The US Economy Needs a Booster Shot
Heading into the holiday season, the United States is confronting a spike in COVID-19 infections and renewed restrictions on commerce. Unless Congress acts immediately to extend and expand support for workers, households, small businesses, and state and local governments, the hard-won gains from the previous stimulus could be lost.
BERKELEY – November brought welcome news from Pfizer, Moderna, and AstraZeneca, each of which is reporting high levels of effectiveness for its COVID-19 vaccine. Hopes that vaccine distribution will begin by early December have pushed stock-market indexes to near-record levels. But the stock market does not necessarily reflect the Main Street economy. Without additional fiscal stimulus, the partial, uneven, faltering economic recovery now underway is in serious danger. With the long-feared winter wave of COVID-19 now upon us, and with unemployment rising, we are witnessing what has aptly been described as “the most unequal recession in modern US history.”
Owing to record-shattering fiscal and monetary stimulus earlier in the year, the economic recovery initially progressed faster than expected. But overall economic activity and employment remain well below pre-pandemic levels, and as key components of fiscal stimulus expire amid the latest epidemic wave, the recovery is losing momentum. Without legislative action, crucial stimulus policies – Pandemic Emergency Unemployment Compensation and Extended Benefits, Pandemic Unemployment Assistance, the national eviction moratorium, and forbearance on federal student loans – will expire by the end of December.
Moreover, many cities and states that are already facing historic budget shortfalls now must re-impose restrictions on economic activity in response to the latest surge in COVID-19 cases. Because state governments are constrained by balanced-budget laws, the end of federal fiscal support could not come at a worse time.