By Paul Kiernan 

WASHINGTON -- Robust federal spending significantly lessened the economic pain caused by the coronavirus pandemic, White House economists said Thursday, adding that more relief efforts would further aid the recovery.

A report Thursday by the White House Council of Economic Advisers concurred with other assessments that the wide-ranging federal response to the pandemic has been largely successful.

Some 82% of the layoffs since February were likely to be temporary, a feared wave of small-business bankruptcies hasn't materialized, and income inequality has narrowed as the poorest households received stimulus checks and enhanced unemployment benefits that surpassed their regular earnings, the report said.

Still, the economy continues to face headwinds with a resurgence of the novel coronavirus in many parts of the country.

"I think we're going to continue to see the U.S. economy recover," said Tyler Goodspeed, director of the council, at a press briefing. "It would recover a lot faster, and with much less long-term scarring, with additional support."

How much additional help the economy needs is a central question dividing the Trump administration and congressional Democrats. House Democrats have passed a bill calling for an additional $3.5 trillion in aid, while Republicans have countered with $1 trillion.

Mr. Goodspeed indicated that an economy that performs below its potential -- sometimes described as having a large "output gap" -- could do more damage to public finances than heavy spending to spur a recovery.

"If you care about long-term debt sustainability, the No. 1 thing we should be focusing on right now is attenuating the output gap," Mr. Goodspeed said.

A major sticking point in talks between Republicans and Democrats is how much money the federal government should add to unemployment benefits. Democrats want to extend the $600 weekly supplement provided by the Cares Act, which expired in late July, while the Trump administration has suggested $400 in extra benefits, and Senate Republicans have proposed $200.

Mr. Goodspeed said that jobless benefits should be generous enough to give workers time to search for a suitable job, rather than rush to find one that isn't a good fit.

"You want to provide a safety net such that people can continue to search for work and find the best employer-employee match," Mr. Goodspeed said.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

August 13, 2020 16:39 ET (20:39 GMT)