Relief holdup threatens shaky economy
WASHINGTON - President Donald Trump’s decision to hold up pandemic relief just before Christmas threatens to cause hardship for millions waiting on unemployment benefits and stimulus checks, further hobbling an already-shaky economy.
Trump’s reluctance to sign a $900 billion bipartisan stimulus package that Congress approved on Monday, along with his push for a new one, comes just as special pandemic unemployment benefits are about to expire for as many as 14 million people. The funds were wrapped into a spending bill that would also risk a government closure if not signed into law, with millions of contractor positions at stake.
It could take as long as a month before people receive their funds and even later for the effects to filter into the economy, according to Michael Englund, chief economist at Action Economics LLC.
Beyond the short-term impact, the lack of immediate direct payments and gap in special unemployment benefits threaten to deepen economic scarring marked especially by a jump in long-term unemployment.
“There is going to be kind of a pinch in the month of December,” Englund said by phone. “Many people are probably counting on the checks going out in the final week of December.”
Meanwhile, “people are winding down their savings” and additional curfews and closures will weigh particularly on the service sector, Englund said.
Even as House Speaker Nancy Pelosi plans a vote Dec. 28 on a bill to increase the size of stimulus checks to the $2,000 Trump demanded, she urged the president to sign the bill Congress already passed that has additional economic aid, including forgivable loans for small businesses, supplemental unemployment benefits, support for renters facing eviction and funds for vaccine distribution.
The delay - even if it ends up being only a few days - could hardly come at a worse time. Consumer spending and incomes fell more than analysts expected in November, while other data indicate Americans are running down their savings accounts including cash from previous benefits.
Trump still has several days to sign or veto the bill, which passed by wide enough margins that Congress could override his veto unless dozens of Republicans change their vote to avoid crossing the president.
Meanwhile, 803,000 Americans filed for state unemployment benefits last week, still almost quadruple the prepandemic level. Even activity in the red-hot housing market is cooling off as home sales fell last month despite mortgage rates at record lows.
Nearly 4 million Americans have been unemployed for longer than six months, and research has shown it becomes more difficult to get a job and these people are more likely to accept lower-paid work, cutting into their spending and future opportunities.
The holdup “adds insult to injury at a time when people are losing checks, and they are already living on fumes,” according to Diane Swonk, chief economist at Grant Thornton LLP. “This is huge. It’s 14 million people going off a cliff.