A string of emergency COVID-19 relief bills passed earlier in the year added 4.7 percent to gross domestic product (GDP) in 2020 and will add another 3.1 percent to the economy in 2021, according to an analysis by the nonpartisan Congressional Budget Office (CBO).
“By providing financial support to households, businesses, and state and local governments, the legislation will offset part of the deterioration in economic conditions brought about by the pandemic,” the report said.
The Federal Reserve estimates that the economy will shrink 3.7 percent this year, down from the roughly 2 percent projected growth rate before the pandemic, meaning the economic downturn could have been nearly twice as bad without the intervention.
The report could also give a boost to Democrats in stalled negotiations over an additional COVID-19 relief package.
The CBO found that direct assistance to state and local governments had the largest effect on the economy. For every dollar spent on state and local aid, the economy saw an 89 cent increase through 2023, well above the 59 cent average of all the measures.
The much-vaunted Paycheck Protection Program, which offered small businesses forgivable loans to keep workers on the books, only resulted in a 37 cent increase for every dollar paid, the lowest on the list.
Enhanced unemployment benefits also punched above their weight, at 68 cents of GDP increase per dollar spent.
All in all, the report said the bills would add $2.3 trillion to the 2020 deficit and another $0.6 trillion to the 2021 deficit.