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Election Uncertainty Leaves U.S. Economic Rescue Hanging In The Balance


As Americans wait on the final results of the 2020 election, the outcome will have a big effect on the size and timing of any additional economic rescue package.

As of Wednesday evening, with the presidential race still up in the air, Democrats looked likely to retain control of the House although with fewer seats. But it's still unclear which party will control the Senate. Democrats still may flip it, but if so only by a very narrow margin.

So here is how a stimulus package may take shape depending on how the presidential and Senate races play out.

Thanks to a divided Congress, and with Republicans unwilling to spend as much as Democrats, this scenario would likely result in the smallest of economic rescue packages and it probably wouldn't pass until February.

"The Senate GOP will dig their heels in but have to deal, because of a thinner margin [of Republican votes]. But the economy will be struggling so it will be hard not to do anything," said Mark Zandi, chief economist of Moody's Analytics.

Zandi expects there might be a $1 trillion to $1.5 trillion package that could include money for supplemental unemployment benefits, stimulus checks, rental assistance, airlines, healthcare and schools, as well as more money for Paycheck Protection Program loans for small businesses. But, he said, he doesn't expect there to be much aid for state and local governments.

Then again, if the economy is perceived to be in better shape than it is now, there may be less pressure to do a deal.

Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, who considers leading indicators to assess where the economy is headed, said no matter who wins, the economy is unlikely to fall into a recession in the next two quarters. But, he noted, because the recovery so far has been much stronger for higher-income households and the manufacturing and construction sectors, lower-income households and the service sector will still be in pain.

"Those lower-income households are probably going to suffer. But it doesn't mean the recovery falls apart," Achuthan noted.


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