5 Reasons More Stimulus Will Get Passed, and 5 Reasons It Won't

There’s no question about it. The CARES Act, passed back in March when the economy was grinding to a halt, was an overwhelming success. The $2 trillion package helped absorb the shock of the lockdowns and included direct payments to Americans, $600 weekly checks for the unemployed, support for small businesses through the Paycheck Protection Program, and bailouts for large industries like airlines. With the help of the relief package, the economy is bouncing back faster than expected from the depths of the crisis. Personal income spiked in April when the stimulus checks went out and has remained above pre-COVID-19 levels through August.

However, the $600 unemployment supplement checks stopped rolling out at the end of July, and with the pandemic likely to continue for several more months, the economy may need another boost. Here are five reasons another stimulus will get passed -- and five reasons it won’t.

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Early on in the crisis, a number of economists were calling for a V-shaped recovery from the pandemic, implying a quick snapback from the springtime lockdowns. In fact, a number of metrics have shown a V-shape, including the stock market, the housing market, and retail sales. However, the reality of a K-shaped recovery is becoming clearer these days. Wealthy Americans are doing well. They’ve mostly kept their jobs, and their stock portfolios and home values are still up. Lower-income Americans, however, are very much struggling as industries like restaurants and travel/tourism have been crippled by the pandemic, impacting Americans who tend to be younger and poorer.

Those workers have seen their industries shut down and may not be able to go back to work until the pandemic is over. They need more relief or they may lose their homes and fall into a vicious cycle of poverty, increasing the risk of homelessness and drug addiction, which cause additional social problems.

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In surveys about the potential for a second stimulus package, a majority of voters almost always respond favorably. In August, a survey by MagnifyMoney found that 61% of Americans need help paying for expenses, showing majorities across generations and political parties. It also reported that 81% of Democrats and 78% of Republicans said Congress should pass another relief package. A survey back in April found that 84% of Americans wanted another stimulus check.

The stock market has also treated news of another stimulus round kindly, rising on new proposals and falling when a deal seems unlikely.

The CARES Act was popular across the board, and another stimulus package, originally called the HEROES Act, is likely to be treated similarly.

Booming job growth in May and June showed that the economy was recovering faster than expected from the lockdowns, a benefit of both the economic reopenings and the CARES Act. However, since then, most metrics have showed that the recovery is slowing down. After the economy added 4.8 million jobs in June, job growth slowed to 1.7 million in July and 1.4 million August, which are still strong numbers but show that a recovery that could peter out before the pandemic is over, potentially leading to a W-shaped recovery.

Initial unemployment claims, another popular employment indicator, remain at historical highs of close to 1 million new Americans filing for unemployment every week, and that doesn’t include independent contractors like gig workers. Though workers seem to be rejoining the economy faster than they are losing jobs, that figure still shows how volatile the labor market is right now.

Since the start of the pandemic, epidemiologists have warned that the fall and winter could be the peak of the pandemic as immune systems weaken in colder weather and flu season will also sicken Americans and increase the risk of overburdening hospital systems.

Colder weather is right around the corner, which will force people indoors, where the virus is more susceptible to spread.

Nationwide, new COVID-19 cases -- including that of the president himself -- have stabilized around 40,000 over the last couple weeks, and recent spikes in Europe and elsewhere around the world are a reminder that another wave of infections are a definite possibility in the U.S., as much of the country experienced in July.

The threat of another wave of the pandemic could incentivize Congress to pass another relief bill preemptively before Americans have to face another wave of the pandemic.

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Americans have long held a low opinion of Congress, but the CARES Act was an undeniable success for the legislative body, showing that both parties can come together during a crisis to do what needs to be done.

While both parties have been bickering over the details of a second relief package, it’s in the interest of incumbent candidates in Congress to have a popular legislative achievement they can show to voters, especially with the election around the corner, and it should help lift Congress’ overall reputation.

Similarly, President Trump, who's currently behind in the polls to former Vice President Biden, likely sees a second relief package as a political winner for him.

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Congressional comity has been rare during the Trump era, and the situation got stickier following the death of Supreme Court Justice Ruth Bader Ginsburg. President Trump nominated Amy Coney Barrett to replace her, and Republicans seem set to try to confirm her before the election, which would be in near-record time.

The fight over Barrett is likely to take up much of the oxygen on Capitol Hill between now and the election. And it will add to the partisan rancor, especially as Democrats are still sore that President Obama’s last pick, Merrick Garland, was blocked by Senate Majority Leader Mitch McConnell..

While the Senate can address the relief package and hold hearings on Barrett, Ginsburg’s death makes the situation more complicated.

While the economic recovery may be slowing down, it is still proceeding faster than expected and much faster than the rebound out of most recessions. That makes another stimulus package less necessary as Congress would be reluctant to pay for something that it doesn’t need to.

Additionally, the economy has largely reopened, and everyday life is much more normal than it was in March and April, which prompted the first round of stimulus. As long as the recovery remains on track, the need for another round of stimulus, at least a wide-ranging package like the first, seems questionable.

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While it’s important to spend money in a recessionary climate to help the economy recover faster, all that additional spending isn’t free. Between fiscal stimulus and aggressive bond-buying by the Federal Reserve, the U.S. runs the risk of devaluing the dollar and running up the national debt to levels not seen in generations.

According to the Congressional Budget Office, the national debt is set to top the GDP next year for the first time since World War II. Only a handful of other countries have debt-GDP ratios that high.

There may not be immediate consequences to that extra debt, especially as interest rates are so low right now, but the bloated debt load could make it harder to borrow in future, in addition to costing the Treasury in future interest payments and adding to the chances that the dollar could weaken significantly.

In all likelihood, the closer we get to the election, the lower the chances are of another stimulus package being passed. Democrats, who could retake the White House and the Senate, may be especially reluctant to pass another stimulus bill with just weeks ahead of the election, potentially handing President Trump a political victory.

The Democrats have been trying to pass a larger stimulus package than Republicans want, and they have not indicated any reluctance to pass it ahead of the election. But, traditionally, both parties are reluctant to rock the presidential race with major legislation just weeks before the election.

Both sides have been in negotiations over a second stimulus package for months now. There have been a number of sticking points over the deal, including the size of the bill, whether there will be individual direct payments, and whether state and local governments will get the relief many of them so badly need after sales and income tax receipts plunged during the crisis.

Considering how long negotiations have carried on without a compromise, there may not be one without a direct impetus, like a clear sign that the recovery is faltering.

On Sept. 30, McConnell said that the two sides were “very, very far apart” on a deal, though Treasury Secretary Mnuchin said later that day that the two sides agreed that direct payments would be part of a second package. There's uncertainty surrounding how the Senate will proceed in light of several lawmakers' positive coronavirus tests. And Congress is also scheduled to go on recess for much of October, though that could change if leaders prioritize making a deal.

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While Americans have adjusted their lives to the pandemic at this point, getting used to remote work, more time at home, and new schedules, there is still a lot of uncertainty in the economy and with the pandemic. The Centers for Disease Control and Prevention has said that a vaccine probably won’t be widely available until next summer, so Americans should expect the pandemic-related headwinds to remain for several more months.

That means a second stimulus package could be key in determining the path of the economic recovery. Though new stimulus may not happen before the election, the issue is unlikely to go away as long as the pandemic is active.

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