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3 reasons Americans need more federal aid

Posted January 22, 2021 7:12 a.m. EST

— Congress has approved trillions in relief funds for Americans suffering because of the pandemic recession, but President Joe Biden thinks the country needs even more.

Last week, he unveiled a $1.9 trillion economic stimulus plan that he wants to push through Congress, and on Wednesday -- his first day in office -- he signed executive orders that extend eviction protections for renters and payment deferrals for student loan borrowers.

On Friday, he's set to sign additional executive orders providing more assistance to working families.

Democrats have made clear that another wide-ranging economic relief bill, including $1,400 stimulus payments, will be their first legislative priority.

Economists, including Janet Yellen, Biden's pick for treasury secretary, say the additional aid is needed to stop the bleeding before the federal government can try to rebuild the economy. Here are three reasons why:

1. The economy is still getting worse

During the first week of the year, the number of new people applying for unemployment benefits soared above 900,000 for the first time since August. Claims fell only slightly last week, and they remain at the highest level in months.

The US economy is down 9.8 million jobs compared with its pre-pandemic level. That's more jobs than were lost in 2008, after the financial crisis.

Even though a majority of higher-wage workers saw their jobs return by the summer, the unemployment rate for low-wage workers remains stubbornly high.

Nearly 25% of those workers who were earning less than $27,000 a year remain out of a job, according to Opportunity Insights, a project at Harvard University tracking the recovery. For comparison, the overall unemployment rate is about 6.5%.

2. Things could get even worse before they get better

The growing number of Covid cases and deaths, as well as renewed local lockdown measures, are making it harder for businesses to stay afloat.

The number of small businesses open and operating is down nearly 30% compared with pre-pandemic levels, continuing to fall throughout the autumn.

Winter weather is making it harder for businesses like restaurants to attract customers to outdoor patios.

And economists warn that more jobs could be lost in the coming months, despite the vaccine rollout beginning.

3. Traditional stimulus relief won't work during a pandemic

Traditional stimulus programs like one-time direct payments or tax credits aren't as effective when the recession is caused by a public health crisis, said John Friedman, an economics professor at Brown University and a co-director at Opportunity Insights.

People still won't go out to eat or spend money on other entertainment if they don't feel safe, for example, no matter how much money is in their bank accounts -- and that also means they aren't buying as many new clothes or other items as they might otherwise.

"Instead, we need to help those hardest-hit by the pandemic get through the next six to nine months until this public health crisis passes. Then we can get the economy going again," Friedman said.

He pointed to enhanced unemployment aid, food stamp benefits and rental assistance as programs that can provide a stopgap for people right now.

While Biden has already renewed eviction protections, he'll need Congress to extend federal unemployment benefits and boost food stamps. He's also called on lawmakers to provide money for child care, restore emergency paid leave benefits, create new grants for struggling small businesses and subsidize health insurance premiums for those who have lost their jobs.

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