“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth.”
Business leaders have made urgent pleas for help, arguing that the risk of not acting could doom entire sectors. The Business Roundtable, a group of chief executives from major corporations like Apple and Walmart, warned on Tuesday evening that “communities across the country are on the precipice of a downward spiral and facing irreparable damage.”
Some 36,000 franchise businesses are likely to close by winter without additional federal support, said Matthew Haller, senior vice president for government relations and public affairs at the International Franchise Association in Washington, which represents owners of gyms, salons and other chains. “The situation’s pretty dire,” he said.
Laid-off workers are also under pressure. Ernie Tedeschi, an economist at Evercore ISI, estimates that unemployed Americans will begin to exhaust the savings they were able to amass from previous rounds of aid as early as this month, leaving them struggling to buy food or pay rent. Without another aid package, the economy will regain four million fewer jobs through the end of next year than it would have if lawmakers had struck a deal, he said in a research note on Wednesday.
The gridlock in Washington is a reversal from the spring, when fear of an imminent economic collapse led Congress to vote overwhelmingly to approve trillions of dollars in aid to households and businesses. The effort was largely successful: Households began spending again, companies began bringing back workers, and a predicted tidal wave of evictions and foreclosures mostly failed to materialize. The unemployment rate, which reached nearly 15 percent in April, fell to 7.9 percent in September.
But most of the aid programs expired over the summer, and in recent weeks economic gains have faltered. Economists say the loss of momentum is likely to grow worse if more aid doesn’t arrive soon. Federal Reserve officials had been expecting another aid package to arrive when they released their economic projections in September, minutes released on Wednesday showed, and warned that “absent a new package, growth could decelerate at a faster-than-expected pace in the fourth quarter.”
While Republicans, Democrats and the White House have sparred over the scope and size of another package, many economists say the amount is less important than how fast and where the money is deployed.