As lawmakers in Washington continue to argue over the size and scope over the next federal coronavirus aid bill amid concerns over excessive debt levels, new analysis from S&P Global finds that both President Biden’s sweeping $1.9 trillion spending package and a $618 billion counter proposal from ten Senate Republicans would help return the economy to pre-pandemic levels by the middle of this year.
The ratings giant predicts that Biden’s plan will bring gross domestic product back to pre-crisis levels by the second quarter of 2021 and boost demand-driven growth through 2023.
The $618 billion pared-down plan proposed by a group of Senate Republicans this week would also boost growth to pre-crisis levels by that time, but it would add less to overall GDP than would Biden’s plan.
The boost from additional stimulus legislation will “not change the longer-run growth of the economy,” S&P experts said, since they are intended to be short-term fixes and are financed with debt.
Rather, investments in infrastructure and workers (through education, for instance) are what will change the course of the American economy in a more permanent way.
If additional stimulus is enacted, regardless of its size, S&P predicts the risk of recession over the next year will fall to between 20% and 25%, down from the 25% to 30% range it was anticipating at the end of last year.
1.5%. That’s how much the last stimulus bill (worth $900 billion and signed into law in December) will add to GDP on average in 2021 and 2022, the Congressional Budget Office said Monday. The legislation will also add $774 billion to the federal deficit in 2021 and $98 billion to the deficit in 2022.
The U.S. economy is improving more quickly than expected from the ongoing coronavirus crisis and is on track to reach pre-pandemic growth levels by the middle of the year, the CBO said, but the labor market won’t return to normal until 2024.
Discussions surrounding federal stimulus legislation are heating up again on Capitol Hill. On Monday, Democratic congressional leaders set the wheels in motion to pass Biden’s $1.9 trillion rescue agenda without any input from Republicans. At the same time, Biden met Monday evening with the group of ten Senate Republicans who this week introduced a pared-back, $618 billion alternative plan—less than a third of the size of Biden’s. The smaller plan would scale back stimulus checks, federal unemployment benefits, and school funding and omit any new aid for state, local and tribal governments. It does not include a provision to raise the national minimum wage to $15 per hour, a major priority for Biden and Democrats.