The surge in coronavirus cases across many U.S. states will come with a big price tag. The next bailout package will need to be at least $1.5 trillion, compared with an estimate of $1 trillion before the rise in COVID-19 cases, according to Moody's Analytics chief economist Mark Zandi.
"A few weeks ago I thought $1 trillion would be enough," Zandi said on a conference call hosted by the Center on Budget and Policy Priorities. But now, he added, a fiscal package of $1.5 trillion in stimulus aid is needed in large part because of the virus' resurgence across swaths of the U.S., which is causing economic headwinds in those states.
States that reopened early — such as Arizona and Texas — are suffering from surges in coronavirus cases, leading to rollbacks of economic activity as local officials try to stem infections. Nevada on Thursdayand restaurants, effectively closing bars that don't serve food, for example.
On Thursday, the nation hit another all-time, single-day high for confirmed new infections: 63,200 cases.
"The economic recovery has gone sideways" in recent weeks, Zandi added. "Unfortunately, the rapid reopenings has also reignited the virus."
The U.S. could end up in a "very, very dark economic scenario" without another stimulus package, or one that fails to provide enough support, he said. Unemployment could rise in the fall if states order more businesses to close to halt the spread of virus, while consumers may shy from spending if they feel unsafe while leaving their homes, he noted.
"A double dip"
States that reopened early, such as Arizona and Texas, are, based on indicators such as restaurant bookings, consumer spending and small business activity, Deutsche Bank economists said late last month.
"We're concerned the latest health developments will lead to a double dip, or at least a stalling of the recovery," Oxford Economics economists Oren Klachkin and Mahir Rasheed said in a Thursday research report. "Forty of the 50 states, accounting for about 85% of national GDP, are now witnessing a rise in cases and are reversing their relaxation of social distancing measures."
Treasury Secretary Steven Mnuchin told CNBC on Thursday that GOP leaders are in support of another stimulus effort, although it's unclear what the package might look like. Mnuchin said that they are in support of extending additional unemployment benefits, for example, but added that Republican leaders want to "fix" the program so that people aren't earning more on the jobless benefit than they did in their previous jobs.
The HEROES Act, passed by the House in May, wouldalthough Republicans have signaled their opposition to the package. That bill would extend the $600-per-week boost in unemployment insurance until January 2021, as well as provide funding for testing and tracing, subsidies for state governments to avoid local layoffs, and protection from evictions for low-income households.
Rise in evictions?
Without an additional package, the additional unemployment benefits of $600 per week will end on about July 25. Out-of-work Americans will see their jobless benefits shrink by as much as 50% to 85% after that, depending on their state's regular unemployment pay, according to Andrew Stettner, senior fellow at the Century Foundation and an expert on unemployment.
WIthout that assistance, millions of people won't be able to pay their rent, mortgages or bills.
"Needless to say there is no worse time to have a mass of evictions ... than during a pandemic combined with a recession," said Robert Greenstein, the president of CBPP, on the conference call with Zandi. "The next package needs to be substantial enough to do the job and last long enough" to get the economy through early 2021.