The United States could reach previous employment levels by next year if President Joe Biden’s proposed stimulus package is passed in Congress.
This is the belief of Treasury Secretary Janet Yellen, a leading economist and previous chair of the Federal Reserve. However, Yellen warns that unemployment would remain elevated for “years to come” if Congress doesn’t act now.
Republicans Opposed to Biden’s Stimulus Package
Speaking to CNN over the weekend, Yellen said that Biden’s proposed $1.9 trillion federal stimulus package would help the nation to “get back to full employment next year.” The Treasury Secretary believes it could take until 2025 or even longer to fix the unemployment rate if no action is taken.
The White House is aggressively trying to push the stimulus package through Congress with the support of Democratic lawmakers. Republicans have opposed the bill, based on its high cost to the federal government. It’s important to note that Congress approved trillions in stimulus spending under former President Donald Trump.
Biden’s proposed bill would include direct assistance for families, including stimulus checks of up to $1,400 per eligible individual. Eviction aid, subsidies for food, extended unemployment subsidies, and a $15 federal minimum wage are also included in the legal text.
Some economists have remained cautious about the proposed stimulus, saying that it could trigger inflation. Larry Summers, an economic advisor to former President Barack Obama, said in a Washington Post opinion column earlier this month that the stimulus, being almost three times as large as the projected economic shortfall, could create “inflationary pressures.” Summers warned that these could be more severe than any that any seen “in a generation” of the U.S. He claimed that there is no precedent for a stimulus package this large in proportion to the current and expected state of the economy over the next year.
Lawmakers May Push for Smaller and More Focused Stimulus Measures
Republicans opposed to the large stimulus package have suggested that the government instead focuses on smaller and more targeted spending, such as assistance for those in struggling industries, like hospitality and entertainment.
The stimulus would be beneficial for the economy in the short-term, but it needs to be proportionate. Market investors will see stimulus as a net positive, but it will be important to analyze whatever package Congress eventually settles on. Too much stimulus could quickly improve the economy at the risk of creating more challenges later.
Stocks have so far rallied under President Biden, but investors must remain vigilant and fully informed about federal policies to make the best picks moving forward.
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