Stimulus price tag of $1.2T falls way short, some experts say

Economic experts are warning that the $1.2 trillion stimulus proposal under negotiation in the Senate may fall well short of addressing the massive fallout from the coronavirus pandemic.

The plan, drafted by Senate Republicans, would include direct payments to many Americans, as well as $300 billion in loans to help struggling businesses stay afloat and a $200 billion facility for important industries such as airlines.

“Responding to this kind of protracted slowdown will require a bigger stimulus than the 6% of gross domestic product proposed by the administration,” Narayana Kocherlakota, the former president of the Federal Reserve Bank of Minneapolis, wrote in a Bloomberg opinion piece. “It’s going to take a much larger fiscal infusion to make up for that shortfall — something more on the order of $2.5 trillion rather than $1.2 trillion.”

Kocherlakota called for $10,000 cash payments to every adult, significantly more than the two payments of $1,200 included in the Senate GOP proposal.

Democrats are pushing to include an additional $150 billion in funding of federal, state and local COVID-19 response efforts, an order of magnitude larger than the $8.3 billion package President Trump signed into law two weeks ago and the White House’s request this week for about $50 billion more in funding.

In recent days, economic analysts on different points along the political spectrum have said more needs to be done to keep the U.S. economy intact in the coming weeks and months.

The Economic Policy Institute, a left-leaning think tank, said Friday that at least $2.1 trillion would be required through the end of the year alone to provide financial relief from the coronavirus.

“The likely cost of a fiscal boost sufficient to restore economic healthy by the end of 2020 starts at $2.1 trillion — but it could be more, and fiscal policy should be set to deliver more if conditions warrant,” EPI research director Josh Bivens wrote in a Friday blog post.

The right-leaning American Enterprise Institute recommended the U.S. follow in the U.K.’s footsteps and shore up all wages at 80 percent to save small businesses. That alone would cost $1.2 trillion to $1.5 trillion in assistance, they said.

“Low-margin businesses will face great financial difficulty losing multiple months of revenue, and many if not most small businesses would rather shut down or lay off a significant fraction of their workforce than take out a loan, even with a favorable or zero interest rate,” AEI scholars Glenn Hubbard and Michael R. Strain wrote.

Gordon Gray, the director of fiscal policy at the right-leaning American Action Forum, agreed that even the colossal bill under consideration by the Senate may only be a first step.

“While the costs are substantial, this is likely not the last fiscal intervention Congress will need to enact as the United States grapples with the current crisis,” he said.

Some current and former lawmakers have also come around to the idea that a substantially larger stimulus package will be needed.

“The Federal government is going to underwrite 70 percent of the payroll in this country if the containment policies continue to be this aggressive,” Sen. Lindsey Graham (R-S.C.) said Friday. “It’s going to be a hell of a lot more than $1 trillion.”

Former Rep. Joe Crowley (D-N.Y.) said Friday that the third round of stimulus will fall far short of what’s necessary to address the economic fallout of the pandemic, predicting Congress will likely need “several” more emergency relief proposals as the true extent of the damage becomes more clear.

“This has been coming in waves, and the waves are getting bigger and bigger and bigger,” he said on a phone call hosted by the Association of Former Members of Congress.

Former Rep. Frank LoBiondo (D-N.J.) delivered a similar assessment.

“There’s probably going to need to be at least several more after this,” he said. “Because we’re going to find out that whatever we include in this one, there are going to be people who are left out. And the people who are left out are going to be suffering as much as anybody was before their phase of it kicked in.”

Goldman Sachs has predicted that initial unemployment insurance claims will spike to a record-shattering 2.25 million for the third week of March. That comes after jobless claims last week increased 70,000 to 281,000. The bank also forecasted unemployment will shoot up to 9 percent from its current level of 3.5 percent.

While Senate Majority Leader Mitch McConnell (R-Ky.) has called for swift passage of the stimulus measure by early next week, the Democratic-led House has its own ideas about what the economic response should look like.

“Senate Republicans’ latest bill does not go nearly far enough to help working people and our most vulnerable,” Rep. Rosa DeLauro (D-Conn.), an influential appropriator, said Friday. “At a time of crisis, we must be concerned for the solvency of major industries that need assistance, but working people, families, and our most vulnerable must be our top priority.”