US economic growth has dropped to its lowest level in nearly three years, but the federal government’s response has been remarkably muted.
The unemployment rate stood at 4.7 percent in September, its lowest in over four years.
In the first six months of the year, the number of Americans who are out of work increased by more than a quarter, according to a report released Thursday by the Congressional Budget Office.
The result of the latest round of stimulus measures is likely to keep many people out of the labor force for months, said Steve Kogan, a senior economist at the Committee for a Responsible Federal Budget.
“There’s a lot of concern about what the economic fallout will be,” he said.
“People are going to take time to adjust to a recession.”
The latest round in the federal stimulus package includes $8 billion in direct tax relief for the poor, which is the biggest increase in the last two years.
The program is being offered to families who earn less than $45,000 a year.
But it’s unclear whether the extra cash will pay for the costs of the stimulus package, which will cost $1.2 trillion over 10 years.
“I’m really not sure where the extra money’s going to come from,” said Kogan.
“There’s nothing there.”
The money is not going to fund programs such as child care assistance and unemployment insurance, which are critical for millions of Americans.
The stimulus program is part of the $787 billion package of stimulus passed by Congress in the waning days of the Obama administration, which was intended to help the economy recover from the global financial crisis.
That includes a $4.2 billion tax cut for families making between $200,000 and $250,000, as well as a $1,000 credit for people with disabilities.
But the $1 million credit only applies to households earning $250 or less, while the credit for households making more than $250 will be available for people making between 100,000 to $150,000.
The $1 credit will be refundable starting in 2019, according a White House official.
“It’s a huge relief for families,” said Kevin Hassett, chief economist at Citi.
“It’s going directly to the very families that need it the most.”
The stimulus package is also likely to trigger another round of spending cuts and tax hikes in the coming months.
The sequester cuts, which began in December, have already reduced the deficit to $2.4 trillion.
The cuts are projected to increase spending by $1 trillion over the next decade.
The Congressional Budget office estimates that a further $3.5 trillion will be needed to fully fund the stimulus programs.
While the government’s unemployment rate is currently 4.5 percent, Kogan said that number may drop to as low as 4.2 percent if the stimulus plan does not be enacted.
“If we’re in a recession, and there’s no relief, we’re going to have another recession,” he explained.
“The only way to get out of that is to do something that really helps the economy.”