Relief efforts should cushion economy in months ahead: White House report

WASHINGTON: Increased transfer payments and expanded liquidity measures aimed at companies should help buffer US households and businesses from the worst of the economic crisis unleashed by the coronavirus pandemic in coming months, the White House Council of Economic Advisers said in a report on Thursday.

Nonetheless, the economy would recover faster and with less scarring if agreement were reached on additional support, Tyler Goodspeed, the CEA's acting chair, told reporters in a briefing on the report.

Republicans and Democrats in Congress are at an impasse over the size of another coronavirus aid package, with talks having broken down in the past week. "Very substantial headwinds remain," Goodspeed said. "What is going to be absolutely essential for continued economic recovery is ... a continued recovery in the US labour market."

The report said the US government acted with "unprecedented scale, speed, and coordination, surpassing past efforts to mitigate previous crises," and said it had helped ameliorate a stark economic contraction while improving expectations for a recovery in 2021.

However it cautioned that its findings were based on data through mid-July, and the longer-term impact was still evolving. Federal Reserve officials warned this week that the US economic recovery will be slow until the virus is under control, and the expiration of economic stimulus could slow the recovery further. At least 5.2 million coronavirus cases have been reported in the country and more than 166,000 people have died.

"It does appear as of now that the increase in transfer payments resulting in a marked increase in personal income and savings, and the expanded liquidity measures aimed at firms, will likely provide a buffer to households and businesses for the next few months, allowing them to weather the worst of the crisis," the report said.

The US government's Paycheck Protection Program, which provided loans that could be converted to grants if small and medium-sized businesses met certain conditions, had helped stabilize labor markets, the report said, with an estimated 80.6% of layoffs likely to be temporary rather than permanent.