Markets Crumble as Congress Divided on Details of Spending Bill

By:
Chris Gaetano
Published Date:
Mar 23, 2020
GettyImages-stock-market-downward-1057996750-1

Markets fell sharply as they waited for Congress to conclude its negotiations over the massive spending package meant to address the economic fallout of the coronavirus epidemic, and while assurance that a deal was coming soon did calm things a little, it wasn't enough to make up for the damage done so far, according to Bloomberg.

With senators debating throughout the weekend, it appeared at first that some sort of deal would emerge by today, but the talks collapsed on Sunday, according to the Hill. Democrats, who ultimately blocked the bill, said that the measure proposed by the Republicans does not adequately protect workers, citing lack of expansions to paid sick leave and unemployment insurance, while going too easy on corporations. They pointed primarily to $500 billion set aside for distressed industries, which they characterized as a "slush fund." They also said that measures that ostensibly protect workers' jobs are too vague, noting that the bill requires companies to keep employees only "to the extent possible."

Absent a deal Monday morning, the Dow Jones Industrial Average lost nearly 1,000 points before paring down its losses later to about 400, although as of 2:06 p.m. Monday, losses amounted to 553 points. The S&P 500, meanwhile, lost nearly 5 percent, and while it has regained some during the day, it remained down nearly 35 percent from its record high. One sort of bright spot has been the Nasdaq, with Bloomberg reporting that tech stocks have given the index a 0.9 percent growth.

On Monday afternoon, Senate Democrats again blocked the economic stabilization bill.  According to the New York Times, the impasse concerns the $425 billion fund created by the bill that the Federal Reserve could leverage for loans to assist broad groups of distressed companies, and an additional $75 billion it would provide for industry-specific loans. Democrats are concerned that these funds do not have rules for transparency or enough guardrails to make sure companies do not use them to enrich themselves or take government money and lay off workers.

Americans wait with bated breath for a relief package to finally be signed into law as the economy continues to crumble beneath their feet. As bad as the situation has gotten now, some experts are projecting even bigger damage as time goes on. The Wall Street Journal is reporting that economists are predicting the loss of at least 5 million jobs, and a drop in total economic output of $1.5 trillion.

Globally, the Organisation for Economic Co-operation and Development (OECD) is estimating that the coronavirus could stunt global growth to about 1.5 percent, according to CNBC, and even this figure might be too optimistic. The International Monetary Fund may think so too: IMF Managing Director Kristalina Georgieva, following a ministerial call of the G20, said that the global growth outlook for 2020 is negative, and she warned of "a recession at least as bad as during the global financial crisis or worse." However, the IMF does believe that 2021 could bring recovery, provided nations around the world prioritize containment and strengthen health systems.

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