The probability of a stimulus package is fading.
While there is a new hope that Congress will be able to approve more coronavirus relief this year now that the presidential election is over, the bill may be smaller if Republicans retain the Senate, even if Democrat Joe Biden takes the presidency, experts say.
“A divided government, with Democrats controlling the White House and Republicans in the Senate, is likely to mean a smaller-than-expected fiscal stimulus package,” Mark Haefele, leading investment officer at UBS Global Wealth Management, said in a note.
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It is true that Senate Republican is still not a certainty, even if the signs tilt in that regard.
House Democrats point to a $2. 2 trillion package; Senate Republicans have brought a smaller $500 billion spending program that includes small attendance and federal unemployment benefits; but Democrats blocked it after the measure passed more than 1,200 stimulus and state aid checks.
UBS analysts expect a deal of up to $1 trillion, below the $2 trillion stimulus package expected if Democrats had won a majority in the Senate.
However, aid is likely to come with elements that contribute to the recovery, adding higher unemployment benefits and more budget for small businesses with problems under the payout coverage program, UBS analysts said.
It is known if the next package would come with stimulus controls.
Economists have been calling for a stimulus renewal since the last circular of more staff fired and other aid previously approved by Congress expired in late July.
A divided government can also further hamper an agreement on a new injection of aid to the economy.
“Americans are suffering. The longer Congress waits for a stimulus package, the more small businesses will go bankrupt and others won’t pay their rent or mortgage,” said Ken Moraif, senior advisor to Retirement Planners of America, a monetary consultant. . .
“We will start to see systemic damage to the economy and see permanent unemployment even more,” Moraif added.
In October, the ranks of permanently dismissed personnel were reduced from 3. 8 million to 3. 7 million, according to the Ministry of Labour. This number has increased as employers cut ties to an increasing percentage of the staff they had laid off.
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Several analysts are concerned that some Republicans have little incentive to approve a package in an unconvincing consultation in 2020. That said, some Republican officials have indicated that they need to succeed in an agreement before the end of the year.
On Wednesday, Senate Majority Leader Mitch McConnell said he supported Congress by passing a new stimulus package before the end of the year instead of January, as he had said in the past. The Senate will return from recess on Monday.
“I think we have to, and I think we want to do it before the end of the year,” McConnell said at a news convention on Wednesday. “I think now that the election is over with you have to find a solution. “
On Friday, McConnell said Congress approved a smaller stimulus package, as a fall in the unemployment rate to 6. 9 percent last month, as well as other signs of economic growth, indicated that the U. S. economy was recovering.
“I think it reinforces the argument I’ve put forward in recent months that anything smaller than investing an additional $3 trillion in this challenge is more appropriate,” McConnell told reporters, according to Reuters.
But House Speaker Nancy Pelosi rejected her call for a limited bill and worked with Treasury Secretary Steven Mnuchin to reach a nearly $2 trillion settlement.
“I don’t like it at all, because they haven’t agreed to weigh the virus yet. If they don’t weigh the virus, we’ll still have to deal with the consequences of the virus,” Pelosi said at a press conference. .
Still, some analysts are involved in the feasibility of a stimulus package after the two sides failed to reach an agreement in recent months.
“There will be a lot of grudges between Republicans and Democrats after this election,” said Andrew Mies, senior investment director at 6 Meridian, a registered investment advisor. “If things are more or less the same in Congress, does that mean it will still be stuck with the stimulus package?”
Several European governments are re-establishing restrictions on businesses in the hope of stopping the outbreak of virus cases. In the United States, where infections are also spreading at a worrying rate, the concern is that concern can depress commercial sales, leading to additional layoffs. .
“The economy will want a new stimulus circular early next year. We are already seeing modest blockades in Europe,” Mies added. ” State by state, there may be more restrictions on what other people can do and, as a result, there will be more unemployment problems. “