On election night, Democratic campaign consultants may have been wondering, “Where did all these voters come from?” But unless the next Congress sets a legislative course over the next few months, Speaker of the House Nancy Pelosi may soon be wondering, “Where did all the voters go?”
The incoming Biden administration will need to navigate an extremely rough economic path ahead. Congress has struggled to reach an agreement for another round of stimulus to provide emergency relief for families and businesses. Now they must act before the “dark winter” ahead further deteriorates the economic recovery.
Barry Wides is the deputy comptroller for community affairs at the Office of the Comptroller of the Currency, where he oversees outreach to banks and their community partners, the development of related policy and the production of educational materials on community development.
Carey Anne Nadeau is a MIT-trained entrepreneur, focused on modernizing the measurement of risk. Formerly a researcher at the Brookings Institution and Urban Institute, Carey Anne went on to found ODN (ODNsure.com), which uses location-based driving data and open data to predict where car crashes are likely and help auto insurance carriers and city Vision Zero Initiatives prevent crashes and save lives. She is the host of Profiles in Risk, a podcast featuring influential drivers of transformation in the insurance industry.
Rani Hoitash is the John E. Rhodes Professor of Accountancy at Bentley University. He received his Ph.D. in accounting and information systems from Rutgers University and a Bachelor of Science in Economics at the College of Management in Tel-Aviv Israel. His research concentrates on corporate governance, internal controls and auditing. His work is published in The Accounting Review, Journal of Accounting Research, Journal of Accounting & Economics, Journal of Financial Economics, Contemporary Accounting Research, Auditing: A Journal of Practice and Theory, Sloan Management Review, and several other journals. Professor Hoitash’s teaching interests include financial accounting, accounting information systems, and auditing. Hoitash recently served as an editor of Auditing: A Journal of Practice and Theory and on the editorial boards of Contemporary Accounting Research and the Journal of Business Research. He is a member of the Information Systems Audit and Controls Association and the American Accounting Association and is a Certified Information System Auditor (CISA).
Gross domestic product, the broadest measure of goods and services produced across the economy, decreased at an annual rate of 32.9 percent in the second quarter of 2020, followed by a surged of 33.1 percent in the third quarter, in part due to earlier rounds of fiscal stimulus when businesses were offered Economic Injury Disaster Loans and forgivable Paycheck Protection Program loans, and individuals received direct payments and extended unemployment benefits.
Economic experts believe the current surge is not enough to stop continued losses incurred by various segments of economy.
“While the strong bounce back in activity from the initial devastation of COVID-19 was heartening, the recovery thus far has been highly uneven, and the path ahead is highly uncertain,” said Federal Reserve Governor Lael Brainard in a speech last month at the Society of Professional Economists annual online conference.
This highly uneven and uncertain bounce indicates the prospect of a K-shaped recovery, where some sectors continue to recover, while others see a steady decline.
The new stimulus package must focus on the sectors facing difficulties ahead to avoid colossal damage and massive layoffs.
According to the U.S. Chamber of Commerce, approximately 4 million small businesses — 13 percent of America’s 31 million smallest employers — have now exhausted their PPP loans, and many face permanent closure without further assistance.
According to the National Restaurant Association, the restaurant industry will lose $240 billion. U.S airlines may be forced to furlough 75,000 pilots, flight attendants, mechanics and other workers by the end of 2020 if Congress doesn’t act.
States and municipalities are now on verge of extreme shortfalls due to declines in tax revenues and rises in additional costs. Local governments that fund and operate public school systems will need more funding. “The average school district will face $1.8 million, or $485 per student, in additional costs for disinfectants, personal protective equipment and other preparations to bring students into classrooms this year,” according to the Association of School Business Officials.
The Federal Reserve’s Survey of Consumer Finances indicates that cash-strained households will continue to suffer as a result of continued unemployment and reduced working hours. The CARES Act did support these households either through direct payments or enhanced unemployment benefits this year, but the financial security of these households will depend on whether unemployment benefits will be extended or supplemented next year.
Therefore, it is imperative for Congress to ensure that the recovery reaches those who have been disproportionately affected. A targeted fiscal support can turn a K-shaped recovery into a broad-based, inclusive recovery to eliminate shortfalls in employment and provide a better outcome overall.
