Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

CRFB webinar - Where Does the Next Phase of COVID Relief Stand - July 31, 2020

363 views

Published on

Lawmakers on Capitol Hill have been negotiating over a new package of economic and public health support to combat COVID-19. Congress has already enacted $3.7 trillion of spending, tax cuts and deferrals, loans, and other fiscal aid, but some of this support is now expiring, particularly expanded unemployment benefits.

On July 31st, Committee for a Responsible Federal Budget senior vice president Marc Goldwein presented a webinar titled "Where Does the Next Phase of COVID Relief Stand?" This slide deck was made to accompany that webinar.

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

CRFB webinar - Where Does the Next Phase of COVID Relief Stand - July 31, 2020

  1. 1. CRFB.org
  2. 2. CRFB.org $19.0 trillion in Q1 $17.2 trillion in Q2 $0 $5 $10 $15 $20 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 GDP Has Fallen by 9.5 Percent Shaded bars indicate recessions Source: Bureau of Economic Analysis, Washington Post Real GDP (trillions) 2
  3. 3. CRFB.org $0.5T $0.7T $0.9T $1.1T $1.3T $1.5T January February March April May Illustrative Monthly After-Tax Income (Billions), Assuming Flat Market and Transfer Income in May Market Income (minus taxes) Government Transfers (excluding UI and rebates) Economic Impact Payments 5.4% Increase from February Personal Income Has Grown Through May Despite Recession May is a rough CRFB projection, assuming no net change in market and transfer income Note: updated 6/22 to correct an error that omitted employer pension and payroll tax contributions from income Source: Bureau of Economic Analysis 3
  4. 4. CRFB.org $0.5T $0.7T $0.9T $1.1T $1.3T $1.5T January February March April May June July August Illustrative Monthly After-Tax Income (Billions), Assuming Flat Market and Transfer Income in May Market Income (minus taxes) Government Transfers (excluding UI and rebates) Economic Impact Payments Unemployment 2% Fall in Income from February, 4% from July But Income Is Slated to Fall in August May is a rough CRFB projection, assuming no net change in market and transfer income Note: updated 6/22 to correct an error that omitted employer pension and payroll tax contributions from income Source: Bureau of Economic Analysis 4
  5. 5. CRFB.org And We Still Face a Large Output Gap Source: CRFB Calculations based on Congressional Budget Office Data Note: All estimates begin August 1 of 2020 Estimated Output Gap Beginning August 1 (Billions of Nominal Dollars) -$750 -$1,250 -$2,000 -$3,850 -$5,150 -$6,000 -$5,000 -$4,000 -$3,000 -$2,000 -$1,000 $0 6 Months 1 Year 2 Years 5 Years 10 Years 5
  6. 6. CRFB.org $2.2 trillion $2.2 trillion > $5.7 trillion* $3.7 trillion $470 billion $2.4 trillion $63 billion$413 billion $0 $1 $2 $3 $4 $5 $6 $7 Federal Reserve Actions Legislative Actions Administrative Actions Amount Disbursed/Committed Amount Not Disbursed/Committed Deficit Impact How Big Is The COVID Response? Trillions * Some Fed facilities and programs have no announced cap or maximum, in which case, we assume the max as the largest amount disbursed or committed since the crisis began. 6
  7. 7. CRFB.org 7 6 Months 1 Year 2 Years 5 Years 0.25x multiplier $2,950 billion $5,000 billion $8,000 billion $15,450 billion 0.5x multiplier $1,500 billion $2,500 billion $4,000 billion $7,700 billion 1x multiplier $750 billion $1,250 billion $2,000 billion $3,850 billion 1.5x multiplier $500 billion $850 billion $1,350 billion $2,600 billion 2x multiplier $400 billion $650 billion $1,000 billion $1,950 billion 2.5x multiplier $300 billion $500 billion $800 billion $1,550 billion "Income Gap" $200 billion $550 billion $1,350 billion $3,450 billion Source: Congressional Budget Office and CRFB calculations. "Income gap" is a concept we use to describe the difference between actual personal income and potential personal income. To approximate potential personal income, we assume income would remain the same share of potential GDP as projected prior to the current crisis. The gap is small in the near-term due to existing government transfers. But More Funds Will Be Needed Cost of Closing the Output Gap, Depending on Average Multiplier
  8. 8. CRFB.org But More Funds Will Be Needed Funding may be needed for: ▪ Unemployed workers ($600/week bonus expires July 31) ▪ State & local governments (Fiscal Year Started June 1) ▪ Small businesses (PPP loans !all issued) ▪ Households (Economic Impact Payments ~all issued) ▪ Colleges, Hospitals, and Health Providers ▪ Essential Workers ▪ COVID-19 and related public health needs 8
  9. 9. CRFB.org 9 Policy Ten-Year Cost/Savings (-) Provide Aid to State and Local Governments $1.13 trillion Increase Safety Net Spending $485 billion Provide Additional Rebates $435 billion Increase Health Care-Related Spending $382 billion Support Small Businesses and Employee Retention $290 billion Reduce Individual Taxes $290 billion Provide Student Loan Relief and Funding for Higher Education $191 billion Increase Housing-Related Spending $202 billion Establish Hazard Pay Fund for Essential Workers $190 billion Increase Communications-Related Spending $32 billion Provide Pension and Retirement Relief $48 billion Increase Agriculture Spending $31 billion Limit Business Loss Deductibility -$254 billion Total $3.4 trillion Source: Congressional Budget Office, Joint Committee on Taxation The House Introduced the Heroes Act
  10. 10. CRFB.org 10 Policy Ten-Year Cost/Savings (-) Reform & Extend Unemployment Benefits $110 billion^ Issue Second Round of Economic Impact Payments $300 billion Provide Small Business Loans and Support $158 billion Offer Tax Breaks for Employers to Hire, Retain, and Protect Workers $200 billion^ Increase Health-Related Spending $111 billion Increase Education Spending $105 billion Provide Targeted Support for Domestic Industries $63 billion Other Spending Increases $39 billion Enact Liability Protection for Schools and Businesses N/A Enact TRUST Act to establish trust fund rescue committees N/A Total $1.1 trillion ^Estimates are extremely rough and actual costs could differ substantially. Source: Bill text, legislative summaries, and CRFB calculations based on CBO & JCT estimates. The Senate Introduced the HEALS Act
  11. 11. CRFB.org 11 Lots in Common, but Many Differences Heroes Act HEALS Act Unemployment Bonus Extend $600 Bonus Extend at $200, Move to 70% of Wages Economic Impact Payments $1,200 per person $1,200 per taxpayer, $500 per dependent Support for Employers $290 billion for loans and tax credits $360 billion for loans and tax credits Aid for states, localities, and public schools $1.1 trillion in direct aid, higher M’caid, and schools About $100 billion for schools, plus flexibility Funding for Hazard Pay $190 billion None Health-Related Funding $382 billion $111 billion Liability Reform None Included Budget Process Reforms None TRUST Act Select Differences Between Heroes Act and HEALS Act

×