MNI EXCLUSIVE: Ex-Presidential Advisers Fear US Fiscal Stall

The U.S. economy could stall or even deteriorate further if Congress fails to agree on another major fiscal stimulus package soon, three chief economic advisers to former U.S. presidents warned in interviews with MNI.

The prospect of a significant, multi-trillion dollar program that includes the extension of vital jobless benefits looks increasingly weak as Republicans and Democrats harden their negotiating stance ahead of the November elections.

"Without a fiscal agreement and without control of the spread of the virus, the economy is at great risk of stalling out well short of where we were before this started," said Austan Goolsbee, who was head of former President Barack Obama's Council of Economic Advisors.

House Speaker Nancy Pelosi has stated Democrats are willing to lower the total stimulus amount to USD2.2 trillion while Mark Meadows, White House chief of staff, says President Trump has increased his offer to USD1.3 trillion from USD1 trillion.

"Households can only cope for so long before running out of money, which would impact consumption and thus the economy more broadly," Jason Furman, a successor to Goolsbee as chief of Obama's Council of Economic Advisors, told MNI. "This might not be enough to reverse the recovery but certainly would unnecessarily stall it."

Furman says an effective second round of stimulus should be USD1.5 trillion to USD2 trillion, including about a USD400 a week bonus for unemployment insurance and more than half a trillion for states and localities.

BIPARTISAN WORRY

Concerns about a lack of additional fiscal action are not reserved to Democrats.

Glenn Hubbard, who was chairman of George W. Bush's Council of Economic Advisors, told MNI that "an additional package provides important insurance, particularly for states and for longer-term unemployed."

Federal Reserve officials, who normally stick to their monetary mettle, have been unusually blunt about stating publicly that a recovery is almost impossible without additional help from Congress.

"While the virus remains the most important factor, the magnitude and timing of further fiscal support is a key factor for the outlook," Fed Governor Lael Brainard said in a speech this week.

Cleveland Fed President Loretta Mester echoed the sentiment in a webinar: "It seems clear further fiscal support is needed."

The U.S. unemployment rate posted a surprise decline to 8.4% in August, falling below 10% for the first time since the pandemic. But fears remain high that what had been temporary layoffs that began alongside the coronavirus pandemic will soon become permanent as millions of businesses shrink or shutter.