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A $900 Billion Plan Would Help the Economy, but Not Fix It – The New York Times

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A $900 Billion Plan Would Help the Economy, but Not Fix It

While a compromise package gaining steam in Congress would provide urgent help to the economy, some people and businesses would be left out in the cold.

The framework of a $908 billion stimulus plan includes several types of assistance that economists have been calling on Congress to approve for months.
Credit…Anna Moneymaker for The New York Times
  • Dec. 4, 2020, 6:07 p.m. ET

The economic recovery, slowing for months, is in danger of going into reverse. That’s why a growing list of economists, business lobbyists and other advocacy groups are urging lawmakers to rally around the $908 billion aid package currently gaining bipartisan support in Congress.

A plan of that size would fall short of doing everything that economists argue Congress should do to help workers and businesses during the coronavirus pandemic. But they said that if lawmakers could get the details right, Congress should do it anyway.

“It’s within the range where you could argue it does enough good that it would be worth taking it,” said William E. Spriggs, a Howard University economist who served in the Labor Department under President Barack Obama. “But it leaves a ton on the table, and still leaves us with a big problem going forward.”

The $908 billion compromise is not even a legislative proposal yet. It is a bipartisan framework, assembled by a group of senators led by Susan Collins, Republican of Maine, and Joe Manchin III, Democrat of West Virginia. Many of its details are still being negotiated, including how the government ought to distribute more aid to small businesses.

Once the bill is complete, its success is not assured: Senator Mitch McConnell of Kentucky, the majority leader, has stopped short of endorsing it, and so has President Trump, who would need to sign any legislation approved in the lame-duck congressional session. But Speaker Nancy Pelosi of California has backed it as a starting point for renewed negotiations, and President-elect Joseph R. Biden Jr. said Friday that he was “encouraged” by the effort.

Experts say the plan would provide relief to several battered corners of the economy. It includes nearly $300 billion for small-business aid, $180 billion for unemployed workers, and $160 billion for state, local and tribal governments.

The plan wouldn’t help everyone who needs aid, and the support might not last long enough to bridge the economy to the rebound that is expected to come when coronavirus vaccines are widely distributed. And much depends on the details, particularly when they come to Americans who have been unemployed for months and small businesses that struggled to tap government programs early in the pandemic.

But if the plan was passed soon, it would send money out quickly. And with virus cases rising and economic gains stalling, a growing number of politicians are willing to accept such a compromise.

“You get most of the way there, you don’t turn around at the end,” said Gov. Mike DeWine of Ohio, one of several Republican governors who has called for more federal aid. “We can’t stop now, and I guess I would say that to my friends in Congress: We need your help one more time here. Help get us through what’s going to be a very tough winter.”

November employment data released by the Labor Department on Friday underscored his point. Job growth slowed to 245,000, the weakest monthly gain of the recovery so far. The number of people trapped in long-term unemployment rose to nearly four million. Restaurants and retailers, whose rehiring of furloughed workers helped power the rebound in earlier months, cut jobs in November. The number of people who have lost their jobs permanently rose, the latest sign that the crisis will leave lasting economic scars.

“I do feel a greater sense of urgency now, especially after seeing the jobs report,” said Karen Dynan, a Harvard economist and former Treasury Department official in the Obama administration. “We’re really starting to see the cracks now.”

Credit…Oliver Contreras for The New York Times
Credit…Erin Schaff/The New York Times

Perhaps the top goal for the aid package is preventing millions of families from losing their only source of income the week after Christmas.

As many as 13 million Americans are receiving benefits under two programs that expanded and extended the existing unemployment insurance program. Those programs, created by Congress in the spring, are set to expire at the end of the year — an outcome that members of both political parties have said they want to avoid.

The aid package being discussed in Congress would extend both programs, while also reviving the extra unemployment benefit that expired over the summer, most likely at half the original $600-a-week level. But depending on how the negotiations go, it may not further extend eligibility for people who are close to the end of their benefits already.

Putting money into the pockets of the unemployed could be good for the broader economy: Research has found that unemployment benefits are among the most effective forms of economic stimulus because recipients are likely to spend rather than save the money. And by helping families avoid foreclosures, evictions and debt defaults, unemployment benefits can prevent the financial damage from spreading.

But the most compelling argument may be not economic but humanitarian: Without the money, many families could go hungry, become homeless and face other hardships.

A line for food aid in Los Angeles last month. Nearly 10 million people are set to lose their benefits at the end of the year, unless Congress can approve a new stimulus package.
Credit…Bryan Denton for The New York Times

“If households are in financial catastrophe, then we have a moral obligation as a country to help households regardless of what their spending or not spending does to the aggregate economy,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution.

Money in the proposal would similarly provide a lifeline to some small businesses that risk closing for good amid weak demand between now and when vaccines become available. Even large companies could be hurt if many smaller firms go under, which is one reason large business groups have called for immediate aid to small companies.

“Jobs created by small businesses impact big businesses’ ability to sell to those people,” said Suzanne Clark, the president of the U.S. Chamber of Commerce. “So we’re really worried about the totality of the ecosystem and the number of small businesses just hanging on by a thread.”

But many business groups warn that the compromise plan does not include enough money, potentially leaving some companies without aid, in a repeat of the government’s initial round of Paycheck Protection Program loans in the spring. Lawmakers could again find themselves almost immediately facing pressure to allocate more money to the program.

The structure of the aid is unlikely to provide a long-term bridge for certain types of businesses, including many in the hospitality industry, that might not return to pre-pandemic levels of activity for months or years.

The deal would provide money to state and local governments, though the $160 billion being discussed is a small fraction of the $1 trillion that Democrats initially proposed last spring.

State and local aid has been a major sticking point in negotiations, with Mr. McConnell dismissing it as a “blue-state bailout.” But Republican-led states face some of the biggest revenue gaps.

States and local governments, which have been battered by pandemic-related costs and collapsing tax revenues, have already cut more than 1.3 million jobs, and much deeper cuts loom. Those cuts could have both short- and long-term consequences. A new round of public-sector layoffs and furloughs, combined with slowing private-sector hiring, could derail the precarious recovery. And cuts to schools, public transportation and other services could make it harder for the economy to regain momentum once the pandemic has passed.

Even if Congress does reach a deal before the end of the year, Mr. Biden warned Friday that lawmakers would need to spend more once he took office. “The country’s going to be in dire, dire, dire straits if they don’t,” he said.

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Economy

Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

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Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

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The economy is ailing again and layoffs are rising, but vaccines offer hope for cure – MarketWatch

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It’s not just the lives of Americans that rest on a quick rollout of coronavirus vaccines, it’s the livelihoods of millions of people who lost their jobs during the pandemic.

Almost every forecast for the U.S. economy predicts a big rebound in growth and employment in 2021, but it sure doesn’t feel that way right now with the coronavirus still spreading like wildfire.

The last few weeks alone have shown weaker hiring, rising layoffs, and declining consumer spending, all of which point to a faltering economy.

Many businesses have closed, cut their operating hours and laid off workers, leaving some 10 million Americans who had jobs before the pandemic still out of work.

Also: The U.S. lost 140,000 jobs in December. How bad was it?

The bad news hasn’t stopped investors from piling more money into the stock market, however. They are also betting on a big rebound in the economy this year and next.

What they are watching most is the speed at which the vaccines are administered, how rapidly the pandemic recedes and what steps new President Joe Biden will take to boost the economy until the crisis passes.

Read: Consumer inflation increases in December on higher gas prices

Does that render moot the next month or two of economic data, the stuff that usually moves markets. Not all all.

These reports will tell us how much ground the economy has lost in the past few months, how much ground it has to make up —- and whether the hoped-for snapback in the economy is actually underway.

“Do the data over the next few months matter? They certainly do,” said Richard Moody, chief economist at Regions Financial.

The key measure to watch is weekly jobless benefit claims, one of the few weekly government reports that’s very sensitive to changes in the health of the economy.

See: MarketWatch Economic Calendar

Jobless claims, a rough measure of layoffs, began to rise again in November just as the latest and biggest wave of coronavirus cases spread across the country. Last week new claims surged to almost 1 million from a pandemic low of 711,000 two and a half months ago.

Read: Jobless claims surge to 5-month high of 965,000

The report is not without its problems. A government watchdog agency found that jobless claims have been inflated during the pandemic.

Read: Jobless claims inflated, GAO finds

Also: Why the inaccurate jobless claims report is still useful to investors

Yet the direction of jobless claims has largely followed the path of the coronavirus cases and the resulting ups and downs in employment.

The latest snapshot on claims will be the most important report next week after the Martin Luther King holiday which closes financial markets on Monday, but most attention next week will be directed toward the inauguration of President-elect Joe Biden on Wednesday.

Read: U.S. budget deficit climbs to $144 billion in December – and more red ink on the way

On Thursday Biden outlined a sweeping new proposal for up to $2 trillion in federal spending that included $1,400 cash payments to households, supplemental unemployment payments, and money for distributing COVID-19 vaccines, among other items, but it’s unclear how much will eventually pass Congress and how long it will take to filter into the broader economy. Stay tuned.

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Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

Published

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Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

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Source link

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