Democratic Connecticut Governor Ned Lamont says what is shaping up to be a divided government after Election Day best step up quickly to enact a new COVID-19 stimulus plan.
If not, the alternative could be having to endure a mild recession and even more job loss.
“The Federal Reserve, blue and red state governors, I think business leaders know we need a real stimulus. We know that we are slowly having to close down different pieces of our economy [because of COVID-19] and it’s going to have an impact on GDP and more importantly, it’s going to have an impact on unemployment and families,” Lamont said on Yahoo Finance Live. “If you want to make sure that this is not a deep recession but a shallower recession, you sure as heck better get some sort of relief package out there now.”
When the country will get a new relief plan of any size remains a wildcard.
Former Vice President Joe Biden is nearing a win in the presidential race after his bruising battle with President Donald Trump, and if he is elected he will likely encounter a Republican-controlled Senate and a Democratic-controlled House. While the stock market has soared since Election Day on the hopes this inevitable D.C. gridlock means no Biden tax hikes or progressive climate laws, it does suggest a less than robust fresh new stimulus.
Most folks on Wall Street have moved quickly in recent days to ratchet down their estimates on stimulus to something under $1 trillion. Ahead of the election, hopes for a “blue wave” sent stimulus estimates north of $2 trillion.
“With the GOP on track to maintain their Senate majority, a big stimulus package is likely off the table. Since negotiations on Phase 4 stimulus began in August, it's been clear that Mitch McConnell did not have the votes for anything larger than $500 billion (a "skinny" bill). That's unlikely to change after the election. If anything, Republicans in Congress will feel emboldened by the outcome of the election and reassured in their fiscal stance. Having Biden in the White House will not help, and might actually make a deal more difficult to achieve,” warned Jefferies chief economist Aneta Markowska in a note to clients.
Markowska expects GDP growth to slow “sharply” in the current quarter (up 2%) then bounce back ‘modestly’ (up 4.6%) in the first quarter amid that skinny stimulus bill.
But clearly, a double-dip recession must not be ruled out one way or another. And that could dent stock prices.
“If we do not get the fiscal expansion in the next few months or late January when the whole government is in the new seats, the risks, indeed, will rise that we will see a higher probability of a double-dip [recession],” Apollo Global Management Chief economist Torsten Slok said on Yahoo Finance Live.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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