facebook linkedin twitter

Experts Lend Advice on COVID Relief Policy for Biden Administration, New Congress

December 4, 2020 by Reece Nations

In a virtual roundtable event co-hosted Tuesday by the Hutchins Center on Fiscal & Monetary Policy and the Peterson Institute for International Economics, economists discussed what economic policies should be prioritized by the in-coming Biden Administration and Congress. 

The panelists who participated in the event, presented by the Brookings Institution, were comprised of fiscal and public policy experts. 

Wendy Edelberg, senior fellow of Economic Studies at Brookings, Douglas Elmendorf, Don K. Price professor of Public Policy and dean of faculty at Harvard University’s Kennedy School and Michael Strain, director and Arthur F. Burns scholar in Political Economy at the American Enterprise Institute, talked about potential fiscal policy for short-term relief. 

Despite stimulative gains following the 2008 economic recession, Elmendorf said subsequent regressions constrained growth in following years. 

“That premature tightening of fiscal policy was one of the greatest mistakes in macroeconomic policy of the past half-century, in my view,” Elmendorf said at the event. “I am afraid that we are on the cusp of making a similar mistake again. We should at this point go fast and go big.” 

Time is an important factor when discussing economic relief solutions, he said. Millions of Americans stand on the precipice of losing unemployment insurance benefits without corrective action taken by the legislature. 

Under the CARES Act, states were given the option to extend unemployment compensation to independent contractors and other laborers that are usually ineligible for unemployment benefits, according to the Department of Labor. Pandemic unemployment insurance provides up to 39 weeks of benefits and the program’s enrollment period ends Dec. 31. 

“There are back-of-the-envelope calculations I’ve seen suggesting that a trillion dollars of fiscal stimulus might be enough,” he said. “Other calculations show — in my view — $2 trillion would be a more appropriate amount of stimulus. The point I want to emphasize is that we’d be much better off airing on the big-side than the small-side of fiscal stimulus.” 

In comparison, the CARES Act allotted $1.8 trillion in direct economic relief to individuals and businesses, according to the Heritage Foundation. Across three separate coronavirus-relief packages passed by Congress and signed into law by President Donald Trump, more than $2 trillion in federal spending has been allotted to COVID-19 relief measures — more than any other stimulus package in United States history. 

Because of the “inexact” nature of macroeconomic forecasting, Elmendorf said large-scale stimulus measures present smaller risks than small-scale measures. If demand for goods and services becomes too high, the Federal Reserve can act to remedy this by raising interest rates or withdrawing from other attempts of economic remedy. 

In contrast, Strain noted smaller-scale economic stimulus measures were more likely to pass through Congress quickly. With the optimal size of any potential coronavirus-relief remaining ambiguous, Strain said lawmakers should come to a compromise that can be enacted with haste. 

“I would rather see something that’s a little bit smaller but that could pass this week or next week, rather than wait for something that’s a little bit bigger but won’t pass until February,” Strain said during the event. “If you look at the output gap, I think a trillion dollars is a reasonable figure for the next round of stimulus. I think Democrats should be willing to take a couple hundred billion dollars less than that, Republicans should be willing to take a couple hundred billion dollars more than that.” 

Although the amount of relief remains a point of contention on Capitol Hill, Edelberg said Congress needs to act soon one way or another. Retaining unemployment benefits established by earlier relief measures needs to be prioritized in any compromise bill passed by the legislature. 

These benefits were provided by a provision of the CARES Act known as the Pandemic Emergency Unemployment Compensation program, according to the Department of Labor. Under this program, states are permitted to extend unemployment benefits by up to 13 weeks if a worker’s regular unemployment compensation benefits were exhausted. 

“I am in a state of near-panic about the lapsing of unemployment insurance benefits that according to Department of Labor numbers could mean that for upwards of nine million people on December 26th they abruptly lose all of their unemployment insurance benefits,” Edelberg said during the event. 

Economy

Supply Chain Problems Hit Charities' Holiday Gifts for Kids

With less than four weeks to go until Christmas, Kristyn Begari has been rushing to find enough doll styling heads... Read More

With less than four weeks to go until Christmas, Kristyn Begari has been rushing to find enough doll styling heads to give to kids in need. But, the purchasing coordinator for the California-based nonprofit Family Giving Tree says it's been difficult to find them, or racially... Read More

World Shares, US Futures Slip on Worries Over Omicron Risks

NEW YORK (AP) — Global shares mostly slipped Tuesday as investors cautiously weighed how much damage the new omicron coronavirus... Read More

NEW YORK (AP) — Global shares mostly slipped Tuesday as investors cautiously weighed how much damage the new omicron coronavirus variant may unleash on the global economy. Germany's DAX lost 1.1% to 15,106.35 in afternoon trading. France’s CAC 40 slipped 0.9%, while Britain's FTSE 100 shed... Read More

Stores Kick Off Black Friday But Pandemic Woes Linger

NEW YORK (AP) — Retailers are expected to usher in the unofficial start to the holiday shopping season Friday with... Read More

NEW YORK (AP) — Retailers are expected to usher in the unofficial start to the holiday shopping season Friday with bigger crowds than last year in a closer step toward normalcy. But the fallout from the pandemic continues to weigh on businesses and shoppers' minds. Buoyed... Read More

US Jobless Claims Hit 52-Year Low After Seasonal Adjustments

WASHINGTON (AP) — The number of Americans applying for unemployment benefits plummeted last week to the lowest level in more... Read More

WASHINGTON (AP) — The number of Americans applying for unemployment benefits plummeted last week to the lowest level in more than half a century, another sign that the U.S. job market is rebounding rapidly from last year's coronavirus recession. Jobless claims dropped by 71,000 to 199,000,... Read More

Beyond Manchin: Dems' $2T Bill Faces Senate Gauntlet

WASHINGTON (AP) — It took half a year but Democrats have driven President Joe Biden’s $2 trillion package of social... Read More

WASHINGTON (AP) — It took half a year but Democrats have driven President Joe Biden’s $2 trillion package of social and climate initiatives through the House. It gets no easier in the Senate, where painful Republican amendments, restrictive rules and Joe Manchin lurk. Facing unbroken GOP opposition, Democrats... Read More

Biden to Keep Powell as Fed Chair, Brainard Gets Vice Chair

WASHINGTON (AP) — President Joe Biden announced Monday that he's nominating Jerome Powell for a second four-year term as Federal... Read More

WASHINGTON (AP) — President Joe Biden announced Monday that he's nominating Jerome Powell for a second four-year term as Federal Reserve chair, endorsing Powell's stewardship of the economy through a brutal pandemic recession in which the Fed's ultra-low rate policies helped bolster confidence and revitalize the... Read More

News From The Well
scroll top