The dot-com crash of 2001 led the Bush administration to send $300 stimulus payments to tens of millions of households. In the midst of the 2008 financial crisis, the Federal Reserve cut interest rates to historic lows and strengthened financial markets. Then, in 2009, former President Barack Obama’s first major bill was an $830 billion package to mitigate the worst of the Great Recession. The response in 2020 – as the coronavirus pushed the US into a sudden shutdown – saw the Fed and Congress supporting the economy with low interest rates, emergency lending programs, larger stimulus checks and boosting unemployment benefits. Now, as a growing number of economists see another recession on the horizon, a similar degree of government assistance is not expected – even with inflation at 41-year highs. That’s because the coming recession will be engineered by policymakers in an effort to fight inflation and its causes, leaving large federal relief efforts unlikely. It doesn’t help matters that stimulus from the pandemic era has recently come under scrutiny to fuel today’s inflation. “Democrats who set policy along party lines decided on trillions of dollars in reckless spending,” Senate Minority Leader Mitch McConnell said in a speech that touched on inflation earlier this month. Economists have been slow to assign full blame to the incentives, citing other factors such as Russia’s invasion of Ukraine and tangled global supply chains. But decades of high inflation may be enough to dissuade even Democrats from pushing aggressive stimulus. Another headwind for further relief is the fact that Republicans are expected to retake at least one part of Congress in the midterms. That would put into power a party that has already been outspoken about avoiding new spending. These factors are coming together at a time when the U.S. looks headed for a recession sometime in 2023. Economists fear the Fed’s fastest rate hike in nearly three decades will put the brakes on economic growth, freeze spending, hit corporate revenue and will result in layoffs. But the low chance of further stimulus may not matter if the economy avoids a recession or sees only a mild one – a prediction held by a number of high-profile experts. Goldman Sachs wrote on June 20 that there is only a 30% chance the economy will slip into recession next year. JPMorgan has a similarly rosy outlook, although it sees a greater chance of a recession over the next two years. “There’s a lot of reason to think it would be a mild recession,” Jason Furman, President Barack Obama’s former top economist, recently told Insider. He cited the savings created by many American households during the pandemic and the absence of pressures on the financial sector.
