US Senate approves historic $2tn plan to shore up economy

More than 69,000 people have been infected by the novel coronavirus in the US

The U.S. Capitol building stands illuminated at night in Washington, D.C., U.S., on Wednesday, March 25, 2020. The U.S. Senate approved a historic $2 trillion rescue plan to respond to the economic and health crisis caused by the coronavirus pandemic, putting pressure on the Democratic-led House to pass the bill quickly and send it to President Donald Trump for his signature. Photographer: Al Drago/Bloomberg
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The US Senate unanimously approved a $2 trillion (Dh7.3tn) rescue plan, the largest in the country's history, to help soften the impact of the coronavirus pandemic on the world's largest economy, as the number of unemployed Americans surged.

The rescue package includes a slew of loans, tax breaks and direct payments for major corporations and individual taxpayers. Americans earning up to $75,000 will receive a direct payment of $1,200 with an additional $500 per child.

The bill also allocates $350 billion of federally guaranteed loans to small businesses, includes a $500bn government lending programme for distressed businesses impacted by the coronavirus, $100bn for hospitals battling the pandemic and $150bn to state and local governments.

The House is set to vote on the legislation Friday before President Donald Trump signs and enacts the bill. Some analysts believe the US may need as much as $10tn of stimulus which may be forthcoming in phases. The pandemic has wiped at least $20tn from markets globally and battered the aviation and travel industry.

More than 69,000 people have been infected by the novel coronavirus in the US alone, according to Johns Hopkins University's tracker. More than 471,000 people have been infected globally and over 21,000 have died. More than 114,000 people have recovered.

Markets rallied for the second day on Wednesday after the package, which is about 10 per cent of US economic output, was approved. The rescue plan is more than double the size of President Barack Obama's stimulus in 2009 which allocated nearly $800bn to deal with the 2008 financial crisis.

The Dow Jones Industrial Average gained about 2.4 per cent on Wednesday after surging 11.3 per cent the day before, its biggest daily percentage gain since 1933 following the US Federal Reserve announcing an unprecedented open-ended asset purchase programme. The broader S&P 500 also advanced 1.1 per cent after climbing 9.4 per cent on Tuesday.

Jobless claims surged to 3.28 million for the week ending March 21, the highest since 1982, according to data released by the Department of Labour on Thursday. Citi had forecast 2.25 million Americans may have lost their jobs, while Goldman Sachs had projected 4 million. 

Prior to the release of the data, Jasper Lawler, head of research at London Capital Group said "a number above 2 million, markets will start clamouring for the next government or central bank bailout."

Governments around the world have flushed out stimulus packages as they try and stem the impact of the pandemic and ensure there's ample liquidity to curtail an economic slow down.

On Thursday Singapore's ministry of trade and industry said its economy contracted 2.2 per cent year-on-year in the first quarter and shrank 10.6 per cent on a quarter-on quarter seasonally-adjusted annualised basis.

"Taking into account the weaker-than-expected performance of the Singapore economy in the first quarter, and the sharp deterioration in the external and domestic economic environment since February, the GDP growth forecast for 2020 is further downgraded to 4.0 to -1.0 per cent," the ministry said.

"The wider forecast range is to account for heightened uncertainties in the global economy, given the unprecedented nature of the Covid-19 outbreak, including the public health measures taken in many countries to contain the outbreak," it added.

In an interview with CNBC former Federal Reserve chairman Ben Bernanke said though the economic crisis facing the US won't lead to a depression as the causes are different, the stimulus rolled out will be ineffective without the US government tackling the public health issue.

"This is a very different animal than the Great Depression" of the 1930s, Bernanke said. "The Great Depression, for one thing, lasted for 12 years, and it came from human problems: monetary and financial shocks that hit the system."

“I think the public health issue is the most important one,” he said. “If we can get that straight, then we know how to get the economy working again. Monetary and fiscal policy can do their thing. And we won’t have anything like the extended downturn we saw in even I don’t think in the Great Recession much less the Great Depression”.