Trump economist backs Biden’s $ 1.9 trillion bailout

“They’ve put in a lot of stimulus,” Hassett told CNN Business Thursday, “but I think we have to be careful.”

The former Trump administration official fears that without more help from Washington, the worsening of the pandemic will cause the US economy to repeat the first quarter of last year, when GDP decreased by 5%

“There are so many companies standing still, barely hanging on. Now they are hit by another shock,” said Hassett, who was Trump’s chief economic adviser from 2017 to 2019 before returning. in a volunteer role in March of last year. “You could find yourself on a downward spiral for the economy.”

“The disease is spreading at a remarkable and frightening rate,” said Hassett, now a Distinguished Visiting Fellow at the Hoover Institution at Stanford University.

Biden’s $ 1.9 trillion plan

With his American bailout, Biden takes a “go-big or go-home” approach. The package asks $ 1,400 stimulus checks to almost anyone earning less than $ 75,000, improved unemployment benefits, $ 350 billion in aid to state and local governments, and $ 400 billion to fight the pandemic itself.
And that would be on top of the $ 900 billion relief plan Congress just enacted. last month to prevent benefits millions of Americans. Some Republicans, deficit hawks and economists are balk at the size of the Biden plan so soon after the last one.

Lindsey Piegza, chief economist at Stifel, fears the federal government is rushing too quickly to spend more money on the problem.

“I would like to see a smaller, more focused approach as we see the economy evolve and adapt, rather than layering extra money on helicopters,” Piezga said.

For his part, Hassett said that there may be elements of the Biden package that he likes more than others, but basically he is “absolutely” in favor of the plan.

“We succeeded last year without a full and total collapse in GDP due to extremely aggressive stimulus measures,” said Hassett, who served as director CNN commentator Last year.
The former Trump economist is an outlier in his pessimistic view of the strength of the recovery. While Hassett warns that the US economy is expected to contract in the first quarter, the New York Fed Nowcast Model expects sustained growth of 6.2%. After Biden unveiled his plan, Goldman Sachs improved its 2021 GDP outlook to 6.6%, although that forecast assumes Biden will receive $ 1.1 trillion in fiscal stimulus.

How vaccines and the pandemic are impacting the economy

The pandemic is clearly causing real damage to the economy, especially in virus-prone industries such as restaurants, cinemas, hotels and cruise lines.

United States jobs lost in December for the first time since spring. Another 900,000 Americans first filed for unemployment benefits during the last full week of the Trump presidency alone.

The slow deployment of the vaccine risks prolonging not only the health crisis, but also the economic crisis.

The acceleration of vaccine distribution is complicated by logistical challenges and the disastrous transition between the Biden and Trump administrations.

Biden and his advisers are taking matters into their own hands without a national coronavirus vaccine distribution plan in place by the Trump administration, sources told CNN.
US debt jumped $ 7 trillion under Trump.  He'll go much higher under Biden

Somewhat counterintuitively, Hassett fears that the US economy will take another blow when vaccine distribution accelerates. He explained that people who are next to receive a vaccine, or who have already received a single dose, will be extremely careful to avoid getting infected.

“If you hide in your basement for three weeks then you know you’ll be fine,” Hassett said. “There will be a massive increase in risk aversion. We should expect the economy to really, really slow down, even if the government doesn’t call for more closures.”

Hassett predicted that after some haggling, Congress will pass another major stimulus package next month. He noted that Congress and the Trump administration were close to a nearly $ 2 trillion stimulus deal last fall.

“Now that the elections are behind us,” he said, “people can only focus on what is good for the country”.

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