Lawmakers released a blitz of competing coronavirus stimulus bills this week, reigniting stalled talks as the pandemic rages on across the country.
A bipartisan group from the House of Representatives and Senate unveiled a $908 billion proposal, as GOP and Democratic leaders traded their own new offers, none of which includes another direct payment to most Americans.
“I think it needs to be more than a trillion dollars,” Gus Faucher, chief economist at PNC Financial Services Group, tells Yahoo Finance Live. “The economy needs a lot of help.”
Treasury Secretary Steven Mnuchin speculated Wednesday that President Trump is ready to sign a new, slimmed-down COVID-19 relief bill from Senate Majority Leader Mitch McConnell.
It has been more than eight months since Trump signed the last major COVID-19 relief package, and lawmakers are in a race against time as a number of aid programs get set to expire December 31, including a moratorium on evictions.
Faucher says the next stimulus bill needs to extend more aid to individual households.
“We had unemployment insurance benefits expire. Many more people will lose their benefits at the end of the year. That will be a drag on consumer spending,” he adds.
Faucher says assistance to small- and mid-sized businesses is essential to any new aid package. “These businesses need help to get through until we get a vaccine. I think that will be very important.”
As of November, the U.S. Small Business Administration had processed and approved more than 5.2 million individual Paycheck Protection Program (PPP) loans amounting to $525 billion, along with 3.65 million Economic Injury Disaster Loans worth $194 billion. Watchdogs have warned that several billions of dollars have gone to ineligible businesses and fraudsters.
Money must also be put aside to help state and local governments recover from the debilitating pandemic, Faucher says. “They will face huge budget pressures. Gasoline tax revenues have dried up, and we could see huge spending and job cuts at the state and local governments. That would be a significant drag in 2021.”
Investors have been pinning their hopes on a vaccine to jump start the economy next year, but Faucher says we probably won’t see the economic impact from a vaccine until at least spring 2021.
“I think the next four or five months will be extremely difficult until there is widespread adoption of a vaccine,” he says. “I think we will see much slower economic growth down to 1% as an annual rate.”
He expects much stronger economic growth in the the second half of 2021 into 2022, once a vaccine is widely available and COVID-19 infections begin to fall.
Alexis Christoforous is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AlexisTVNews.