U.S. Relief Package Is Necessary But Insufficient
Although the effort will be a start, bolder action will be needed to ease overreliance on the Fed and improve longer-term prospects.
Well, it’s a start.
Photographer: Andrew Caballero-Reynolds/AFP/Getty Images
This week offered another illustration of a dual policy dynamic in the U.S. that has been undermining both short- and longer-term economic prospects for the past few months: too limited a response for necessary fiscal measures and pro-growth structural reforms and too much reliance on monetary policy tools that are close to, if not already past, the point of limited effectiveness. Although some rebalancing of this policy mix is likely next week, it unfortunately will not be enough to significantly alter longer-term economic prospects. It will also underscore the need for a bold policy response on the part of the incoming Biden administration.
Congressional lawmakers will spend the next few days finalizing, after protracted discussions, a fiscal relief package in response to the significant Covid-related pain and suffering felt by a growing number of Americans. This comes on the heels of data pointing both to a continuing contraction in retail sales and a reversal in the labor market, with initial jobless claims heading back up and likely to exceed 1 million in the next few weeks.