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Is the US $ 900 billion US stimulus bill enough to break the ice?
Source: Beijing Commercial Daily
After arguing for several months, at the last moment when the US government shut down, the two parties finally “shook hands” and reached an agreement on a $ 900k COVID-19 aid stimulus bill. millions. When it comes to scale and unemployment benefits, both sides take a step back. After all, in the current epidemic situation, there is nothing more real than paying money directly before the vaccine is fully effective. But for the United States, the large deficit is also a problem that it will have to face in the future, and “helicopter money” also comes at a price.
“Something is better than nothing”
The new stimulus plan is unstoppable. The twentieth local time, the United States Congress finally reached an agreement on a stimulus plan of 900 billion dollars aimed at boosting the United States medical system and stimulating the economy struggling under the weight of the new epidemic. of the crown.
“We can finally announce what this country needs to hear for a long time. More relief measures are on the way.” That day, Senate Republican Leader McConnell said. However, he also mentioned that there are still differences between the two parties, and the final details are still under negotiation. The vote is expected to take place on the night of the 20 or 21 local time.
The $ 900 billion stimulus is second only to the $ 2.2 trillion stimulus plan of March this year. The CNBC financial media mentioned that congressional agreement to reach one of the largest bailout bill agreements in US history is a “long overdue” effort. . Before this, around the new round of the stimulus plan, the two sides have been stagnant for several months. The bill was never passed due to differences in the overall scale and unemployment benefits.
Right now, with the epidemic “out of control”, the new blockade is looming and a new fiscal stimulus plan is imminent. Specifically, of the US $ 900 billion stimulus package, US $ 284 billion will go to the “Wage Protection Program”, US $ 15 billion will go to fund independent theaters, cultural institutions, etc., 82 US $ 1 billion will be used for educational institutions, US $ 7 billion is used to strengthen broadband network access and help people make remote connections during the epidemic. Additionally, the plan will provide billions of dollars in funding to support the detection and monitoring of the new corona virus and the distribution of the new corona vaccine.
As for the bipartisan unemployment compensation approach above, the bill includes a direct payment of $ 600 to most adults and a weekly subsidy of $ 300 to each American who is unemployed by the epidemic. This benefit will continue until the end of March next year. Compared to the $ 2 trillion stimulus bill passed in March this year, the new subsidy was only half what it was at that time. At the time, the unemployed received an additional $ 600 per week on top of their normal unemployment benefits.
The New York Times noted that this bailout bill should have come sooner, but it’s better than nothing. The two sides have been through a long and painful tug of war and finally finalized the aid bill. For the people, they have waited too long.
It should be noted that the Democratic and Republican congressmen also reached a budget plan for fiscal year 2021 totaling $ 1.4 trillion that day. If the bill is not passed, the US government may face closure. Prior to this, the US Congress voted to pass a series of provisional appropriation bills to provide funds to the federal government to prevent a “shutdown” of the government.
Economic recovery from “life extension”
Although the $ 900 billion scale is largely discounted from the $ 2 trillion originally expected by the Democratic Party, this may already be the best result that can be achieved at this time. On the same day, House Speaker Pelosi and Senate Minority Leader Schumer said the current epidemic situation is dire and that the economic rescue plan will provide Americans with much-needed relief. they need, but this is far from sufficient. Moving forward, Democrats will further promote the new plan.
Jiang Shu, chief analyst at Beijing Jinyang Mining, analyzed to a reporter for the Beijing Business Daily that the scale of 900 billion US dollars has dropped a lot from what the Democratic Party initially mentioned. The main reason is that the two parties are still running for election. Okay, “but since the Democratic president immediately realizes the transfer of power, it won’t be as exaggerated as the market thought before. There is no need to increase the burden on himself, and he can continue to increase it in the future.
As for downscaling, Sun Jie, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, told a reporter for the Beijing Business Daily that this is also related to the fiscal situation in the United States. Last year, the United States’ fiscal deficit reached $ 984.4 billion. More than $ 1 billion accepted. However, as far as the current situation is concerned, the deficit is likely to exceed US $ 3 trillion, so the high deficit also makes the two US sides fearful. But overall, the adverse effects are diminishing and new stimulus laws can be passed, but the scale needs to be controlled.
In fact, there have been endless calls from the outside world for a new fiscal stimulus plan. In the last period of time, Powell, who is in charge of monetary policy as chairman of the Federal Reserve, has rarely called for the introduction of fiscal policy many times, which was almost unimaginable in the past. Last month, Powell also asked Congress to pass a new round of fiscal stimulus, emphasizing the urgent need for additional economic stimulus.
Like Powell, most economists are in favor of a new round of stimulus plan by the end of the year. Not long ago, James Knightley, chief international economist at the Netherlands International Group, also noted that recent economic prospects have deteriorated in the context of the growing number of confirmed cases of new coronary pneumonia. The increasing number of cases may lead to the introduction of more epidemic prevention measures at the expense of economic activities. If Congress does not pass a new round of bailout plan, resulting in a “bailout cliff” effect, the economy and people’s livelihoods may deteriorate further.
It is understood that by the end of December many previously introduced bailout clauses will expire, such as the federal moratorium on eviction orders designed to protect tenants from being evicted by landlords, relief clauses that provide grace for payment of student loans and epidemic unemployment assistance programs. This also means that once the new stimulus measures cannot be plugged in seamlessly, thousands of unemployed people may face the pressure of the “cliff” that follows.
The deficit is “stressed”
Although the pressure of the “cliff” has been avoided, the reality remains worth watching. Not long ago, data from the US Department of Labor showed that the non-farm employed population increased by 245,000 after the November seasonal adjustment in the United States, which was almost less than half of market expectations. , and the growth rate fell for the fifth month in a row. The labor participation rate in November was 61.5%, lower than market expectations of 61.8%. The unemployment rate for the month was 6.7%, slightly better than the 6.8% expected.
Data released by the US Department of Commerce on the 16th also showed that US retail sales fell 1.1% month-on-month in November, the second consecutive month of decline. The drop far exceeded the market consensus and was higher than the 0.1% month-on-month drop in October. The October data is the first time since April that the indicator has experienced a month-over-month decline. This means that as the holiday shopping season approaches, US retail sales have seen a sharp decline from the previous month, highlighting that under negative factors such as the new crown epidemic and the declining household income, the US economy has encountered resistance to recover from the recession.
In Jiang Shu’s view, the current introduction of a new stimulus bill also shows that the two sides have certain concerns about the economy, and the $ 900 billion scale also has plans for future consideration. However, judging from the current state of the epidemic, although the number of cases continues to rise, compared to the second wave from a public safety perspective, the “second wave” from an economic perspective is actually a little more strong and does not lead to extreme and comprehensive measures to prevent the epidemic. Recovery is only a certain degree of suspension of evening entertainment and social activities, so it may not produce a second wave of economic crisis.
The economy may be just one of the problems that the United States must face. With the introduction of the new stimulus bill, the fiscal deficit has also become a problem that the United States must address. In October of this year, the US Congressional Budget Office estimated that the US government’s fiscal deficit in fiscal 2020 will reach US $ 3.13 trillion, which is equivalent to US $ 15, 2% of the US gross domestic product, which is more than three times that of fiscal year 2019, and is also the current fiscal year since WWII. The highest level.
In the first two months of fiscal year 2021, that is, October and November 2020, the US budget deficit reached US $ 429 billion, an increase of US $ 86 billion year-over-year. Treasury officials said this was due to a 9% increase in spending on health care and aid programs and unemployment benefits, reaching $ 887 billion. At the same time, government revenue so far this year has fallen 3% to $ 457 billion.
According to Sun Jie, the US deficit problem has become unimaginable before. Before the $ 900 billion stimulus plan, the US deficit accounted for nearly 16% of GDP. After the 900 billion dollars came out, the deficit as a percentage of GDP is likely to reach the level before World War II. The reason why the United States dares to do this is also related to the Modern Monetary Theory (MMT) that has been discussed in previous years: on the one hand, it is a realistic persecution, and on the other, it is the change of ideas.
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