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Why is the CARES Act called the largest economic stimulus in U.S. history?
The COVID-19 pandemic has had an unprecedented impact on the global economy, and the U.S. government quickly passed an economic stimulus bill, the CARES Act, to alleviate the economic challenges brought about by the pandemic. The CARES Act, officially known as the Coronavirus Aid, Relief, and Economic Security Act, was not only enacted in response to the pandemic, but is also one of the largest economic stimulus measures in U.S. history. The bill is worth $2.2 trillion and covers a wide range of funding uses, including personal subsidies, business loans, and public health spending.
Background behind the bill
After the outbreak of the epidemic, global economic activities have dropped sharply, social distance measures have caused many businesses to close and airlines to face bankruptcy. The government acted quickly to avoid economic collapse.
In March 2020, the US government faced a huge economic challenge. Then, demand in all walks of life fell sharply, businesses were unable to operate normally, and the unemployment rate soared. Under pressure from all sides, the government decided to introduce the CARES Act to support people and business activities and stabilize the economy.
Main contents of the CARES Act
Major funding allocations under the CARES Act include:
- $300 billion in one-time cash payments to individuals and families who file taxes.
- US$260 billion in unemployment benefits to improve the living security of the unemployed.
- Established the Paycheck Protection Program to provide forgivable loans to small and medium-sized businesses.
- US$500 billion in corporate loans to stabilize operations of large companies.
- $339.8 billion in support for state and local governments.
The passage of this bill created an unprecedented series of fiscal strategies, giving many Americans and businesses hope in times of difficulty.
Economic impact of the bill
Not only is the CARES Act unprecedented in amount, it also has far-reaching economic impacts during its implementation. According to the Congressional Budget Office, the bill will increase the fiscal deficit by about $1.7 trillion between 2020 and 2030. This means that in the short term, the government will face a huge economic burden, but in the long term, stimulus measures may promote economic recovery. Many economists say the CARES Act prevented a major recession and protected the jobs and incomes of millions of people.
Comparison with past laws
The CARES Act is much larger than the 2009 economic stimulus bill in response to the Great Recession, which was $831 billion. The current size of the bill is 10% of the US GDP, which shows the highly emergency response measures taken by the government in the face of the crisis.
Beneficiaries
The beneficiaries of the CARES Act include ordinary people on the one hand, and it also provides necessary financial support to businesses and medical institutions on the other. Cash subsidies provided to individuals under the Act enable many families to cope with short-term financial losses and reduce the risk of economic collapse.
"Our goal is to help every American get through this difficult time. Support today is for economic recovery tomorrow."
Future Challenges and Prospects
While the CARES Act streamlined the government's relief process, its ongoing fiscal impact cannot be ignored. Long-term high deficits could raise future fiscal policy challenges, and in such an environment, the government will need to consider how to reduce the national debt and promote economic stability. When a new round of stimulus measures or policy changes comes, how to balance economic growth and fiscal sustainability will become a thorny issue.
The introduction of the CARES Act has brought hope to the COVID-19 pandemic, but as time goes by, we also have to think: After such a large-scale economic stimulus, where will the future economic path go?
