Evictions and a recession are looming so Congress needs to pull off a rescue package, Moodys’ Mark Zandi says

Job number one for the incoming Biden administration is to contain the raging COVID-19 pandemic and provide support for the tens of millions of Americans whose finances are being wrecked by the virus. The recent results from Pfizer, Moderna and AstraZeneca’s vaccine trials are hopeful, but they mean little to the families and small businesses struggling to make it until vaccines are distributed.

Epidemiologists have consistently warned that COVID infections would increase this fall. However, the surge in confirmed infections has been overwhelming. Greater testing explains some of the increase, but positivity rates have significantly risen and are consistent with out-of-control community spread of the virus. With the Trump administration all but abdicating any role in combating the virus, it is now increasingly likely hospitals will not be able to manage cases in large parts of the country.

This is forcing state and local government officials, including here in Philadelphia, to require businesses, particularly restaurants, bars, gyms and recreational venues to pull back on their activities. Other businesses are telling employees they will not be returning to the office for the foreseeable future. Many school districts that had just started to bring students back for in-person education have no choice but to quickly retreat. Fear of the virus is also causing people to be more cautious and double down on self-quarantines.

The economic recovery thus looks to be stalling out, and the threat that the economy will slide back into recession is high. Retailing has gone flat, consumer sentiment is turning down again, small business sales are soft, and more than a million workers are filing for unemployment insurance each week — a number that is again on the rise.

It is critically important for lawmakers to come to terms quickly on another fiscal rescue package, even more important than the size of the package. You may recall that before the election House Democrats were holding out for a $2.2 trillion package while Senate Republicans had coalesced around a much smaller one at $500 billion. President Trump couldn’t seem to make up his mind. Nothing got done, and the remaining emergency help the government is providing to prop up the economy is set to soon expire.

One of the most disconcerting lapses would end the moratorium on rental evictions. If not extended, the loss of this help means millions of households behind on their rent payments could be evicted early next year. Landlords have continued to work through the eviction process, and sheriff notices are piling up to be executed as soon as the moratorium ends. Imagine millions of people losing their homes in the dead of winter at the height of the pandemic.

Then there are millions of student loan borrowers who will have to resume payments this January on their government-backed loans. At the same time, federal government employees who were given a break on payroll taxes during the past several months will need to start making catch up payments on those taxes. And the fast-approaching expiration of emergency unemployment insurance means millions of unemployed workers will soon be completely on their own financially.

Unfortunately, odds of lawmakers coming to terms on more help for the economy before President-elect Biden’s inauguration in January seem low. The outgoing Trump administration hasn’t made any part of the transition easy, including economic policy.

Take Treasury Secretary Mnuchin’s recent decision to shut down the credit facilities that the Federal Reserve established early in the pandemic. These facilities didn’t get much attention, but they have been extraordinarily effective in establishing a firewall between the chaos in the economy and the financial system by allowing households and businesses to continue getting much-needed loans. Shutting them down and jeopardizing this flow of credit is such a serious mistake that even the uber-diplomatic Fed felt compelled to say so in a public statement.

A critical test of whether lawmakers will be able to work together after inauguration day is the December 11 deadline for passing a budget and continuing to fund the government to avoid a shutdown. It seems incomprehensible they would allow a shutdown at the height of the pandemic, yet lawmakers continue to wrangle.

Given these difficult politics, the raging pandemic and the struggling economy, the new Biden administration should focus on quickly striking a deal with Congress on another fiscal rescue package, even if that means agreeing to a smaller package that nevertheless includes the right kind of help. That would be more unemployment insurance, grants for small businesses, a rental assistance fund to help with back rent, aid to state and local governments, help to the airlines, and ample funding for COVID testing and hardening schools for in-person education.

If President Biden can sign this legislation within a few weeks of taking office, it should allow the financially hardest pressed among us manage until the vaccines become a reality and we are finally on the other side of this crisis.