The US Senate has approved a $2.2 trillion bailout bill, while the UK has announced its own worth $400bn. Many however argue that the sums, large as they are, may not be enough.

American senators have pushed through the largest rescue package in US history, worth over $2.2 trillion.

The sum, which dwarfs the $800 billion bailout following the 2008 recession, is aimed at mitigating the impact of the Covid-19 pandemic.

There are currently more than 470,000 confirmed cases of the coronavirus globally, with more than 21,000 deaths.

The virus is believed to have originated in animals sold at a wet market in the Chinese region of Wuhan. 

Businesses and the workers they employ have been hit hard by the disease as customers stay at home to protect themselves from the disease. In many areas across the globe, non-essential retailers have been asked to close as part of shutdowns.

Like workers elsewhere, those in the US face the prospect of job losses in the near future, as firms’ liquidity dries up.

“The gears of the American economy have ground to a halt,” said Senate minority leader Chuck Schumer.

The American bailout, like ones in the UK and other Western economies, is primarily aimed at ensuring cash flow throughout the crisis.

Businesses and state governments will benefit from a $500 billion fund, which will give them access to loans and grants to keep tiding over.

An additional $367 billion will be earmarked for smaller businesses to cover company payroll.

The package also includes direct aid for individuals - most American adults will receive one time payments of $1,200 under the bailout, with an additional $500 for each child. 

Unemployment protections were also increased to $600 a week over a maximum four-month period.

Officials in the UK have not gone as far as implementing direct payouts to individual citizens, but have guaranteed 80 percent of salary for workers not able to attend their jobs.

The US payouts came after intense debate between Democrats and Republicans, with some among the latter, arguing that generous unemployment protections would disincentivise work.

On Twitter, veteran Republican Senator Lindsey Graham wrote: “Only in Senator @BernieSanders world does it make sense to pay people more NOT to work than TO work. 

Adding: “I am all for making peoples salaries whole. However, I am not for increasing people’s salary through the unemployment insurance system.”

Many critics pointed out that his concerns about workers misusing aid did not extend to corporations.

Too little, too late?

Concerns about the bailout packages introduced by governments in western states centre on whether all those in need are being reached and whether the amounts on offer are enough in the long term. 

In the UK, for instance, there is still little guidance on what help is available for those in self-employment.

With the ongoing lockdown, a self-employed plumber for example, will not be able to go about his work and will only be entitled to general unemployment benefits during the quarantine period, which may take weeks to pay out.

Those concerns are not limited to just the UK, as more people draw on state resources to stay afloat, the state’s disbursement systems will be under immense strain.

Speaking to Foreign Policy magazine, Columbia University’s Nobel Prize winning economist Joseph Stiglitz spelt out these challenges for the US government.

“I worry if we have the capacity to deliver checks to everybody in two weeks, or two months. I also worry whether the unemployment insurance system is capable of expanding tenfold in two weeks,” he said.

The economist highlighted further measures governments could take to ensure the most vulnerable are not hardest hit. These include stopping all evictions on rented properties and foreclosures on those that are owned by their residents. He also suggested freezing interest accruals on debts.

Stiglitz argues that debt obligation rather than cashflow is the real predator hiding in the bushes, and that only by addressing the issue can the US and wider global economy avoid the economic depression brought on by Covid-19.

The 2008 financial crisis began when subprime mortgage borrowers in the US were unable to keep up with debt repayments, bringing down that market and others heavily dependent on it.

The lockdown brought on by Covid-19, as well as the cost in terms of people getting sick, could trigger precisely the debt time-bomb lawmakers are trying to avoid.

Source: TRT World