Talk about an early recovery of the U.S. economy, with significant growth in the third and fourth quarter this year, is wishful thinking without another stimulus package approved by the U.S. Congress and signed by the president. If such a package isn’t implemented soon, providing more funds to residents, businesses and states, we risk experiencing a depression far worse than the great depression of the 1930s.
Attempts to control the spread of the yet unstoppable COVID-19 pandemic have resulted in the closure of most American businesses and have caused the jobs loss or loss of income of well over 33 million residents.
As the disease continues to infect Americans and claim lives at a staggering rate, disputable attempts are being made to return the country to normal. The argument is that people need to earn a living and if everything remains shuttered, businesses will totally fail. Sadly, these necessities, it seems, overshadow the clear health risks.
But although most states, including Florida are gradually lifting COVID-19 restrictions, mostly while adopting safe guidelines, the momentum expected in the business sector is unlikely to materialize.
For one, the majority of Americans are literally scared to resume normal routine like going out to dine at restaurants, shopping at malls, traveling on airplanes, taking sea cruises, occupying hotels, or any other of the former practices that were generating an economic boom.
Secondly, the consumer demand needed to spark the necessary economic growth is absent. With over 33 million Americans not earning a steady income, there’s very little disposable income outside of paying for inescapable essentials like rent, mortgages, food and utilities. Without consumers having funds to generate revenue to the general business sector, any economic recovery is doubtful, at best.
Thirdly, the economic fallout from the pandemic is not pertinent to only America. Almost every other nation is experiencing an economic nightmare. This will result in a steep decline for American goods usually demanded by these countries, and a related steep decline in U.S. exports. Companies that rely heavily on selling to overseas markets will be particularly negatively affected.
No economy can survive without strong consumer demand and the ability of consumers, local and overseas, to spend heavily on the businesses that comprise that economy.
Since this demand has shrunken because of local and foreign factors related to the pandemic, if America’s leaders are serious about seeing an economic upturn in the third and fourth quarters this year, the only way this is going to happen is with another massive stimulus package to put the necessary cash in the pockets of consumers, including in the coffers of cities, counties, and states.
The $2.2 trillion provided for businesses and residents in the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest in U.S. history, has been pretty much exhausted without any meaningful indication of positive impact on the economy. That’s because of the record unemployment rate and business closures.
Although millions of Americans received the $1,200, and $500 for children, provided as an Economic Impact Payment under the CARES Act, a survey conducted by a Money/Morning Consult survey indicated 74 percent of recipients expected the payment to last less than a month. Forty-six percent said the payments would last less than two weeks. In other words, almost half the respondents don’t expect their checks to assist them beyond 14 days.
There is the potential for business bankruptcies to rise sky-high if consumers do not have the purchasing power to support businesses, and in turn create reemployment and new employment opportunities.
So, yes, another major federal stimulus package is needed urgently. The Economic Impact Payments in the CARES Act are a good start, but nowhere near enough to effectively stimulate this historically depressed economy.
A stimulus package is an economic measure that originates in Keynesian economics which postulated a downturn or recession in an economy can be alleviated with increased government spending. Several stimulus packages have been applied by former U.S. governments, as recent as in 2009, to revive creeping or actual recessions.
Stimulus packages can be aimed at increasing aggregate consumer demand through various measures taken to increase employment, consumer spending and investment.
Since implementing stimulus packages is a massive cost to governments, residents and businesses should not consider them “free lunches.” There are none of those in America. There’s no doubt residents and businesses will eventually, likely in the short term, have to repay these packages in a combination of direct and indirect taxes. But, if the packages are sufficient to effectively jump-start consumer demand/spending, improve the health of businesses, and generate wide-scale employment and real economic growth, any increase in taxes would be unfair to oppose.
Bipartisan members of the U.S. House and Senate are currently debating the composition of a possible fourth 2020 stimulus package. Cooperation in urgently finalizing a package that benefits American residents, businesses, and states is urged. It is clearly obvious without additional economic stimulus, this flagging U.S. economy will not rebound any time soon.