There are signs that the cushion is losing air. The pace of monthly job gains has slowed considerably since the spring. This fall, consumers pulled back on spending, and their confidence in the economy fell in November to a three-month low. The savings rate has fallen by 20 percentage points as households burn through their reserves. Lines at food banks are growing as nutritional insecurity worsens.
The economy can be likened to a car, and the Cares Act to a half-built bridge. If the bridge is complete, the car can get to the other side in one piece — if Congress passes extensions to unemployment benefits, aid to state and local governments and another round of small-business relief, then the economy can make it to the other side of the pandemic without incurring the kind of deeper problems that leave an economy weakened for years.
But if Congress does not pass another stimulus, then the first quarter of 2021 could easily see a shrinking economy and increasing unemployment. Deeper problems could take root. Millions of businesses could be wastefully lost. Labor demand could weaken over the medium term, keeping unemployment higher for longer.
If the Cares Act had not been so successful, then House Democrats would not be approaching another round of stimulus at such a leisurely pace. Senate Republicans would not be confusing rising stock prices for overall economic strength. But if another economic recovery package isn’t passed before February, it will become unfortunately clear how needed one was in December and January.
The passage of time should make Americans even more thankful for the fact that leaders in Congress and the administration of President Donald Trump were able to set their divisions aside in March.
Given how quickly Washington returned to rancorous division, it is easy to fail to appreciate the role that statesmanship and bipartisan cooperation played in this success. Workers, households and businesses need leaders of both parties to compromise again — quickly.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”