STEVE INSKEEP, HOST:
Nancy Pelosi, the speaker of the House, and Treasury Secretary Steven Mnuchin say they made some progress during their latest coronavirus stimulus bill talks. That's Pelosi's characterization. But some progress does not mean a deal. Millions of Americans remain out of work because of the pandemic. David Wessel joins us now to talk through what this means for them. He is director of the Hutchins Center at the Brookings Institution. David, good morning.
DAVID WESSEL: Good morning, Steve.
INSKEEP: How much difference does it make in people's lives if a COVID relief bill doesn't pass really soon?
WESSEL: Well, it makes a big difference. Of course, there's lots of people who were getting aid from the government before the CARES Act, which was passed in March, expired. But more importantly - or not more importantly - alongside, this is really important to the economy. Congress and the president pumped $2 trillion into the economy when they put it into a medically induced coma in the spring. That saved us from a much more severe recession.
Now the economy is growing again. The government is likely to report that the GDP grew very strongly in the third quarter when it posts the numbers next week. The unemployment rate - still high. It's fallen faster than a lot of people expected. But we've only recovered about half the 22 million jobs we've lost. So leveling off at this pace of economic activity would be painful, very painful.
A couple of colleagues of mine at Brookings, Wendy Edelberg and Louise Sheiner, estimate that if we got $2 trillion more fiscal policy - that's the magnitude that Pelosi and Mnuchin are discussing - we could get the economy back on the pre-pandemic growth path by late next year or early in 2022. But without it, it could take us years, perhaps even a decade, to get back to the path we were on.
INSKEEP: David, this next question requires deep knowledge of the alphabet. We've heard about V-shaped recovery, where it bounces right back, and a U-shaped recovery. There are various other letters. And people talk about a K-shaped recovery, which is ominous. Why? And what is it?
WESSEL: Well, it is ominous. Simply put, it's a dramatically unequal economic recovery - the top of the K and the bottom of the K - in which some people, mainly educated white-collar workers, the people who can work from home, who are still getting paid, are doing pretty well. And others, mainly low-wage workers, people who worked in hotels, restaurants, airports, airlines, disproportionately Black and brown people, well, they're suffering. A far greater share of the jobs that pay under $16 an hour have evaporated than the share of jobs that pay over, say, $28 an hour. And the gap between winners and losers in the economy, which was widening even before the pandemic, has gotten even wider because the pandemic has not affected everybody the same way.
INSKEEP: This is a strong case for doing something, but, of course, doing something requires borrowing. Is there - are we getting anywhere near the point where it would be a dangerous amount of borrowing?
WESSEL: I don't think so. Look. In the short term, this is like a war. Fight the virus now and figure out how to pay for it later. But there's been a shift in thinking about the long-term budget, as well. The federal budget is on an unsustainable course. But interest rates, not only the ones that the Fed sets but the ones in global markets, are so low and are projected to remain so low that some influential economists say attacking the debt simply isn't as urgent as it once seemed.
Consider this - even though the federal government is borrowing more every day, it's actually spending less on interest because rates are so low. Now, some people argue that we shouldn't count on interest rates staying low forever and take out some insurance by beginning to restrain the debt as soon as the economy returns to health. But others counter that with the Treasury borrowing at just 1.5% for 30 years - less than the rate of inflation - this is precisely the time to borrow more, make worthy public investments in both physical and human capital that will pay off in the future.
INSKEEP: David Wessel of the Brookings Institution, thanks as always.
WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.