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Thursday, May 23, 2024

Optimistic US economic advisor predicts 20% growth in second-half

As the American economy grapples with a resurgence in coronavirus cases, chances for recovery of the battered economy are uncertain, but White House economic Advisor Mnuchin is optimistic.

The US economy will grow on the order of 20 percent in the third and fourth quarters, a top White House economic adviser predicted Sunday, despite reopening setbacks linked to a coronavirus resurgence.

“I don’t deny that some of these hotspot states moderate that recovery, but on the whole the picture is very positive,” Larry Kudlow said on CNN’s “State of the Union.”

“And I still think the V-shaped recovery is in place, and I still think there’s going to be a 20 percent growth rate in the third and fourth quarters,” he said.

America’s economy on a rebound?

The administration on Thursday is due to make public its first estimate of GDP in the second quarter, a period that saw the economy shut down in an attempt to stop the spread of COVID-19.

The International Monetary Fund has estimated that during the April through June period, US GDP contracted 37 percent compared to the same period last year.

Read more: US Economy future uncertain, warns Federal Reserve

Kudlow acknowledged that the pace of the recovery was subject to debate, but he pointed to economic indicators that he said signaled a takeoff, citing in particular a jump in retail sales in May and June as well as a strong rebound in the automotive sector.

The Federal Reserve has been more cautious about the prospects of a comeback in the second half of the year.

For 2020, it expects the GDP to contract 6.5 percent.

US economy struggling to recover from pandemic but Mnuchin optimistic

The United States entered into recession in February 2020. To soften the shock of the health crisis, the Congress at the end of March approved a massive $2.2 trillion relief package called the Cares Act.

Read more: World facing worst economic situation in 150 years: World Bank

It included direct checks to Americans and $349 billion in funds to support small and medium-sized businesses.

A second relief package totaling nearly $500 million was completed in April.

Unemployment benefits were increased by $600 a week as part of the effort to protect individuals during the crisis. But that measure expires on Friday.

For weeks, Democrats and Republicans have been debating a new plan to extend unemployment benefits, so far without agreement.

Newly unemployed American citizens filed nearly 1.42 million claims for jobless benefits last week, reversing recent months of decline as the world’s largest economy grapples with a surge in coronavirus cases.

Read more: Jobless claims rise as US lawmakers debate aid

Treasury Secretary Steven Mnuchin insisted on “Fox News Sunday,” however, that unemployment payments should be reduced from current levels.

“The fair thing is to replace wages, and it just wouldn’t be fair to use taxpayer dollars to pay people more to sit home than they would get working,” Mnuchin said.

The rise in claims in the week ended July 18, together with the reported 974,999 people who applied for benefits under a program for workers who would not normally be eligible, adds to fears that the United States’ tentative recovery from the coronavirus downturn is stalling.

The administration proposes setting unemployment compensation at 70 percent of a recipient’s last paycheck.

Read more: 100 days to US elections: America is on knife’s edge

Despite the differences, Mnuchin said he was optimistic about the second relief package, adding that Senate Republicans would be unveiling their bill on Monday.

But with just 100 days to the US presidential elections and President Donald Trump down in the polls, the pressure is on.

Opting for direct taxes, cutting payroll taxes, helping the economy as a whole

Mnuchin stressed that the administration’s objective is to help the most vulnerable small businesses as well as people who are out of work.

Asked why the White House had quickly backed off Trump’s recent call for a cut in payroll taxes, which fund health and pension programs for the elderly, Mnuchin said there was no bipartisan support for it in Congress.

Read more: Virus destroys 36.5 million jobs in the US as Trump eyes reopening

Instead, the administration is opting for direct payments which, he said, “are a much quicker way of effectively giving everybody a tax cut, and it’s much quicker than the payroll tax cut.”

AFP with additional input by GVS News Desk