior tCentury Foundation staffer and expert on unemployment insurance, in an e-mail to Washington Newsday. “A botched job would be a historic failure with immediate and tragic consequences for American families and the economy.