Second stimulus update: What to expect if the White House doesn't meet Pelosi's 48-hour deadline

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Is it now or never?

On Monday, Republican and Democratic leaders inched closer toward a compromise for another massive economic aid package. However, House Speaker Nancy Pelosi says the two sides only have until the end of Tuesday to reach a deal; otherwise they won’t be able to pass a stimulus package before the election.

If a deal doesn’t come Tuesday, it might not come until after until Jan. 20, if it comes at all: Divided governments rarely act between Election Day and Inauguration Day.

Though the battle on Capitol Hill over a new stimulus deal has been waged since May, some economists estimate things may start to look even worse for those who have been hit the hardest by the pandemic if help isn’t on the way soon.

“The economic recovery is already slowing,” Mark Zandi, chief economist at Moody’s Analytics, recently told Fortune. “Without additional support it threatens to stall out or even backslide.”

According to Brett Ryan, senior U.S. economist at Deutsche Bank, failing to pass another stimulus bill this year could have an adverse impact on incomes: “The most immediate effect is the extra income” from enhanced unemployment benefits, Ryan tells Fortune.

More than 25 million Americans are on some form of unemployment assistance. Without another stimulus deal, they’re unlikely to see any additional enhanced unemployment benefits. Before it expired at the end of July, out of work Americans were receiving the $600 weekly enhanced unemployment benefit. President Trump then signed a memorandum in August to provide a $300 enhanced weekly unemployment benefit; however, the $44 billion he set aside for it is running dry, and most states have ended the additional payment.

Failing to pass another bill with enhanced unemployment assistance “sets the economy back about a quarter,” Ryan predicts. “You’re going to have a drop-off in income of close to $1 trillion” in the third and fourth quarters of 2020, “and that’s pretty meaningful,” he says. Much of that will come from the lack of enhanced unemployment benefits—which alone could account for “about a $500 billion hit in the fourth quarter.”

Another problem with the timing of the yet-to-be stimulus bill is that failure to pass it may mean “income is going away in the heart of the holiday season,” Ryan notes. Retail sales might start looking less healthy despite strong numbers for September, as shopping for things like clothing could dwindle. That could translate to a decline in consumer spending in the coming months, Ryan suggests, and though he notes it’s unlikely, “if you get a weak holiday shopping season, and firms see less demand, they’re going to be less likely to hire or take risk. You don’t want to create that negative dynamic where firms see less demand than they expected and therefore they pull back on hiring, and it starts a downward spiral.”

There’s also a potential negative impact to small businesses, particularly those in the hospitality industry, should help not arrive soon.

Many small businesses have already exhausted their Paycheck Protection Program (PPP) loans, which were intended to help keep employees on the payroll while much of the country was on lockdown. As many businesses continue to struggle and the weather turns colder, economists foresee a rough few months if no further aid is passed.

Deutsche Bank’s Ryan argues that a failure to pass fresh PPP might lead to “more small-business bankruptcies as we get into the winter months, because we’re still dealing with the virus and social distancing and with these constraints on a lot of small businesses in terms of how they can operate,” Ryan notes. “Not having another round of PPP loans available yet is a potential timing issue, and it could slow the labor market recovery,” he suggests.

Certainly, not passing a stimulus deal before the election doesn’t mean one won’t be passed at all. But economists like Ryan don’t expect a deal until early next year, as late as February.