US stimulus package may be massive but it won’t be enough | Larry Elliott

The precise details of the US stimulus package are still to be revealed but some things are already clear: it will be massive, it will hit many of the right targets and it won’t be enough.

Let’s start with the size. The deal worked out between the White House and Congress is worth $2tn (£1.7tn), or about 10% of the annual output of the world’s biggest economy. That is colossal by any standards. By comparison, the fiscal boost provided to mitigate the damage caused by the global financial crisis of 2008 amounted to $800bn.

The US budget is going to explode this year. Depending on the length and depth of the recession, it could hit 20% of GDP.

But with that sort of fiscal injection, you can afford to spread the money around, which is what the package does. If the advance reports are right, there will be a $1,200 cheque posted to American adults on a middle income or below, with an extra $500 for each child. On top of that, there will be more generous support for those losing their jobs, through the extension of unemployment insurance by 13 weeks and a four-month enhancement of benefits.

Together, these mean Americans would get their full salaries for a guaranteed period if forced out of work by Covid-19.

A quarter of the stimulus is aimed at business. There will be direct financial help for some sectors, such as airlines and airports, but the bulk of the corporate support comes in the form of loans and grants to businesses of all sizes. The US Treasury will put aside a sizeable sum to indemnify the Federal Reserve against losses it might incur from extending credit to struggling companies.

Donald Trump is desperate to get the stimulus signed into law, which has allowed Democrats in Congress to extract some important concessions. The cash payments go in full to anyone earning less than $75,000 a year, and will then be tapered and not paid at all to anybody paid more than $99,000.

The Democrats have also taken steps to avoid company bosses enriching themselves at the expense of the government. There will be a ban on share buybacks – a traditional form of enrichment for US CEOs – for the duration of any loan plus one year. Trump himself will not be able to benefit and there will be a new inspector general and oversight board to check that the aid is being properly spent.

The size and the comprehensive nature of the package will limit the amount of pain that the US is going to suffer as a result of the Covid-19 pandemic but it is not going to eradicate it entirely.

Wall Street is awaiting the weekly jobs report due out on Thursday with trepidation. Before the crisis broke, about 200,000 Americans a week were filing jobless claims. The lowest estimates for the latest week are 2 million and some are double that. The pain from a likely tripling of unemployment will be colossal.