Economy Needs At Least $1.3 Trillion In New Stimulus To Sustain Recovery, Bridgewater CIO Says
In an interview with CNBC, Greg Jensen, the co-CIO of hedge fund giant Bridgewater Associates, estimated that the U.S. economy needs another stimulus bill worth between $1.3 trillion and $1.7 trillion to sustain its recovery.
According to Jensen, Bridgewater’s analysis shows that fiscal support from the government—through the Federal Reserve’s new backstops and the CARES Act, for example—has boosted the U.S. GDP by 7% relative to where it would have been without any support.
He expects a “big drawdown” if lawmakers, who have been struggling for weeks to agree on the next round of federal coronavirus aid, don’t enact any more measures to prop up the economy.
One of the biggest points of contention over the next stimulus bill is the price tag: Democrats passed their $3 trillion opening offer in May; the GOP’s July proposal was worth about $1 trillion.
Democrats have offered to meet White House negotiators in the middle at $2.2 trillion, but the White House has rejected that offer.
On Friday, White House chief of staff Mark Meadows said that President Trump would be willing to sign a new bill with a $1.3 trillion price tag—that’s slightly higher than the GOP’s original $1 trillion offer, but much lower than the Democrats’ $2.2 trillion red line.
When the federal government ends its fiscal stimulus measures, “it’s a massive tightening to the economy and an unsustainable one,” Jensen told CNBC. “One way or the other, maybe we fall into a trap over the next month or two out of politics but over time, that need for a major round of support is going to come.”
Bridgewater Associates is the hedge fund founded by investor Ray Dalio, who Forbes estimates has a net worth of $16.9 billion. Bridgewater managed nearly $140 billion as of April 2020.
Jensen also made a distinction between more effective government spending that makes its way directly into the economy (like stimulus checks) and spending that’s intended to prevent further damage (like additional aid to state and local governments). “The money for states is going to prevent negatives, he said. “The stimulus checks will be direct positives.”
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