Last week, House Democrats unveiled their latest pandemic-relief package. The bill combines aid for families, a bailout for struggling cities and states, and additional funds for testing, tracing, and hospitals. The price tag is about $3 trillion—and it comes just weeks after the president signed an economic-relief package worth about $2 trillion.
Republicans have assailed the bill as a profligate wish list. Even Americans who are suffering from the health and economic ravages of the pandemic may feel a bit stunned by the dollar amount. Does the government really have to spend $5 trillion in three months? Can the United States afford to dump such unfathomable amounts of money into the economy?
The answers to those questions are yes and absolutely yes.
Small-business activity has plunged nationwide by nearly 50 percent. Hundreds of thousands of companies have already failed. Big retailers such as J.Crew and Neiman Marcus have filed for bankruptcy, while others, including Macy’s, are teetering. By some measures, scarcely one-third of Americans say they are working. Next month’s jobs report will likely show that, for the first time since World War II, a majority of Americans aren’t officially employed.
“The scope and speed of this downturn are without modern precedent,” Federal Reserve Chair Jerome Powell said on Wednesday. “Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
To understand why the U.S. needs additional fiscal support, let’s review where we stand on government assistance.
In March, the U.S. passed the CARES Act, which helped families and small businesses in a variety of ways. Most famous, perhaps, were the $1,200 checks for tens of millions of families. Unemployment Insurance got a $600-a-week bump. Congress also created the Paycheck Protection Program to accelerate the distribution of emergency cash to small and medium-size businesses.
While the CARES Act was an impressive start, and the largest stimulus or relief package ever signed in U.S. history, it wasn’t enough. The $600 benefit for unemployed workers will lapse on July 31. Thousands of small businesses failed to snag necessary funds in the early rounds of the PPP. And now state and local governments are facing a catastrophic loss of tax revenue from sales and income taxes, which could force them to fire hundreds of thousands of people and slash funding for health care in the middle of a pandemic.