Opinion | The threats to end the pandemic boost to unemployment checks would cause a disaster for the US economy. By Neil Dutta of RenMacLLC.
Business InsiderLawmakers, particularly Republicans like Mitch McConnell and Donald Trump, do not want to extend the benefit. But not extending the boost to the payments would cause a major demand shock and seriously harm the US economy as it tries to emerge from the coronavirus pandemic.
This is an opinion column. The thoughts expressed are those of the author.Lawmakers across the federal, state, and local levels ought to be commended for quickly responding to the economic damage wrought by the coronavirus pandemic and measures taken to slow the spread of the virus, but it is important for policymakers to not rest on their laurels. To be sure, the news in recent weeks has been encouraging. The pace of testing has increased and the rate of positives has come down. US equity markets have advanced. There are tentative signs that aBut it appears some policymakers have lost their appetite for more action to support the economy. For more than a year before the pandemic hit, President Trump was clamoring for the Federal Reserve to cut rates in an effort to boost the economy. But now, the Fed is still taking aggressive steps and it's the Trump administration that is signaling it wants to do less.quipped, "I think it's possible that we'll see a strong enough economy that we don't need [another stimulus]."There is a risk to declaring victory too soon and expecting the reopening of the economy to drive a robust labor market recovery. The risk of too much stimulus is negligible — especially with negative real interest rates as far as the eye can see . But there is plenty of obvious risk in waiting to see how economic conditions unfold and doing too little to lift the economy. Now isn't the time to hesitate. Nowhere is this risk greater than if lawmakers allow the enhanced unemployment insurance benefits to lapse in July. As part of the CARES Act, unemployment insurance was supplemented with a $600 per week boost. In many cases, particularly in the affected industries of leisure & hospitality and retail, the enhancement ends up paying more than the previous wages of the workers. But given the state-mandated shutdowns and the public health imperative to encourage people to stay home, the addition was a necessary bridge for households during the pandemic. since the economy is starting to reopen. The thinking is pretty straightforward: extra unemployment insurance raises incomes beyond what someone would otherwise get in the marketplace creating a perverse disincentive to look for work.
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