• Second, forgivable PPP loans, as originally designed, were a very wasteful way of trying to support small businesses as they essentially reimbursed expenses for continuing operations even though revenues had collapsed, rather than protecting owner’s equity as companies were forced to shut down during the pandemic. This needs to be improved upon in further relief.
• Third, a moratorium on evictions is leading to a growing backlog of unpaid rent. It will be important to find a way to help renters pay this overdue rent as the pandemic ends to avoid a flood of evictions just as we all try to get back to normal.
Most of all, the economy needs a decisive end to the pandemic, which can only come from a near-universal adherence to public health guidelines on mask-wearing and social distancing and an efficient and rapid distribution of vaccines.
Conversely, the economy does not need another broad round of stimulus checks. This has been a terrible year for everyone. However, for many Americans who have not seen any negative impact on their income, further one-time checks from the government would either be saved or spent on goods, many of which are imported, neither of which activities would do much to help battle unemployment or protect small businesses.
More importantly, this pandemic has led to a huge deterioration in the public finances. At the end of 2019, U.S. federal debt in the hands of the public amounted to $17.2 trillion, or 80% of GDP. At the end of 2021, we expect it to amount to $24.6 trillion, or 110% of GDP. As the economy recovers and long-term interest rates move higher, interest payments on this debt will rise rapidly. Eventually, this will lead to higher taxes on families, businesses and investors.
Investors in the week ahead will be watching Washington to see if long-overdue relief will finally arrive. However, as they do so, they should hope for a package that supports those impacted by the pandemic rather than one that blindly pumps money into an injured economy. They should also be looking for leadership on the health crisis itself, which emphasizes what we all can do and must do to finally bring this terrible episode to a speedy conclusion.
David Kelly is chief global strategist at JPMorgan Funds.