Either coronavirus stimulus plan would fill the hole in the economy for 2021: New analysis
Washington is currently deadlocked over two competing stimulus proposals.
One plan, spearheaded by the White House, would cost $916 billion. The other, from a bipartisan group of lawmakers and backed by Democratic leadership, comes in at $908 billion.
The two bills have key differences in how they spend the money. The White House plan, for example, includes stimulus checks, while the competing proposal offers much more generous unemployment benefits. And the Republican push for a coronavirus liability shield might not cost the government much but it could sink the entire deal.
But if lawmakers can’t figure something out, they’d be walking away from legislation that would fill the gaping hole in the U.S. economy for all of 2021.
That’s according to a new analysis from the budget experts at the Committee for a Responsible Federal Budget.
“We estimate if you passed either the Mnuchin or the bipartisan plan or anything of similar size, it would do the equivalent of closing the entire output gap in 2021,” Marc Goldwein, senior policy director for the CRFB, said on Yahoo Finance Live.
The output gap can be thought of as the difference between how big the economy should be – if the economy were operating at full potential – and what is actually likely to happen under current laws.
Needed to avoid a ‘shallow double dip recession’
One crucial caveat: the estimate shows that either plan’s effects would take three years to fully play out. But the CRFB notes that with both plans, “the vast majority of that boost” would materialize over two years.
“This fiscal relief could be hugely important for preventing what could be a shallow double-dip recession,” said Goldwein, as we wait for a coronavirus vaccine to roll out, allowing full economic activity to resume.
As of Friday, optimism about reaching a deal was at perhaps a low ebb with Congressional leaders barely talking. Without a deal before the end of the year, “we’re in for a rough next couple of months,” Goldwein said.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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