A recession may be looming, but Congress isn’t likely to rescue struggling Americans this time
Already, more people are struggling to cover their usual expenses, and more lower-income folks are falling behind on their credit card bills.
Meanwhile, many economists are projecting a recession will hit by the end of next year, if it isn’t here already.
But don’t look to the federal government for a helping hand this time. There’s little appetite in Congress to provide support to those struggling if the economy heads further south, experts say.
Some 40% of Americans lived in households that had difficulty paying their usual household expenses in the last seven days, according to the most recent US Census Bureau Household Pulse Survey, which took place in late July and early August. That’s up from 31% at the beginning of the year.
The situation is even worse for parents. Nearly half of adults with minor children at home found it somewhat or very difficult to cover the usual expenses in the last week, up from less than 38% at the start of the year, the survey found.
“While families were receiving those payments, the vast majority were putting them towards just basic expenses,” Zippel said. “And so to not have that cushion anymore, combined with prices going up, is certainly putting many families in a pinch.”
Likewise, hunger is on the rise. Some 11.5% of adults live in households where there was sometimes or often not enough to eat in the past week, up from 10% at the start of the year, according to the Census survey. Among families with children, the figure is 15.3%, up from 12.5%.
That heightened food insecurity also means that more people are turning to food banks for help. Some 65% of food banks reported an increase in demand for emergency food assistance in June, compared with the previous month, according to the latest survey by Feeding America, a network of more than 200 food banks and more than 60,000 partner agencies, food pantries and meal programs.
“Inflation is devastating to the budgets of families, seniors and people just barely getting by, driving more and more of them to food banks and food pantries,” said Katie Fitzgerald, chief operating officer of Feeding America.
The flood of federal assistance earlier in the Covid-19 pandemic enabled many Americans to stay current on their credit cards. But now, delinquencies are rising among low-income borrowers, with rates approaching pre-pandemic levels, New York Fed researchers found.
“With the supportive policies of the pandemic mostly in the past, there are pockets of borrowers who are beginning to show some distress on their debt,” the researchers said.
Congress likely to sit on the sidelines
Typically, when recessions hit, Congress steps in to help those who are struggling.
In every recession since at least the 1970s, Congress has increased unemployment benefits by providing a weekly federal supplement, extending the duration of benefits beyond the typical 26 weeks, or both, according to Chad Stone, chief economist at the Center on Budget and Policy Priorities.
And in early 2008, Congress passed the Economic Stimulus Act of 2008, providing $600 tax rebate checks to most individual taxpayers and $1,200 to married couples for those earning below a certain income cap. Then-President George W. Bush called it a “booster shot” for the American economy.
Federal relief measures, particularly unemployment insurance, help both struggling Americans and the overall economy because people typically spend the funds on essentials, which benefits businesses and prevents more layoffs.
“We need fiscal support for the economy, aka money flowing into workers’ pockets, so that we can stop that recessionary cycle in its tracks and have workers continue to buy things,” said Alix Gould-Werth, director of family economic security policy at the Washington Center for Equitable Growth.
But nearly all of that federal aid has dried up. In its place, several states have used their surplus revenue to issue rebate checks or temporarily suspend gas taxes to help their residents combat inflation.
The massive federal response during the early years of the pandemic drained many lawmakers’ will to do more for those in need, even as the economic storm clouds gather once again.
Whether the job market stumbles and the economy weakens further remains to be seen. But experts aren’t hopeful that will spur the federal cavalry to come to the rescue if it does occur.
“Should we actually go into a recession, policymakers don’t have the appetite to do the standard things we’ve done in the past,” Stone said. “There’s not much expectation that Congress will respond.”