Joe Biden, a Washington DC veteran, could take his thinking a little further than the capital to review America’s chaotic recovery plan. Congress closed an inadequate (but better than nothing) $ 900 billion stimulus plan over the weekend, though the methods remain ineffective. That suggests help will be needed in the future, but it will require both political will and rewriting.
The agreement reached by congressional leaders on Sunday serves only to catch up with the economic damage caused by the first wave of the crisis. The poverty rate increased 2.4 percentage points from June to 11.7% in November, according to a study by three universities. Goldman Sachs boss David Solomon told CNBC last week that small businesses have spent 90% of their Check Protection Program (PPC) aid money.
The new injection includes a direct payment of $ 600 for an individual who makes up to $ 75,000 a year, half of what lawmakers distributed in the spring. Unemployment benefits are rising once again, this time by $ 300 a week. There is also $ 284 billion in aid to small businesses.
However, the programs have flaws. States, awash in jobless claims, are hugely behind schedule. As a result, only about 60% of the people who applied have received the aid, and the average time was up to seven weeks, according to the Century Foundation. Meanwhile, PPC has been hit by fraud, with aid going to large companies, while many small businesses have been left without it.
The winter surge in Covid-19 cases will continue to weaken the economy. Jobless claims for the week ending December 12 were already at their highest level since September. A winter storm in the Northeast has closed many restaurants completely, with concerns that they will never open again.
More money will be needed, but programs to supplement lost income must be simplified. Stimulus checks and unemployment benefits could be combined into a program similar to Britain’s, which has covered 80% of workers’ wages at ERTE, up to about $ 3,400 a month. That has helped keep the UK unemployment rate relatively stable this year: it grew by less than a percentage point from the first quarter, to 4.9% in the August-October period.
For small businesses, the provision of government grants for amounts less than $ 100,000, rather than start-up loans through banks, would help. Reviewing what doesn’t work will be a difficult task for Biden, especially with a deeply divided Congress. But it would help ensure that public money is well spent.
The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, of Carlos Gomez Down, it is the responsibility of Five days
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