Better than expected US job data could create less pressure for congress to restart stimulus negotiations: Chief economist
Odds of another round of fiscal stimulus for the U.S. economy dropped on Thursday as senators headed out of Washington for the weekend following a partisan split over a slimmed-down package proposed by Republicans.
The Senate voted 52-47 to advance to the floor a bill introduced by Senate Majority Leader Mitch McConnell, short of the 60 needed to bring it up. Democrats were united in blocking the legislation.
Estimated at roughly US$500 billion to US$700 billion, the bill was intended to target the most pressing areas for help -- revived supplemental unemployment insurance benefits and extended aid for small business, in particular. It was a fraction of the US$2.2 trillion backed by Democrats and even below Republicans’ previous US$1 trillion.
Democratic leaders and the White House broke off negotiations on a compromise more than a month ago, and with nothing further scheduled, chances are rising that there will be no further aid before the November election. A number of GOP senators offered pessimistic comments after the Thursday vote about the likelihood of a revival in talks before the election.
“You never know around here sometimes things look bleak and they revive, and so forth, but we thought the scaled-down version was a good bill,” said Senate Appropriations Chair Richard Shelby. Asked whether a pre-election stimulus is dead, he said, “It looks that way.”
Senate Finance Chair Chuck Grassley, a Republican, said that while it was “sad” that no deal is likely to get done, the impact will be “a lot less” than a couple weeks ago amid signs of an improving economy.
Trump administration officials have said that while some areas do need targeted help, a robust recovery is nevertheless in place. Democrats have by contrast highlighted the millions of unemployed who are now going without COVID-19 relief.
Small Business Committee Chairman Marco Rubio, a Republican, warned that unemployment at smaller companies will climb. Weekly figures on unemployment claims showed the labor market remains deeply damaged by the COVID-19 crisis. Initial jobless claims in regular state programs were unchanged at 884,000 in the week ended Sept. 5, well above the 850,000 economists had expected.
What’s more, funding for the temporary supplemental jobless benefit payments authorized by President Donald Trump in early August is running out. Economists warned that without fiscal action, household incomes will be under pressure in the waning months of 2020, in turn hurting consumer spending.
McConnell, asked what happens next, said, “Well, hopefully Democrats will come back to the table.”
Minority Leader Chuck Schumer and House Speaker Nancy Pelosi said on a conference call with House Democrats that the party needs to hang tough and continue demanding what they call a realistic stimulus plan from Republicans, according to participants on the call.
Caucus members appeared unified in the view that pressure will build on Republicans from GOP governors and mayors to offer another bill, the participants said, speaking on condition of anonymity to discuss the private chat.
Schumer told reporters earlier Thursday that, “If past is prologue, there’s actually a significant chance that the public heat on many Republican senators as they go back home will have them come to their senses, and they’ll start negotiating with us in a serious way.”
The Senate vote underscored that the divided chamber is not able to work out a bipartisan compromise on its own. The main avenue for a deal continues to be between Pelosi and the White House. Pelosi said Thursday that such talks are not yet dead, but offered no roadmap for how the stalemate could be broken.
One Republican senator, Rand Paul of Kentucky, joined Democrats to oppose bringing up the bill; no Democrats backed it. Senator Kamala Harris of California, the Democratic vice presidential nominee, wasn’t present to vote.
The pared-back proposal, released Tuesday, provided a US$300-per-week unemployment benefit enhancement, US$105 billion for schools, a US$10 billion grant to the U.S. Postal Service, US$258 billion for the Paycheck Protection Program for small businesses, US$47 billion for vaccines and testing needs, and liability protections for employers.
Among the bigger items excluded from the bill were large-scale assistance to state and local authorities, which have seen their revenues walloped by the COVID-19 crisis. That’s been a key area of dispute in the negotiations, with President Donald Trump casting the near US$1 trillion proposed by Democrats as a subsidy for poorly run blue states.
Individual stimulus checks were also left out. The Congressional Budget Office hasn’t yet scored the cost of the Republican bill, which calls for drawing on unspent funds allocated to support Federal Reserve facilities.
Besides its smaller size, Democrats slammed the Republican bill for “poison pill” provisions that include lawsuit protections for businesses that reopen and a tax break for paying for private-school costs.
The White House and congressional Democrats have been more than US$1 trillion apart on the stimulus since negotiations broke off Aug. 7. Democrats lowered their demand from US$3.4 trillion that passed the House in May to US$2.2 trillion, but haven’t budged beyond that.