US economy at risk as unemployment benefits expire


U.S. lawmakers face increasingly sharp warnings of dangers to the economy as Congress and the White House struggle to reach agreement on a new fiscal stimulus package, leaving millions of Americans without payment vital and risky safety net not only for the United States but the entire world. recovery.

White House Chief of Staff Mark Meadows said on Sunday the two sides were still very far apart, despite the progress made over the weekend after emergency unemployment benefits expired.

The Capitol Hill standoff echoes other US budget deadlocks in the past – which have also been marked by moments of political mastery – but with much higher stakes given the recession triggered by the coronavirus pandemic.

“We still have a long way to go,” Meadows said on CBS. Face the nation. Mr Meadows, who has led discussions on the Trump administration side with Treasury Secretary Steven Mnuchin, said a Saturday session went well, but he was “not optimistic” about the fact that there would be a “very short term” agreement.

The failure to reach a compromise before July 31 has left more than 25 million people in the world’s largest economy struggling with sudden austerity, after benefits worth $ 600 per week expired.

Democrats wanted to renew them at the same level until early 2021, but Republicans resisted, initially arguing that a new stimulus was not needed, then pushing for much smaller payments, making it l one of the most important and economically consequent sticking points in the negotiations. .

The current stalemate stands in stark contrast to March and April, when the White House and Congress quickly converged on $ 3 billion in budget support to prop up the economy during early lockdowns, helping to support U.S. and global markets.

Now, the lack of a deal has caused concern in the Federal Reserve, whose President Jay Powell has repeatedly pushed Congress to offer more support to the economy.

The median forecast from top U.S. central bank officials is that the U.S. economy will contract 6.5 percent this year, but the slowdown could be deeper if the stimulus is withdrawn. A delayed US recovery would also have a negative impact on the global economy, which is expected to decline 4.9% this year according to the IMF.

“Globally, other economies have benefited more from their own regional and national fiscal and monetary policies than from the spillover from the United States,” said Douglas Rediker, former senior treasury official in the Obama administration, but “The aggressive leadership of the United States was important as a signal as well as providing an indirect global stimulus. ”

US economists have warned that unless an agreement on unemployment benefits is reached, there could be additional job losses in the United States in companies affected by lower consumer spending, which would make it even worse human suffering.

“People are going to be evicted, they will be unable to feed their families,” said Martha Gimbel, head of economic research at Schmidt Futures. “Think of the huge amount of money that has been sucked into this economy, the government should desperately try to put it back,” she added.

Mark Meadows, White House chief of staff, right, and Steven Mnuchin, Treasury secretary, after Saturday talks © Stefani Reynolds / Bloomberg

On Sunday, Mr Mnuchin said he remained optimistic about a deal, with a new round of negotiations scheduled for Monday. “The president wants us to reach a deal quickly because it is important to the American people,” he told ABC. This week.

“Between the two sides there are different things that are very controversial,” he added, although he said there were also areas of agreement, such as extending a program. help for small businesses.

Nancy Pelosi, Speaker of the Democratic House, said her party was “united” in its insistence that unemployed Americans continue to receive $ 600 a week in emergency benefits, rather than the $ 200 offered by the party. republican.

When asked when a deal could be made, Ms Pelosi replied: ‘The point is that [we] will be close to a deal when we get a deal. “

Steven Horsford, a Democratic lawmaker from Nevada, told the Financial Times that the Republican-controlled Senate “wants to pull the rug under the majority of Americans who still struggle,” adding: “This is irresponsible, unacceptable, truly inhuman and immoral that the Senate has left [for the weekend] without doing its job. . . Something needs to be done in the very near future. ”

Areas of agreement between Republicans and Democrats include a new round of direct payments to American individuals, of $ 1,200 each. In addition to unemployment benefits, parties disagree on whether to protect businesses from liability for coronavirus infections – an idea pushed by Republicans – and whether to provide financial assistance to state and local governments – a priority for Democrats.

Over the past decade, the United States has seen several moments of high-stakes budget negotiations, including contact with a debt default amid Republican resistance to an increase in the debt limit for the Obama administration, difficult discussions to avoid the downfall of George W. Bush. tax cuts in 2012 and several government closures.

The hope among analysts and economists is that the current stalemate in the United States can be resolved quickly, but the details will matter.

“The size and scope of the package will be important. Any reduction in jobless benefits will have a disproportionate impact on consumer spending, as it will hit the very segment of the population that spends virtually every penny of income, ”Oxford Economics wrote in a note.


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