Analysis: $2 trillion virus relief bill is massive, but it won't prevent a recession
Congress and the White House have nearly finalized a $2 trillion relief package for the economy - the biggest in U.S. history.
The good news is the majority of the money is going to laid off workers, small business owners, hospitals and state and local governments. The bad news is it won't be enough to stop a recession. And it's an open question whether the nation can avoid an economic depression, the likes of which haven't been seen since the 1930s.
"By any measure this is a huge stimulus package. One thing that it cannot stop is the recession that is coming," said James McCann, senior global economist at Aberdeen Standard Investments
Looking back at the Great Recession, economists consider Congress' response too slow, too stingy and too focused on big Wall Street firms. Many analysts say Congress deserves some credit for doing better this time. This relief package is more than double the $830 billion that Congress passed in 2009. It came together in a few days, and it's far more targeted at Main Street.
Roughly a quarter of the money will go to large companies, including billions earmarked for Boeing and airlines, but middle class and low-income Americans are slated to get $1,200 checks (more for people with kids). Small business owners look likely to get access to $10,000 grants and millions in loans, and there's additional money set aside for the unemployed.
But economists say two key problems remain: Fixing the health crisis and getting money to people in time.
Constance Hunter, chief economist at KPMG, predicts it will take at least 6 to 10 weeks for the government to get a significant amount of the money dispersed. That's a long time for laid off workers and small business owners with no money coming in to wait. It makes it less likely they will bounce back quickly.
"There isn't some magic restart button for the economy," said Hunter. "Before the money arrives, there will be a lot of collateral damage to the economy. That's going to make restarting it difficult."
The nation is choosing to shut down much of the economy to save lives, maybe as many as hundreds of thousands of lives, according to one estimate. The nation has to get the pandemic under control before daily life and business can go back to anything remotely normal. It's still a big unknown how long that will take. President Trump has floated the idea of getting people back to work by April 12. Yet, public health officials don't think that is realistic and going back too soon could cause a second spike in coronavirus cases and deaths, forcing more shutdowns.
Senate Major Leader Mitch McConnell, R-Ky., declared on the Senate floor Wednesday that "this is not even a stimulus package, it is emergency relief." Economist agree. This $2 trillion isn't about boosting the economy, it's about trying to compensate people for what could be $2.5 trillion in lost business and wages in the coming weeks. And that's a best-case scenario. Losses will be deeper if the pandemic last into the summer.
To prevent a depression, the relief payments have to get to workers and business owners fast enough to prevent a chain reaction of pain where one person goes out of business and that triggers another failure and another.
James Bullard, a noted economist and head of the Federal Reserve Bank of St. Louis, put out a dire forecast of what's ahead for the nation in the coming months: He expects 46 million Americans to be unemployed (30 percent of workers), and an unprecedented 50 percent decline in economic output.