Coronavirus to shave trillions from US economy over 10 years

WASHINGTON (NYTIMES) – The US Congressional Budget Office projected on Monday (June 1) that the coronavirus pandemic would inflict a serious long-term blow to the United States economy, taking 3 per cent off the gross domestic product 10 years from now.

Without adjusting for inflation, the budget agency said, the pandemic would cost nearly US$16 trillion (S$22.5 trillion) over the next 10 years. Adjusting for inflation, that number would still total US$7.9 trillion. The estimates were an official tally of the damage the crisis has wrought, reflecting expectations of dampened consumer spending and business investment in the years ahead.

The estimate, requested by Senators Chuck Schumer of New York, the Democratic leader, and Bernie Sanders of Vermont, is likely to become wrapped in the continuing debate in the Senate over another coronavirus relief package, as Republicans urge restraint while Democrats push for another large round of spending.

Much of the diminished output would come from the energy and transportation sectors, which will grow more slowly as Americans pull back on travel.

Phillip L. Swagel, the director of the budget office, cautioned that “an unusually high degree of uncertainty surrounds these economic projections” because it remained unknown how the pandemic would unfold during the remainder of the year, or how social distancing and future relief measures enacted by the federal government might affect growth.

“If future federal policies differ from those underlying CBO’s economic projections – for example, if lawmakers enact additional pandemic-related legislation – then economic outcomes will necessarily differ from those presented here,” Swagel wrote in a letter to Schumer and Sanders.

The two senators had asked the budget office on Wednesday to examine the effect of the pandemic on the economy over the past few months as Democrats press for another quick and substantial round of federal coronavirus aid to spur a recovery.

Last month, the House passed a US$3 trillion stimulus package as an opening offer in anticipated negotiations with the Senate. Senate Republicans rejected its price tag and scope, arguing that it contained provisions unrelated to relief for families and businesses grappling with the health and economic toll of the pandemic.

Lawmakers have begun discussing a number of proposals, including toughening liability protections for businesses, providing aid to states and watering down unemployment benefits approved in the US$2.2 trillion stimulus package. But some Republicans have begun pushing back at the idea of more federal spending, raising the specter of the ballooning national debt.

In a joint statement, Schumer and Sanders said the budget office’s estimate undercut Republican arguments that Congress should wait to approve another relief package, as well as President Donald Trump’s call to include tax cuts in the next measure.

“In order to avoid the risk of another Great Depression, the Senate must act with a fierce sense of urgency to make sure that everyone in America has the income they need to feed their families and put a roof over their heads,” the senators said. “The American people cannot afford to wait another month for the Senate to pass legislation. They need our help now.”

Later, on the Senate floor, Schumer called on the chamber to address before the end of the month not only coronavirus relief measures, but police violence, arguing that lawmakers should not “spend time on fringe conspiracy theories, not spend time on putting right-wing judges who have shown no sympathy to civil rights and racial justice and harmony on the floor of the Senate.”

But Senator Mitch McConnell, R-Ky., the majority leader, gave little indication that the Senate would soon enter negotiations on another relief package. Instead, he announced Monday, he hoped that the Senate would take up a measure that would soften the terms of a federal loan program intended to help small businesses during the pandemic.

The House approved the measure Friday, 417-1. The legislation would give companies more time and flexibility to use the money, altering the Paycheck Protection Program to allow small businesses 24 weeks instead of eight weeks to spend the loan funds.

“These events only compound what has already been a historically challenging time for our country,” McConnell said in a speech on the Senate floor. “As our nation continues to combat and contain the coronavirus, the Senate will continue to lead the response.”

As he spoke, protesters began to gather outside the Capitol. They told reporters that the government – and lawmakers of both parties – had failed to support them. As police officers stood between the building and the hundreds gathered there Monday, at least one protester offered a police officer a mask. It was not accepted.

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