The Recovery Plan America Needs
Though US policymakers took bold early action to prop up the economy during the COVID-19 crisis, the International Monetary Fund now expects America's GDP to contract by 8% in 2020. If the US government does not pursue a comprehensive recovery program, the outlook will become even worse.
BERKELEY – In just a few short months, the COVID-19 pandemic has done massive damage to the United States economy – and the workers who make it run. Unemployment has already reached its highest level since the Great Depression, with about 42 million workers – largely lower-income, less educated, and disproportionately black and Hispanic – having filed jobless claims since mid-March. Without concerted government action, America’s economic prospects – and its inequality problem – will only worsen.
To be sure, America’s monetary and fiscal authorities took early, bold action to support the economy. The US Federal Reserve cut the federal funds rate nearly to zero and worked with the Treasury to deliver credit to households, businesses, and state and local governments. And the US Congress and the White House have so far approved almost $3 trillion worth of economic relief, including the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.
But whereas the Fed has committed to using its emergency tools “for as long as it takes” to ensure a strong recovery, a divided Congress and chaotic executive have yet to make a similar pledge. The House Democrats have passed a second $3 trillion recovery package, but its prospects are uncertain in the Republican-controlled Senate, which is about to start a two-week recess without considering it.