Despite US Economy 30% Contraction Warning, Stimulus Bill Faces Senate Halt

Morgan Stanley Revises 2Q Economic Growth Rate from -4% to 30% in One Week
Senate Fails to Agree on $2 Trillion Stimulus Package, Bill Rejected

Mitch McConnell, U.S. Republican Senate Majority Leader
Photo by Reuters Yonhap News

[Asia Economy New York=Correspondent Baek Jong-min] There is a warning that the U.S. economy could shrink by as much as 30% in the second quarter due to the novel coronavirus disease (COVID-19) crisis. However, the economic stimulus bill being pushed by the Donald Trump administration to respond to COVID-19 was temporarily stalled in the U.S. Senate on the 22nd (local time).

According to political media The Hill and others, the Senate held a procedural vote that day amid failure of the Republican and Democratic parties to agree on the stimulus bill, but the vote ended in a tie with 47 votes for and 47 against, resulting in rejection. The Democrats said they would propose their own bill, while the Republicans expressed their intention to push for a revote. In Washington political circles, it is expected that the COVID-19 response bill is urgent, and since more than 60 senators' approval is required to pass the procedural vote, both parties will attempt last-minute negotiations to find common ground. The Senate currently consists of 53 Republican senators and 47 Democratic and independent senators.

The Trump administration is pushing a $2 trillion stimulus package to revive the economy hit hard by the spread of COVID-19, including cash payments to individuals, support for small and medium-sized enterprises, and strengthening unemployment insurance. It is also known to include a plan to allow the U.S. Federal Reserve (Fed) to supply up to $4 trillion in liquidity.

U.S. Treasury Secretary Steven Mnuchin appeared on a broadcast that day and said regarding the stimulus package for COVID-19 response that if the package bill passes, $4 trillion (about 4980 trillion won) in liquidity will be available to support the national economy, and $3,000 will be paid to a family of four.

Democratic senators reportedly have differences of opinion with the Republican bill regarding worker protection and corporate control. The Democrats insist on adding strong worker protection provisions to prevent companies from laying off workers, but the Republicans are rejecting this. Senate Minority Leader Chuck Schumer of the Democrats criticized, "The bill proposed by the Republican Senate leadership has many problems," calling it a "bailout plan for big corporations." Senate Majority Leader Mitch McConnell of the Republicans, who leads the Senate, said immediately after the rejection, "Americans are watching this spectacle. I heard the stock market fell by 5%," and added, "Americans expect us to take action tomorrow," expressing his intention to hold a procedural vote again at 9:45 a.m., 15 minutes after the opening of trading on the New York Stock Exchange on the 23rd.

Investment bank Morgan Stanley revised down its U.S. economic outlook again in less than a week on the same day. Morgan Stanley had predicted a 4% decline in second-quarter GDP last week but drastically lowered it to 30.1% that day. It also estimated that first-quarter U.S. GDP would shrink by 2.4%. The annual growth is expected to remain at -2.3%. Morgan Stanley also estimated that the unemployment rate in the second quarter would reach 12.8%, a negative forecast representing an increase of 9.3 percentage points from last month's 3.5% unemployment rate.

Simon Kennedy, an economist at Morgan Stanley, analyzed, "With the explosive increase in COVID-19 cases and social distancing measures in place, along with worsening financial market conditions, a significant negative impact on U.S. GDP is expected."

The economic outlook from investment banks is becoming more pessimistic as the number of patients in the U.S. increases and stay-at-home orders are issued in New York State and California. JP Morgan Chase and Goldman Sachs, which announced their second-quarter U.S. economic outlooks last week, predicted growth of -14% and -24%, respectively. According to data compiled by Johns Hopkins University, the current number of COVID-19 patients in the U.S. is 33,276, ranking third in the world after China and Italy. The number of patients in New York State, home to New York City, the center of the global economy, has reached 15,793.

This content was produced with the assistance of AI translation services.