US economy needs consumer incentives

In the USA there is to be a new economic stimulus package soon, politicians agree on that. This is important because the economy is still in a deep crisis: While many economic indicators in June pointed to a strong recovery, the last few days have seen the first disappointments: The consumer climate at the University of Michigan, for example, deteriorated in July compared to the previous month. Given the dramatic increase in new corona infections, consumer uncertainty is hardly surprising. However, the still high unemployment figures – initial applications for unemployment benefits have even risen again recently – and the imminent expiry of additional unemployment benefits are probably depressing consumer sentiment at present.

There is still disagreement about the concrete form of new measures. At least the Republicans have now obviously come closer together: According to their wishes, the new aid package is to weigh around 1 trillion US dollars, which would correspond to just under 5 percent of the economic output of 2019. The Republicans have left open how the additional unemployment benefits are to be paid in future. For the time being, the reduction in social security contributions demanded by Trump was abandoned. However, it could be implemented in a further package if necessary. The focus is currently on direct aid for households, the US Secretary of the Treasury explained.

Before a new economic stimulus package can be passed, difficult negotiations between the Republicans and the Democrats are still pending. The Democrats have been calling for new aid on a much larger scale since May.
It is to be hoped that the further negotiations will proceed swiftly. After all, now would be exactly the right time for state aid, especially in the form of consumer incentives. After all, it would be a major problem for the US economy if consumers were to become less willing to spend again. In that case, the economy would soon be in danger of running out of steam as it rises. New aid, on the other hand, could give it a significant boost.

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