By David Bailin
Chief Investment Officer
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With infections still rising in the US, we believe more fiscal stimulus is needed now. We consider how much is needed and why.
More government spending is required now. The failure of the US to contain the virus early - and the lasting impacts this is having on all “socially close” economic activities – means that the rate of re-employment in the US will slow. We reaffirm our March $4.5 trillion fiscal response estimate and note that $2 trillion of that amount is required to bridge the economy to January 1st.
We expect Congress will agree to an extension of emergency benefits as they have 36 times previously. Additional income supports are likely and greater attention is needed to avoid the government creating disincentives to work. Federal unemployment benefits to date are just 18% of all COVID-related supplemental Federal outlays. While the failure to pass additional benefits would be quite worrisome, the idea that a massive “spending cliff” is upon us is an exaggeration.
An effective vaccine would represent the greatest fiscal savings instrument in world history. Keep an eye on its progress.
This week will start the period of drama and suspense over how the two US political parties come to eventual agreement.
Read: CIO Strategy Bulletin
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