CBO says the US Economy will effectively be recovered by mid-2021

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The US CBO (Congressional Budget Office) has projected that the US economy will bounce back to its pre-pandemic size by the middle of the year without any emergency stimulus. The recent report throws a monkey wrench into President Biden’s push to pass an enormous $1.9 trillion rescue plan ahead of a meeting with 10 Republican legislators at the White House on Monday evening. They presented their own more modest proposal. The nonpartisan federal agency pointed out an optimistic forecast following a year-long fight with the coronavirus. The pandemic has since killed 441,000 Americans, put millions out of work, and shuttered large swaths of the US economy. The report also said the gross domestic product would return to pre-pandemic levels by mid-2021.

The CBO report also said that it will continue growing until 2026 as a vaccine reduces the number of new infections and the need for social distancing. It says, “Labor market conditions continue to improve. As the economy expands, many people rejoin the civilian labor force, had left it during the pandemic, restoring it to its pre-pandemic size in 2022. The unemployment rate gradually declines throughout the period, and the number of people employed returns to its pre-pandemic level in 2024”. Point to be noted that the Biden administration announced a $1.9 trillion rescue package Last month. It was the first major legislative effort as the unemployment rate hovers around 6.7%. The package includes $1,400 stimulus checks for eligible Americans and $20 billion for a national vaccine program.

The proposed program would reportedly cut child poverty in half. But most conservatives and Democratic Senators including Joe Manchin of West Virginia have argued against passing such a big package on the heels of a $900 billion aid bill passed by the US Congress. On Monday, the White House press secretary Jen Psaki said it had been backed by other economic authorities. She said, “A new report by the Brookings Institution estimates that with the American rescue plan, we would boost GDP by 4 percent and return our economy to pre-COVID levels by the end of 2021. A separate analysis by Moody’s Analytics found that the president’s plan would create 7.5 million jobs”.