Lawmakers have worked for months to come up with the next relief package, but so far there has been nothing except for words. Post-election developments do hint of a coronavirus stimulus package soon, but there is one more crucial factor that could decide when Congress approves the relief bill and if it would include checks or not, and this factor is the COVID-19 vaccine.
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A vaccine dims chances of coronavirus stimulus checks
The sooner we have an effective COVID-19 vaccine, the better are the chances of no, or a reduced, stimulus package. In case any vaccine gets emergency use authorization, and it helps the economy to get back to normal, then it would lower the need for any stimulus package.
Moreover, there are good chances of a vaccine coming soon. On Monday, Moderna announced that it has found its vaccine to be 94% effective in preliminary trial data. Separately, Pfizer and BioNTech have also revealed that their vaccine was more than 90% effective in trials.
“The improvement in the labor market, the improvement in the economy, the improvement in vaccine development all take pressure off of Congress from delivering,” Ed Mills, Washington policy analyst at Raymond James said, according to CNBC.
Senate Majority Leader Mitch McConnell, last week, also reiterated his push for a smaller and targeted relief package following the Pfizer news and better-than-expected jobs data. Even before the election, McConnell has tried to come up with a targeted relief package, but Senate Democrats blocked it arguing that it isn’t enough to meet the needs of Americans.
Democrats want a relief package costing more than $2 trillion.
Congress still needs to approve stimulus package
It is very likely that a vaccine would dim the chances of a coronavirus stimulus package and checks. However, former Federal Reserve Bank of New York President Bill Dudley believes that promising early data on the COVID-19 vaccine strengthens the need of a stimulus package.
Speaking to CNBC, Dudley says that the Congress should approve a stimulus bill costing between $1 trillion and $2 trillion to assist businesses and people to weather the next six to nine months. The need for the stimulus package is more important now because the Federal Reserve now lacks the resources to prevent the economy from pandemic-induced damage over the next few months.
Dudley argues that the arrival of potential vaccines could make the price tag of the stimulus package more agreeable to the lawmakers as they would know that the crisis will end soon.
“It makes the case for fiscal stimulus even more compelling,” Dudley said, adding, “you basically want to prevent scarring...and a little fiscal stimulus can go a long way in reducing the scarring in the economy so that you can have a stronger recovery on the other side.”
Many others, such as Moody’s chief economist Mark Zandi, also believe that Congress needs to come up with a stimulus package. This is because even if any vaccine gets emergency use authorization, it could take several months before the vaccine is widely available to the public.