Biden’s Covid plan has to work. The economy depends on it

Biden’s Covid plan has to work. The economy depends on it

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Although vaccine development has taken place faster than many expected, distribution is lagging behind, in part because of the chaotic presidential transition amid the worst pandemic in a century.

“We will not see a strong economic recovery until we have wide distribution of the vaccine,” said Kristina Hooper, global chief strategist at Invesco.

Kevin Hassett, a former economic adviser to President Trump, told CNN Business that the U.S. economy is facing a “negative spiral” that could cause a sharp contraction in GDP in the first quarter, as well as last year.
The pandemic has already killed more than 400,000 Americans and US health officials are warning that the death toll could reach 508,000 in mid-February.
Rochelle Walensky, the new director of the Centers for Disease Control and Prevention, told NBC on Thursday that she does not think vaccines will be in all pharmacies in the United States until February, despite predictions by Trump officials. Biden’s goal is to distribute 100 million doses in the first 100 days – and the CDC official said that is still the plan.

Risk of ‘downtime’

The timing is critical because Americans’ health restrictions and voluntary measures are crushing virus-sensitive parts of the economy, especially the service sector.

As shown by the CNN Business Recovery Dashboard, box office sales, domestic air travel and hotel occupancy remain well below pre-crisis levels.

Millions of people whose jobs depended on restaurants, bars, hairdressers, laundries, cinemas, cruises, hotels and countless other industries are unemployed. The Back-to-Normal index, prepared by CNN Business and Moody’s Analytics, shows that the United States economy is operating at just 81% of where it was at the beginning of March.

“The next step in the recovery should be driven by the service sector. Without it, we will stagnate,” said Aneta Markowska, chief economist at Jefferies. “You cannot reopen the service sector without leaving the pandemic behind.”

‘The vaccine has to get here’

George Harman, a Winchester, Virginia, father of two, has cut spending dramatically since he took an unpaid leave of absence from a car dealership in early December. Harman stopped working because he feared that his elderly parents who lived with him would be sick.

“I could physically go to work, but is it worth dying or infecting someone in my home?” said Harman, who has a history of heart disease.

Like countless other Americans, Harman is not qualified for unemployment and is short on cash.

“The vaccine has to get here,” he said. “If I can vaccinate my parents, I can take chances at that point. But I can’t go to a place that I know has a widespread spread of the virus and then take it home.”

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Biden plans to sign a series of executive orders on Friday to help those in need, including a measure that could help people in a situation similar to Harman’s. The White House said Biden will ask the Department of Labor to consider clarifying that workers who refuse unsafe working conditions can still receive unemployment insurance.
While executive decrees help, Biden needs Congress to pass legislation that would have a much greater impact. Biden is asking lawmakers to approve his $ 1.9 trillion US bailout package, which provides for $ 1,400 stimulus checks for almost everyone earning less than $ 75,000, higher unemployment benefits, $ 350 billion in aid to state and local governments and $ 400 billion to defeat the pandemic.

Harman expects Congress to act – before he runs out of money.

“We don’t like to be in debt with trillions and trillions, but you are facing a situation that occurs once in a hundred years. You have to do what is necessary,” he said.

Wall Street is unfazed for now

While some economists and Republicans are concerned about the size of Biden’s proposal, Hassett, Trump’s former economist, told CNN Business that he broadly supports the $ 1.9 trillion package.

Markowska, Jefferies’ economist, said the rescue effort will help, but it will not solve the underlying problem.

“We drive recovery as much as we can without the service sector. Without it, we simply cannot progress – regardless of how much fiscal stimulus we apply there,” she said.

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At least so far, Wall Street has not been bothered by the growing pandemic and the slow release of vaccines. The S&P 500 and Nasdaq ended in records on Thursday, taking advantage of what was the best performance from Election Day to Inauguration Day in the post-World War II era.

That’s because markets are being fueled by the Federal Reserve’s emergency policies, which force investors to bet on stocks. And investors are optimistic that the economy and corporate profits will recover fully, eventually.

“I don’t think it’s important for the markets,” said Invesco’s Hooper, “but it’s definitely important for the economy.”

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