President-elect Joe Biden has proposed another $1.9 trillion stimulus package. This would be on top of the $3.5 trillion the nation has spent so far in an effort to address the worst economic crisis since the Great Depression and the most deadly pandemic in a century.
Georgieva said the pandemic is “moving from bad to worse” and that additional help for the economy is needed to get people through the next few months until vaccines are more widely available. She characterized this period as an “unprecedented race" between the virus and the vaccines.
“We are still faced with tremendous uncertainties about the exit from the health crisis and we do have a difficult period ahead. There is scarring from [it] we are yet to address," Georgieva said.
In a sign of renewed pain for the economy, the U.S. Labor Department reported Thursday that new applications for unemployment aid spiked to nearly 1 million last week — the highest since August. Overall, more than 18 million Americans are receiving unemployment aid and the nation is grappling with even deeper job losses that during the Great Recession.
Some Republicans have expressed concern that the United States cannot afford to spend so much money to address the crisis, but Georgieva said now is not the time to focus on the debt. She noted that it is incredibly cheap for the United States to borrow money and the nation has ample capacity to borrow more. Federal Reserve Chair Jerome H. Powell has made the same argument to Congress in recent months.
“In our view, the time to take action on debt and deficit is when we have a durable exit from the health crisis. In other words, we see it in the rearview mirror,” Georgieva said.
While the top priority of the incoming Biden administration should be getting the virus under control, Georgieva also urged Biden’s team to use this moment to enact policies to lessen inequality and put the economy on a more sustainable course by tackling climate change.
“I am convinced that as crisis ... is opportunity. This is our best shot to change course for the better. We must take it on,” she said
Biden has said he wants big investments to upgrade U.S. infrastructure and address climate change, initiatives that he hopes will boost growth and jobs.
Georgieva said climate action is a “win, win, win” that can help the planet, boost growth and create a large number of jobs, especially for people who are getting left behind by the digital economy.
Nearly 10 million people who lost their jobs between March and April of last year still have not been able to gain employment again. Biden is under pressure to create conditions that get as many of these people back to work as quickly as possible. It’s a tall order. Among recent presidents, only Ronald Reagan in his second term and Bill Clinton in each of his terms managed to oversee that scale of job creation.
Georgieva also called on China, India, and other nations to enact more stimulus, and she warned that the pandemic has further exacerbated inequalities between the rich and poor in many countries as well as between rich nations and poor nations.
She cautioned that there could be more protests and riots if countries don’t focus on fighting poverty, creating job opportunities and ensuring all people receive vaccines as quickly as possible.
“Without coordinated international support we will see that divergence becoming a problem for the countries themselves but also for security and stability of the world in the future,” she said.