The Washington Post - USA (2020-07-31)

FRIDAY, JULY 31 , 2020. THE WASHINGTON POST EZ RE A

by The Washington Post, 20
urged Congress to pass a stimu-
lus of $2 trillion or more. The
others, mostly conservative econ-
omists, agreed that Congress
needs to act by mid-August. They
favored a roughly $1 trillion
package.
“If we don’t go big, we are
going to pay for it for years and
years,” said Claudia Sahm, one of
the leading experts on recessions
who is now director of macroeco-
nomic policy at the Washington
Center for Equitable Growth.
“My concern about a backslide is
getting more serious every day.”
Right-leaning economists said
Congress should focus on ways to
make the nation safer, including
at schools and workplaces, so
people can resume more daily
activities. Now is not the time to
worry about the debt, they say.
“This recession was a huge
consumption shock. Health care,
food, transportation, all those
things collapsed,” said Doug
Holtz-Eakin, a former economic
adviser to George W. Bush and
John McCain. “We have to do
things to ensure people’s safety
and make them feel confident to
go back out. Spend what you
need to do it.”
Back in March when the econ-
omy was beginning to fail be-
cause of the forced shutdowns,
lawmakers rallied around the
idea that they were rushing to
shore up the economy through a
short-lived public health crisis,
agreeing to pass over $2 trillion
in stimulus they believed would
see the nation through the sum-
mer, when they hoped the pan-
demic would ease.
And it largely worked. Small
and large businesses received
lifeline loans to stay afloat. Poor
and middle-class Americans re-
ceived $1,200 payments to en-
sure they could pay rent and buy
food and medicine. Laid-off
workers received an extra $600 a
week to prevent widespread pov-
erty.
While there were still painful
bankruptcies and long lines at
food banks, many like Olga Kauf-
man, who lost her retail job at a
mall in Amarillo, Tex., were able
to make car and rent payments, a
big contrast to the 2008-09 reces-
sion when Kaufman’s car was
repossessed.

ECONOMY FROM A

“I was one of those that in

2008 I kind of lost everything:

My apartment, my car and my

career,” said Kaufman, 57. “This

time the $600 unemployment

benefit saved me. I was able to

keep my car and keep paying for

health insurance.”

By early June, as much of the

country had reopened and busi-

nesses brought back more work-

ers than expected, there was

hope that the recovery was on

track. President Trump was pro-

claiming this was a “rocket ship”

recovery.

But new surges in the pandem-

ic have managed to outlast the

relief funds, throwing a new layer

of uncertainty on the economy’s

future. It now appears the recov-

ery is fizzling.

New unemployment claims

have climbed the past two weeks

to 1.4 million, an alarming sign

that layoffs are likely becoming

permanent. Credit and debit card

spending has retreated in July,

real-time data show. Consumer

confidence plummeted this

month with large drops in Michi-

gan, Florida, Texas and Califor-

nia where coronavirus cases are

on the rise. And trackers of

small-business revenue are once

again declining.

The pandemic’s drag on the

economy “has proven to be a lot

worse than what we originally

projected even a few months

ago,” Raytheon Technologies

CEO Greg Hayes said this week

on an earnings call, a sentiment

echoed by other business leaders.

Lawmakers are now faced

with two options, assuming they

are able to pass anything in

August: Throw another short-

term economic fix at the renewed

economic crisis, like they did in

March, or go bolder with a more

long-term economic stimulus

package.

Many economists who don’t

normally like to get political are

urging Congress to go big. They

say the data is telling a clear

story: The economy is in danger

and needs substantially more aid

so it won’t get worse.

“Momentum is fading,” said

Jim O’Sullivan, chief U.S. strate-

gist at TD Securities. “The more

stimulus there is, the better the

economy will do over the next

three or four months.”

Michael Feroli, chief U.S. econ-

omist at J.P. Morgan said he has

shifted his views in recent weeks

as more bleak data has come in.

“A month ago, I would have

said $1 trillion [stimulus] might

be adequate, but with the soften-

ing in the high-frequency data,

the recovery is starting to look a

little more fragile,” Feroli said.

Federal Reserve Chair Jerome

H. Powell put it this way at his

news conference Wednesday:

“We’ve got to hope for the best

and plan for the worst.”

The last of the financial life-

lines to workers that Congress

passed in March expire Friday,

making the economy especially

vulnerable to another drop —

what some call a “W” shape or

“double dip” recession.

Lawmakers are now debating

a small or piecemeal spending

option versus bigger, bolder and

more complicated ones. Conser-

vative Republicans like Sens. Ted

Cruz (R-Tex.) and Rand Paul

(R-Ky.) don’t want another relief

package, arguing that Congress

has already passed close to

$3 trillion in aid, and the nation

can’t afford to beef up the nation-

al debt even more.

The Trump administration is

pushing for a short-term fix on

jobless benefits and resurrecting

a moratorium on evictions. The

Senate may vote on a short exten-

sion to some version of extra

unemployment aid next week.

The other school of thought is

to do something bigger: Senate

Majority Leader Mitch McCon-

nell (R-Ky.) pitched a $1 trillion

plan that would extend but trim

back federal jobless benefits

while giving more money to the

small business Paycheck Protec-

tion Program, among other

things. Democrats want to go

much bigger with a $3 trillion

plan that would fully restore

enhanced jobless benefits, while

also dedicating money for cities

and municipalities facing their

own budget shortfalls.

Many economists worry this is

Congress’ last chance to act be-

fore the election and there won’t

be another bill until February. It’s

another reason many urge Con-

gress to do more.

“We should be trying different

things: stimulus payments, un-

employment benefits, aid to state

and local governments, aid to

small businesses,” said Gus Fau-

cher, chief economist at PNC

Financial Services. “Some of

these things will be more effec-

tive than others, but it’s much

better to err on the side of excess.”

Alan Tonelson, founder of the

RealityChek blog, which has

been supportive of Trump’s trade

policies, said: “Senate Republi-

cans need to recognize it will be

crucial to their political survival.

Much more than $1 trillion is

needed.”

Already, layoffs are rising

again, according to a weekly U.S.

Census survey. State and local

governments are cutting jobs as

they run out of funds. And more

and more business closures are

becoming permanent, Yelp data

show.

All of this impacts people’s

psyches as they see friends losing

jobs and their favorite restau-

rants and stores closing forever.

As consumer confidence falls,

people spend less.

Credit and debit card spending

has declined from mid-June lev-

els, data from the Opportunity

Insights Economic Tracker

shows. That can lead to even

more business closures and more

job cuts.

Dottie Williford is a travel

agent in Durham, N.C., who used

to earn six figures most years. In

2020, she hasn’t had a paycheck

since February. Like many, she

initially thought the blow to the

travel industry would be tempo-

rary. She hoped her clients would

be traveling to Europe again this

summer. Now she is starting to

believe she’ll be lucky if any

clients travel by early 2021. Janu-

ary and February are normally

her highest earning months.

“I thought by June everything

would be back to normal. Then I

started panicking,” said Willi-

ford, who has sharply cut back

her spending. “I’m starting to

worry we won’t be traveling by

January or February. That would

sink me.”

Many small businesses have

exhausted their Paycheck Protec-

tion Program loans. Goldman

Sachs notes more than 80 per-

cent of PPP loan recipients will

be out of PPP money by the first

week of August.

The popular $1,200 “stimulus

checks” that many Americans

received in April and May have

also mostly been spent. On top of

that, the roughly 30 million

Americans receiving unemploy-

ment benefits through mid-July

are about to receive a large cut in

aid as the extra $600 a week

“bonus” expires Friday, meaning

most will go from receiving $

a week to $330.

A bipartisan group of econo-

mists, including Jason Furman,

Barack Obama’s top economist,

and Glenn Hubbard, George W.

Bush’s top economist, crafted a

plan that would extend unem-

ployment benefits by about $

in states with high unemploy-

ment and scale it down as the

economy improves.

The nation currently has 5.

million job openings, and about

30 million people on unemploy-

ment.

Kaufman, the unemployed re-

tail worker in Texas, is one of

them.

“I’m getting zero job inter-

views,” she said. “I went myself to

the mall and it was a ghost town.

There was no shopping. People

are hunkering down and not

spending money at all.”

[email protected]

Jeff Stein contributed to this report.

Consensus grows among economists that Congress must go big on relief efforts

LYNNE SLADKY/ASSOCIATED PRESS

Retail stores are being hit hard by the pandemic. Credit and debit card spending has declined from

mid-June levels, data from the Opportunity Insights Economic Tracker shows.

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