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Virus resurgence threatens the economy as rescue programs run out

Biden – whose approval rating on Gallup dropped to 50 percent this week, its lowest ever – is already attracting attacks from Republicans on the issue. Texas Rep. Kevin Brady, the leading GOP tax writer in Congress, said the president was too focused on pushing his “$ 4 trillion spending frenzy” and not enough on the virus.

Jason Furman, a former top economic advisor to President Barack Obama who is close to the current White House economics team, said the west wing is well aware of the risks to the economy from the surge in Covid cases.

“Any problem that has a 5 to 10 percent chance of causing economic recovery to fail is something you look at and worry about,” said Furman.

The concern is not particularly great, however, because even in the “most plausible worst-case scenario” there is a risk that the delta variant “converts a very quick recovery into a quick recovery”.

Another person familiar with the economics team’s discussions confirmed that the White House is very observant but does not see the virus as a significant threat. Biden has urged Americans to get vaccinated mainly out of concerns for people’s safety but also with an eye to the economy, the person said.

Biden said Monday after the stock market slumped as investors prepared for a possible recovery in the virus, “We can’t let up, especially because of the Delta variant, which is more transferable and dangerous.”

Coronavirus cases are increasing across the country and are again reaching their highest level since the beginning of May as the highly contagious variant spreads across the country. The sharp rise has rekindled fears of the pandemic, especially as cases increase in young children unable to get a vaccine and even in fully vaccinated children.

“If people don’t feel safe, they’ll close schools. If people don’t feel safe, they won’t go back to work, ”said Claudia Sahm, a former US Federal Reserve economist. “The recovery – it works, but it is still vulnerable.”

While it is far too early to assess the impact of the rise in cases, any Delta-driven slowdown in jobs is likely to be most pronounced in the blue states, where higher percentages of residents are vaccinated but people are also less willing to Risks as coronavirus cases are increasing. A poll by CBS News this week showed that nearly 3 in 4 fully vaccinated Americans are concerned about the Delta variant, compared with less than half of those who are not fully vaccinated or have had no vaccinations at all.

The same Democrat-run states also have the most jobs that have yet to be recovered as they initially had stricter shutdown orders and then reopened more slowly. About 8 million of the 10 million jobs missing in the economy before the pandemic are in blue states, said Arindrajit Dube, a labor economist at the University of Massachusetts at Amherst.

The slowdown in employment growth is therefore likely to be greatest in those countries where needs are greatest. And when you consider how much economic activity these states generate, the impact on macroeconomics will be more severe.

“If there are populous parts of the country that have taken Covid seriously all along and these people get scared, then at least recovery will slow down noticeably,” said Sahm, now a senior fellow at the Jain Family Institute.

If Delta continues to expand, the economic shock would come as large swathes of Americans are still struggling to get back on their feet.

While wages have increased, particularly for low-income workers in the leisure and hospitality industries, these increases have been outpaced by inflation. And more than one in three American adults now has fewer emergency savings than before the pandemic, despite Congress having pumped more than $ 5 trillion in stimulus and relief funds into the economy since March 2020, according to a survey by Bankrate.com released Wednesday .

“That really highlights how much we need to get jobs back,” said Diane Swonk, chief economist at Grant Thornton. “All of the problems that really plague low-income households have not gone away. We bought some time, but the clock is running out. “

The end of various social safety net programs will affect tens of millions of Americans. Survey data from the Census Bureau show that 3.6 million households say they face some or very likely eviction in the next two months as the nationwide moratorium expires at the end of July. More than 12 million Americans continue to receive some form of unemployment benefit, with cuts or cuts until Labor Day.

And about 42 million student loan borrowers will have to resume payments in October unless the Biden government acts – and 2 in 3 say they will have a hard time paying the bill, according to a survey by Pew Charitable Trusts this month.

The ultimate risk is that these and other programs will expire at the same time, and a major coronavirus outbreak will result in a decline in economic spending, a slowdown in hiring, or increased incapacity for work for fear of contracting the virus.

“If we see a significant wave at the end of summer, in early autumn, then we will likely see an environment where the economic impact will be much greater if there is no additional fiscal support,” said Gregory Daco, US chief – Economist at Oxford Economics.

Congress has been preoccupied with longer-term initiatives rather than short-term incentives in recent months, namely a bipartisan infrastructure plan and a multi-trillion dollar spending package on childcare, health care, education and climate, Daco said. The legislature will also have to act at short notice on urgent issues such as the budget and the debt limit.

“These will likely be the main focus,” he said. “So there could be a significant discrepancy between the potential need for additional fiscal stimulus and the focus of Congress on medium-term plans.”

In the meantime, the Delta variant is giving Republicans fresh ammunition to rail against the multi-billion dollar spending package that they have long slammed as an expensive Democratic wish list. Brady, the senior Republican on the House Ways and Means Committee, said Tuesday he hoped the president would now “turn away from his distraction from another $ 4 trillion spending spree” to focus on the coronavirus and focus on the economy.

“I’ve been worried that almost since day one, six months ago, [Biden] has been focused on beating the virus and rebuilding the economy, “Brady said. “The president is now trying to make up for this lack of attention, but I fear it is too late.”

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