The future of the US economy, and particularly consumer spending, remains in jeopardy, as unemployment benefits ended Friday. Both chambers of Congress have spent the last few days negotiating a new relief bill to no avail.
Senate Republicans proposed a new bill that would extend the relief, as well as provide another stimulus check. The first stimulus package, which was designed as a stopgap for the COVID crisis, has long since run out.
The new bill does not go far enough, however, according to Democrats. Leaders of the blue party have suggested that Congress should include an additional $1 trillion in aid to support state and local governments, but House Republicans disagree.
US Unemployment Woes
However, as the parties negotiate, the end of the $600 per week unemployment benefits could cause some hardship. Already, families are finding it difficult to make ends meet with the loss of wages.
Republicans have suggested a lower, weekly addition of $200 in order to incentivize workers to return to the workforce. Democrats are seeking a continuation of the $600 weekly payments. A $400 settlement is likely in the cards.
As the negotiations continue, unemployed workers continue facing struggles for survival. However, the broader issue facing the U.S. economy is consumer spending moving into the third quarter.
Should economic relief end completely, there could be a substantial decline in consumer spending. While the stock market has moved back toward pre-COVID levels, a substantial drop in spending would likely result in another move down.
Recent numbers indicating that the US GDP declined by an annualized 32.9% appear to be a harbinger of pain to come.
Addiction to Stimulus
The notion that the U.S. economy is completely dependent on stimulus packages plays into Treasury Secretary Steven Mnuchin’s narrative. The Secretary expressed concern that the economy was ‘addicted’ to stimulus.