Policymakers risk withdrawing fiscal supports too soon during the coronavirus pandemic, a mistake made during the Great Recession of 2008, according to a just-released report by the House Budget Committee.
While the Families First Coronavirus Response Act and the Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law in late March, included enhanced unemployment payments, some of these payments will expire this summer and others at year-end.
“Given the uncertainty, these expiration dates are arbitrary, and families and the economy may still need fiscal relief beyond these dates,” the report, Continuing COVID-19 Relief for Workers and Families, states.
The report examines the benefits of tying the extension of expanded automatic stabilizer programs — such as those included in the CARES Act — and other federal relief to economic conditions.
House Budget Chairman John Yarmuth, D-Ky., said in releasing the report that “withdrawing support too soon would not only stymie recovery efforts, it would put the well-being of the American people at risk.”
Congress, he said, “must stand by America’s families until a strong recovery is underway” to avoid repeating the mistakes of previous recovery efforts.
One of the key lessons learned from the Great Recession “is that painfully high unemployment can persist well beyond the initial downturn,” the report states.
The unemployment rate rose more than five percentage points over the course of the crisis and reached its peak of 10% in 2009 — almost two years after the recession began, according to the report.
“Unemployment remained doggedly high over the next several years and did not return to its pre-recession level until 2016 — seven years after the recession ‘officially’ ended,” the report said.
The report examines how an economic trigger could provide targeted support and certainty for families, workers, and state and local governments while ensuring aid is available for as long as economic conditions require.
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