Shannon Roddel | March 26, 2020
The White House and Senate March 25 reached a historic $2 trillion legislative package to counteract the negative shock from the coronavirus to the U.S. economy.
Congress should be applauded for putting together such an unprecedentedly massive package so quickly, according to Jeffrey Bergstrand, professor of finance at the University of Notre Dame’s Mendoza College of Business.
Bergstrand, a former Federal Reserve economist, said the size of the package is economically appropriate, however, he urged caution on several fronts.
“First, this program is only insurance against the viable possibility of a depression,” Bergstrand said. “At this time, $500 billion in cash payments to households, $350 billion in loans to small businesses, $100 billion to hospitals, $500 billion in support for large corporations in selected industries and an increase in unemployment benefits provides liquidity to households and businesses just to stay open. This will simply postpone closure of businesses and personal bankruptcies.
“It should not be viewed as a stimulus program, as it is not likely to push the economy back to its fourth quarter 2019 GDP level. The economy is certain to recede in the first, second and third quarters of 2020,” he added.
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