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Saving The US Economy

A stalemate in Congress is exacerbating the growing economic crisis brought on by Covid-19

“There are two titanic battles under way in America,” said Irwin Stelzer in The Sunday Times. The first is between President Donald Trump and his Democrat challenger, Joe Biden. The second is between “Covid-19 and the economy”. In the latter struggle, the US economy continues to have “great underlying strength” – as illustrated by the buoyancy of the housing market and resurgent industrial production. But its “seemingly irresistible rise” after reopening has, sadly, “proved resistible after all, in recent weeks”. The outbreaks of Covid cases in California, Arizona, Texas, Florida and other states has led to new restrictions on business and a rise in lay-offs. Even Trump has abandoned his previous optimism, conceding that “the surge in infections is likely to get worse before it gets better”. That’s bad news for his re-election chances. Yet, “perversely”, the administration is pushing for a new $1trn relief package that is “significantly more modest than the existing one”.



The White House and Senate Republicans have thrown their weight behind a plan to slash Covid-related “jobless aid for tens of millions of Americans” from $600 a week to $200 – even as unemployment is rising, said The New York Times. They argue the current amount “discourages Americans from returning to work”. With Democrats in Congress poised to reject any benefits cut, cue another “stimulus stalemate”, said James Politi and Courtney Weaver in the FT. Even assuming a compromise can be reached, economists fear that any reduction of stimulus “risks a huge selfinflicted wound for the US, depressing consumption and potentially creating a housing crisis”. The deadline also coincides with the end of a federal moratorium on evictions, “leaving families at the whim of a patchwork of state and local laws to protect them from being forced out of their homes”.

The US recovery hangs in the balance, said John Stepek on MoneyWeek.com. On the upside, there are signs this “second wave” of the virus is peaking. “The bad news is that the economic fallout, particularly in terms of jobs, remains extreme.” The growing crisis is already having an impact globally: the dollar dropped to its lowest point in two years this week, and gold prices hit a new record as investors scrambled for safe havens. This is a “critical moment” for both America and the global economy, said The Economist. “Pressure is growing” on the US Federal Reserve “to do more”. New monetary aid would mean “experimenting with unconventional policies” at a time when “the future is shrouded by unknowns”. Fed chair Jerome Powell will “know more” by the organisation’s next meeting in September. By then, sadly, “the need for more monetary stimulus could be all too clear”.

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