- September 24, 2020
- Posted by: Stratford Team
- Category: Markets
Senate Majority Leader Mitch McConnell of Ky., walks off the Senate floor on Capitol Hill in Washington, on Wednesday, July 29, 2020.
- Congress is gearing up for a major Supreme Court nomination battle, absorbing most of the attention away from another coronavirus relief bill.
- The GOP’s swift action on the high court appointment is a stark contrast to their reluctance to approve additional stimulus spending earlier this year.
- “It’s like coasting up a mountain where every further inch that you go, you risk stopping and begin to go backwards,” Evercore policy economist Ernie Tedeschi said.
- The prospect of additional aid to individuals and businesses is extremely slim before Americans cast their ballots on November 3, given the Supreme Court battle underway.
- Visit Business Insider’s homepage for more stories.
With a fierce Supreme Court replacement battle underway, Congress is shifting its attention away from passing another coronavirus relief package. Senate Republicans under Majority Leader Mitch McConnell are moving swiftly to confirm a third Supreme Court justice appointed by President Donald Trump.
It’s a stark contrast to the GOP’s reluctance to approve another economic aid package earlier this year, when McConnell pushed “the pause button” on additional spending after a $2 trillion stimulus law was enacted in March.
“No problem to get a new Supreme Court justice approved starting from scratch, but a relief package with multiple proposals already on the table to help tens of millions from sliding into misery as we wait for widespread testing and a vaccine to emerge is too big a lift?” Katheryn Russ, an economics professor at the University of California, wrote on Twitter.
The abrupt shift in the political landscape carries potentially devastating consequences for an economy in the midst of a fragile recovery. At a congressional hearing on Tuesday, both Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell acknowledged another stimulus package was needed to prop it up.
“The recovery will go faster if we have both tools continuing to work together,” Powell said, referring to the Fed and Congress.
Many economists are urging Congress to approve another relief package to keep individuals and businesses afloat through the ongoing pandemic — and prevent the economy from backsliding.
“Most of the data points to the recovery still being positive, but it is losing momentum,” Ernie Tedeschi, a former economist in the Obama administration, told Business Insider. “It’s like coasting up a mountain where every further inch that you go, you risk stopping and begin to go backwards.”
Indeed, consumer spending has mostly rebounded from its steep drop in April, according to Opportunity Insights, a Harvard-based research group. Groceries and clothing purchases drove most of the bounce.
But three data points gauge the ongoing destruction wrought by the pandemic onto the American economy:
- Nearly 30 million people are still receiving some form of unemployment benefits five months into the pandemic, per the Labor Department.
- Nearly 100,000 small businesses have permanently shuttered since the coronavirus outbreak began in March, according to data from Yelp. Those closures continue to rise, particularly among restaurants.
- Around 1.1 million state and municipal employees have been laid off, and the figure could rise as state governments wrestle with massive budget shortfalls, according to the left-leaning Economic Policy Institute.
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, authorized a $600 weekly federal unemployment benefit from late March through the end of July, along with a small business aid program and a wave of $1,200 stimulus checks.
But many of the law’s components expired nearly two months ago. Millions of unemployed Americans are now receiving only 30% to 50% of their past wages. It averages out to $330 each week, though the amount varies greatly from one state to another.
President Donald Trump put in place a Lost Wages Assistance program through executive order in early August, drawing $44 billion in disaster relief funding from the Federal Emergency Management Administration.
Around 49 states were approved to set up the program, and FEMA said it would provide enough benefit funding for six weeks of $300 payouts.
That means an unemployed worker stands to receive $1,800 total from the program, depending when states start distributing payments since it’s retroactive from August 1. Tedeschi says it’s yielding limited relief for the unemployed.
“While we may have delayed the fiscal cliff from July 31, it is still coming fast for these workers,” Tedeschi said, referring to the date that the $600 federal bonus ended. “They are on the front lines of the pain if we don’t pass another package.”
Meanwhile, job postings are 18% lower now compared to this point last year, according to a chart shared on Twitter by Nick Bunker, the Economic Research Director at the Indeed Hiring Lab.
—Nick Bunker (@nick_bunker) September 22, 2020
Republicans and Democrats are still deadlocked on the level of federal spending needed to support the economy, and both parties are $1 trillion apart in their proposals. Unemployment benefits and state aid are two areas of fierce disagreement between them.
The prospect of additional aid to individuals and businesses is extremely slim before Americans cast their ballots on November 3, given the monumental Supreme Court battle underway. Lawmakers are instead gearing up to approve short-term spending bills to keep the government funded through the end of the year.