The US needs $3 trillion to undo the economic damage of the pandemic, but policymakers seem unable to hear that message, economist says

• The US economy requires $3 trillion in fiscal stimulus to undo the damage of the COVID-19 pandemic to output, a prominent think tank’s chief economist told CNBC on Wednesday.
• The historic drop in US GDP this year is reason enough for further fiscal stimulus, but policymakers “seem not to be able to hear that message,” William Lee said.
• “Every penny helps and the danger is that these guys will fiddle around to try to redesign the program to really meet some perfectionist criteria that shouldn’t be,” he said. “We have to get the money out there and we have to get it out there now.”
• Republican-led senate majority leader Mitch McConnell wants lawmakers to vote on a scaled-down stimulus on Thursday.
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The US needs $3 trillion in stimulus to support the economy’s pandemic-induced downturn, Milken Institute’s chief economist William Lee told CNBC on Wednesday.

The relief package should be aimed at programs that incentivize business owners to expand remote work opportunities and helping people find secure jobs, he said.

“I think the one thing that everyone…agrees with is we have to get in there and get in big. The issue is how do you get big without a permanent increase in fiscal deficit,” he said on CNBC’s “Squawk Box.”

“That’s why the programs that are put in place have to be targeted and designed in a way so that they disappear once the economy comes back online again,” he added.

Pandemic-related restrictions enacted earlier this year led to a record 33% plunge in second-quarter US GDP — the worst in American history.

As states started to reopen from May onwards, a revival in economic activity was insufficient to undo the damage of the lockdowns.

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This is why there needs to be an extended stimulus package, but US policymakers “seem not to be able to hear that message,” Lee said.

“Every penny helps and the danger is that these guys will fiddle around to try to redesign the program to really meet some perfectionist criteria that shouldn’t be,” he said. “We have to get the money out there and we have to get it out there now.”

Republican-led Senate majority leader Mitch McConnell wants lawmakers to vote on a scaled-down stimulus on Thursday. The bill isn’t viewed as likely to become law, or even pass the Senate. Instead, it is a political messaging tool to contrast Republicans with Democrats ahead of the November 3 election. 

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