The US economic recovery is in danger of being weaker and more uneven if Congress and the White House fail to agree on a new round of fiscal stimulus, according to mounting warnings from Wall Street and academic economists.
In recent weeks, hopes have faded for an accord before November’s election to pump $1tn or more in government money into the world’s largest economy through direct payments to households, enhanced jobless benefits and aid to small businesses and state and local governments.
The diminished chances of additional fiscal support have caused many economists to fret that the US rebound will lose steam in later 2020 or early 2021, creating a drag on the global economy as it tries to recover from the worst contraction since the second world war.
“The risk of fiscal fatigue where policymakers stop providing stimulus or start trying to claw back too early is a meaningful global risk,” said Nathan Sheets, chief economist for PGIM Fixed Income. “What’s going on in Washington right now is in some sense exhibit A for that.”