New CBO Data Makes Case for More Targeted COVID Relief Plan
For Immediate Release
As policymakers debate a new round of COVID relief, new Congressional Budget Office (CBO) data suggests a modest fiscal package could help secure a full economic recovery once the pandemic ends. Assisted by continued vaccinations and December’s $940 billion Response and Relief Act, CBO is projecting the economy will grow by 4.6 percent in 2021 and 2.9 percent the year after. Of course, there are many factors that could change this path for the better or the worse.
Overall, CBO estimates an output gap of nearly $380 billion for the rest of 2021 and roughly $750 billion through the end of 2023. CBO estimates personal income will continue to remain well above pre-pandemic levels, though it will fall slightly relative to its pre-pandemic trajectory starting this spring.
Below is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Every elected official should be laser focused right now on ending the pandemic, supporting the economic recovery, and protecting those most affected by the crisis. Congress should spend whatever is necessary to accomplish these goals, but they shouldn’t issue a blank check.
Today’s CBO report, in line with other recent estimates, shows that the economy is on its way to recovering. Thanks to the $4 trillion in funds Congress has already enacted and record-fast development of several effective vaccines, there is light at the end of this tunnel.
More funding is warranted to assist those out of work because of the pandemic, prevent state and local government layoffs, boost economic demand, prevent a decline in household incomes, and end this pandemic once and for all. But it shouldn’t take $1.9 trillion to fill a $400 billion or $800 billion hole.
The President is exactly right to focus on the need to contain the virus, and his American Rescue Plan includes many important elements. But many of his proposals are larger than necessary and could be better targeted. Some elements of the plan have little to do with the current crisis and should be fully offset with new taxes or budget savings, such as those President Biden put forward in the 2020 campaign.
And fiscal support doesn’t have to come all at once. There is only so much we can do to boost near-term output while we’re still in a pandemic, and if economic weakness remains, we can enact further relief later.
We’re encouraged to see these talks are happening now, before the mid-March deadline when expanded unemployment benefits once again wind down. But the need to spend more shouldn’t alleviate the responsibility of spending wisely. New COVID relief should match the needs of the economy.
You can read more in our summary blog, which will be posted here soon.
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