District of Columbia. The U.S. Congress and the White House have joined the Federal Reserve, the country's central bank, in trying to lessen the economic damage from the corona virus pandemic. The big focus here is on a stimulus package, a massive plan of government spending, intended to stimulate the U.S. economy. How massive? The Senate deal which is supported by the Trump Administration is worth $2 trillion. Senate Majority Leader Mitch McConnell described it as a wartime level of investment for America. Here's what the money would be spent on.
$500 billion would be intended to help big companies get through this corona virus pandemic. $350 billion would be in loans for small businesses in the hopes it will help them stay in business. $250 billion would be given directly to American taxpayers in the hopes that they'll spend it but those payments would only go to individuals who earn less than $99.000 a year or couples who earn less than $198.000 a year. Hundreds of billions more would go to help hospitals, Americans who've lost their jobs and state and local governments.
The agreement would still have to be passed by the U.S. House of Representatives before it goes to President Donald Trump's desk for signature. So the bill is not finalized and it's not clear how long that will take. But the news of it was welcomed on Wall Street. After setting several records for single day point losses in recent weeks, the Dow Jones Industrial Average of 30 important stocks set a new record on Tuesday for its biggest ever single point gain. Will all this shorten an expected recession?
So what's the difference between a recession and a depression? It comes down to how long the economy contracts. A recession is typically defined as two negative quarters of economic growth and is part of the normal business cycle. The U.S. economy has fallen into recession more than 30 times since 1854. A depression is something vastly different.
It happens when the economic decline is sustained and might potentially go on for years. That's only occurred once in American history in 1929 and it lasted 10 years. Because it lasts so long, a depression is more severe. A decade ago unemployment hit 10 percent during the worst of the "Great Recession" but during the "Great Depression" the jobless rate peaked at nearly 25 percent.
The reason economists are so worried this time, we just don't know how long we'll be fighting this virus. We don't know how long stores will be shut down, how long travel will be paused, how much damage will be done to supply chains or how many companies will go bankrupt. But there is hope if you look to history. The recession that followed the 1918 Spanish Flu pandemic lasted just seven months. That's much shorter than the average recession. Let's hope this time history repeats.