US$2 trillion package a ‘good start’ but economic recovery relies on coronavirus containment, US economist says

A top American economist said on Wednesday that the federal government’s economic package is a “good start” but complete recovery relies solely on containing the spread of the coronavirus.

“Success in controlling growth [of] the disease and, ultimately, putting it behind us is going to be the single most important determinant of the economic consequences of the Covid episode,” said Larry Summers, former US Treasury secretary, at a virtual event hosted by the Economic Club of New York.

Summers applauded the efforts by the Federal Reserve, Congress and the executive branch to pass legislation to stabilise the economy.

“They have made a strong start by acting with what by the context of previous crises is remarkable rapidity,” said the former director of the White House National Economic Council of the Obama administration, adding that the passage of the US$2.2 trillion package “dwarfs the Recovery Act in the spring of 2009” after the financial crisis.

While applauding the federal government’s swift reaction, Summers warned that there are limitations to what policies can achieve.