"How Much Emergency Relief Will It Take to Revive the U.S. Economy?"
WASHINGTON - This morning, as Congress continues to debate additional COVID-19 response and recovery funding, Groundwork Collaborative released a new paper from economists Dr. Mark Paul and Dr. Adam Hersh entitled “How Much Emergency Relief Will it Take to Revive the U.S. Economy?” The paper lays out why Congress should aim to provide economic relief of between $3 trillion and $4.5 trillion in the short-term alone to pull our economy back from the brink and begin to get it back on track, an investment that would be significantly higher than what Congress is currently discussing.
This new paper follows other papers that have also come out highlighting the emerging consensus among economists that major new investments were needed to help families and the economy in the short term, including this from Dr. Wendy Edelberg and Dr. Louise Sheiner of Brookings calling for $2 trillion, this from Dr. Josh Bivens of the Economic Policy Institute calling for at least $3 trillion in debt-financed fiscal support in the short term, and this from Dr. Bill Gale and Grace Enda calling for “Congress...to allocate more resources—trillions of dollars—for relief and stimulus to support people and businesses.”
Some excerpts from the paper are below, and below that is some additional information on the authors. Check out the full paper here and don’t hesitate to reach out if you have any questions or would like to talk to the authors.
“We estimate that Congress needs to provide economic relief of between $3-4.5 trillion in the short-term in order to get American families and businesses working at their full potential. Additionally, Congress should enact automatic triggers to renew support in the event of a prolonged recovery. This range of estimates accounts for a more realistic assessment of disguised unemployment not captured in official measures, and reflects uncertainty around the extent to which a temporary shock will mutate into permanent economic scarring, as well as the size of the multiplier effect from increased federal outlays.”
“The growing consensus among economists is that more risk lies in going too small than in going too big. The longer Congress waits to act, the more permanent damage will be done to American families and the overall economy, and the harder it will be for the U.S. economy to regain prosperity. Whereas our estimate for needed economic relief would bring the economy in line with true full employment, falling short of this target will only widen the current health and economic crises, worsen America’s longer-term problems of caustic economic polarization and a carbon-dependent economy, undermining the country’s long-term economic potential. By committing to adequate support now and making support more targeted, with automatic triggers, Congress can create confidence that will ultimately hasten recovery and bring the economy to true full employment. These actions will help mitigate inequality, benefiting groups long marginalized from economic prosperity.”
“Congress should learn from past mistakes and amplify the impact of stimulative measures by targeting aid at critical areas and setting an expectation that it will continue supporting the economy as long as is needed to return to true full employment. This would include continuing to expand eligibility for unemployment insurance benefits, renewing the $600 weekly supplemental benefits, providing fiscal aid to offset budgetary pressures on state, local, and tribal governments, renewal and better management of the Paycheck Protection Program for small businesses, and resources to expand COVID testing and tracing and health insurance subsidies, among other measures."
“While we recommend $3-4.5 trillion in immediate, near term relief, we also recognize that more support may be needed if relief measures move too slowly or aim too low, causing both the public health and the economic situation to deteriorate further. Thus, we also recommend that Congress should include measures to automatically reauthorize some stimulus spending until public health is normalized and the economy returns to full employment across all demographic groups.”
“...Congress and the Federal Reserve should target their actions to expand investment and job opportunities that help decarbonize the economy so that we take actions now to mitigate the likelihood and severity of similar future shocks. Such actions will not only fend off a prolonged recession and provide critical support for the millions of Americans forced into hardship by the crisis, but will also help reverse the problems of inequality and climate change that has left the United States so economically vulnerable.”
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