Over the Cliff

By Yuval Rosenberg

Coronavirus Update: Over the
Cliff

Negotiations on another coronavirus relief package continue to
involve more finger-pointing than progress, with White House Chief
of Staff Mark Meadows and Speaker Nancy Pelosi on Friday each
accusing the other side of being unwilling to strike a deal.

With an enhanced federal unemployment benefit of $600 a week set
to formally expire on Friday, and with the last of those payments
having already gone out, President Trump and Republicans have been
pressing for a stopgap extension of the program and a moratorium on
evictions. Meadows told reporters Friday that Democrats had
rejected multiple proposals by the administration to extend the
unemployment payments.

“At the president’s direction, we have made no less than four
different offers” to continue the emergency programs, Meadows

said at a White House briefing. “They’ve not even
been countered with a proposal. So the Democrats are certainly
willing today to allow some of the American citizens who are
struggling the most under this pandemic to go unprotected.”

Meadows didn’t detail the offers, but Politico
reports that he made a proposal that many
Republicans might have a hard time swallowing: “to extend enhanced
unemployment at $600 per week for four months as a stand-alone
bill. … It’s an extension of current law -- something the GOP has
railed against.” House Speaker Nancy Pelosi and Senate Minority
Leader Chuck Schumer reportedly countered by proposing to extend
the $600 payments through the first quarter of 2021.

The Washington Post
reports that the White House is also willing to
agree to a deal that does not include the liability protections for
businesses, hospitals and schools. Senate Majority Leader Mitch
McConnell has insisted those protections are his “red line” in
talks. “That’s a question for Mitch McConnell ... that’s his
priority,” White House Press Secretary Kayleigh McEnany said
Friday, when asked if the administration would demand a liability
shield. “This president is very keenly focused on unemployment
insurance.”

Democrats reject piecemeal approach: At her weekly press
conference, Pelosi said that the White House had offered a one-week
extension of the unemployment insurance boost and reiterated her
position that such a deal would only make sense if the parties were
making progress toward a broader agreement and that Republicans
don’t have the votes to pass any of their proposals.

“What is a one week extension good for?  The one week
extension is good if you have a bill, and you’re working it out,
the details, the writing of it,” Pelosi told reporters late
Thursday after meeting with Meadows and Treasury Secretary Steven
Mnuchin. “It’s worthless unless you are using it for a
purpose.”

Republicans initially proposed reducing the federal unemployment
payment, which comes in addition to regular state benefits, to $200
a week and enacting a system that would replace about 70% of a
worker’s previous wages in total.

The speaker blamed Republicans for waiting to formulate a
counterproposal to the $3 trillion plan Democrats passed in May,
which would extend the $600 payments through January, among other
things. “The Republicans said they wanted to take a pause. Well,
the virus didn’t. Since then over 65,000 Americans have died,” she
said. “Clearly they, and perhaps the White House, do not understand
the gravity of the situation.”

Aid to state and local governments also a stumbling
block: The two sides reportedly also remain far apart on a
number of other issues, including additional aid to state and local
governments. Democrats reportedly are seeking more than $900
billion in such funding, much more than the White House and Senate
Republicans want.

President Trump later tweeted that Pelosi and Schumer have "no
interest" in reaching a deal and accused them of blocking
“desperately needed unemployment payments. “Pelosi & Schumer have
no interest in making a deal that is good for our Country and our
People,” Trump
tweeted. “All they want is a trillion dollars, and much
more, for their Radical Left Governed States, most of which are
doing very badly. It is called a BAILOUT for many years of bad Dem
Mgmt!”

The bottom line: Sahil Kapur of NBC News noted
that the barbs flying back and forth at dueling press briefings are
an indication of just how far apart the parties remain: “Abundantly
clear from that Pelosi presser that talks with Meadows/Mnuchin are
going nowhere fast. As anyone who's covered the Hill knows: attacks
dial down when progress is privately occurring and escalate when
it's not.”

What’s next: Talks are reportedly set
to continue in person on Saturday morning. House Majority Leader
Steny Hoyer
said Friday that the House would remain in session
until a deal is reached, but he also said members would be given 24
hours’ notice to return to vote on a package once a relief package
is ready.

What the End of the $600 Boost to Unemployment Benefits
Means

The expiration of the $600 per week in enhanced unemployment
benefits means a sudden loss of personal income and spending in the
economy is now guaranteed, lasting for at least as long as it takes
for Congress and the White House to reach an agreement on what to
do next.

How large will those income losses be? Each state is
different, providing different levels of support to the unemployed,
but the loss of income will be significant everywhere. See
this CNBC chart for details on how sharp the
reduction in unemployment benefits will be in all 50 states.
Nationally, the unemployed have been collecting about $920 on
average, which will drop to roughly $320. In Alabama, for example,
average unemployed benefits will fall from about $850 per week to
$250 per week. In Massachusetts, average payments will drop from
$1,050 to about $450.

Measured as a percentage, and the damage to individual incomes
becomes even clearer. In states that provide relatively stingy
benefits, such as Oklahoma and Louisiana, unemployed workers could
lose more than 70% of their total benefits overnight.

The economic hit: While some Republican lawmakers and a
handful of conservative economists insist that enhanced
unemployment benefits are hurting the economy by paying people not
to work, most mainstream economists say that the unemployment
program has played a major role in holding off a depression-like
catastrophe, and are still very much needed to keep the jobless and
the economy from falling deeper into a hole.

Economist Ernie Tedeschi of Evercore ISI recently
calculated that if the enhanced unemployment benefits
are allowed to expire without replacement, it would shrink the
economy by 2% and reduce employment by 1.7 million by the end of
the year, relative to a scenario in which they are extended. “Even
a partial compromise -- $300 per week for the rest of the year --
would still be an economy 1% smaller by year-end with 800,000 fewer
jobs,” Tedeschi said.

Editorial of the Day: Paying the Price for the GOP Pause

The New York Times Editorial Board lays the blame for the
current chaos in Congress around a much-needed coronavirus relief
package squarely on McConnell and his caucus:

“Congress needs to
extend the emergency aid programs that were
created in March to help Americans endure a broad suspension of
economic activity. Instead, even as the pandemic rages on, Congress
is allowing those aid programs to expire. …
“The abject failure to act is not the fault of Congress in a
collective sense. House Democrats passed a serviceable
aid bill more than two months ago. Responsibility
for the current debacle rests specifically and squarely on the
shoulders of the Senate majority leader, Mitch McConnell,
Republican of Kentucky, and the other 52 Senate Republicans.
…
“[I]t has been clear for weeks that the United States has
failed to control the pandemic and that many Americans still would
need economic aid beyond July. Yet Mr. McConnell and his caucus
chose to spend the summer
confirming federal judges rather than confronting
the crisis.
“Only in recent days have Republicans belatedly begun a
frantic effort to devise a coherent response to the crisis. Like
students who wait until the night before an assignment is due, they
have pleaded for more time and asked if they could submit a part of
the work. The nation will suffer the consequences.”


Read the full editorial at The New York Times.

Democrats Pass $1.3 Trillion Spending Package for 2021

The House on Friday passed a massive $1.3 trillion spending
package that includes $210 billion in emergency funding for the
government’s response to the coronavirus. The pandemic-specific
funding would target multiple initiatives, including state and
local public health departments, medical research and public
housing.

The rest of the bill would fund most of the federal government
in the 2021 fiscal year, including the departments of Labor, Health
and Human Services, Education, Homeland Security, Justice,
Transportation and Energy. Appropriations for the Department of
Homeland Security were removed from the package earlier this week
due to disagreements within the Democratic caucus over Trump
administration immigration policing policies.

Last week, the House passed a $259 billion package that would
fund the departments of State, Interior, Agriculture and Veterans
Affairs, among others. Ten of the 12 annual spending bills for 2021
have now passed the House.

Why it matters: The funding bills have
virtually no chance of making it past the Republican-controlled
Senate, Politico
reports, and President Trump has threatened to
veto them if they somehow do. Politically, the bills amount to an
opening bid from Democrats in negotiations with Republicans over
government funding for the next fiscal year, which begins in
October.

Those negotiations may take some time to get started, since the
appropriations process in the Senate has stalled, with none of the
12 funding bills having passed so far. (You can track the progress
of the 2021 appropriations bills at the Congressional
Research Service website.)

US Makes $2.1 Billion Deal for Vaccine

The federal government has agreed to pay two major
pharmaceutical companies up to $2.1 billion for testing,
manufacturing and the purchase of 100 million doses of an as-yet
unfinished vaccine for Covid-19.

The two companies, Sanofi and GlaxoSmithKline, signed the
agreement as part of Operation Warp Speed, the Trump
administration’s effort to produce and distribute a vaccine by
early 2021. The vaccine candidate is the sixth now in development
under the program, which has also made deals with AstraZeneca,
Johnson & Johnson, Moderna, Novavax and Pfizer.

The potential vaccine is still in the preclinical trial phase of
development, less far along than some of the other Operation Warp
Speed candidates. If approved, the 100 million doses would be made
available at no cost to Americans.

“Pharmaceutical companies have been under pressure to keep
COVID-19 therapies and vaccines affordable, particularly when the
federal government — and taxpayers — have offered substantial
funding toward research and development,” NRP’s Sydney Lupkin

said.

Speaking at a House subcommittee hearing Friday, Dr.
Anthony Fauci, the nation’s top infectious disease expert, said he
was optimistic that a vaccine would be ready soon. “From everything
we've seen now — in the animal data, as well as the human data — we
feel cautiously optimistic that we will have a vaccine by the end
of this year and as we go into 2021,” he said. “I don't think it's
dreaming.”

House Dems Find Trump Administration ‘Squandered’ Up to $500
Million in Buying Ventilators

A report by a panel of the House Oversight Committee raises
serious questions about the roughly $3 billion in taxpayer money
spent by the Trump administration as it scrambled to acquire
ventilators, NBC News’s Heidi Przybyla writes:

“[I]nternal emails and documents obtained by Democrats on the
House Oversight Committee suggest that the Trump administration
failed to enforce an existing contract with a major medical
manufacturer, delayed negotiations for more than a month and
subsequently overpaid as much as $500 million for tens of thousands
of the devices — a costly error at a time when officials from some
of the biggest states were warning of shortages.”

The
report is titled, “The Trump Administration’s
Failures in Contract Management and Inept Negotiation by Senior
White House Officials Denied Americans Ventilators During the
Coronavirus Pandemic and Squandered Up to $504 Million in Taxpayer
Funds.”

Matt Smith, a spokesman for Oversight Committee
Republicans, told NBC that Democrats were politicizing the federal
coronavirus response.

"After months of Democratic governors rushing to
television cameras to beg for more ventilators, Congressional
Democrats are now unhappy with the Administration’s successful
efforts to quickly secure a robust supply from American
manufacturers," Smith said. "Rather than provide credit for the
more-than quadrupling of available ventilators in the national
stockpile since March, they now seek to diminish President Trump’s
success by throwing a tantrum over contracting terms. This is just
the latest example of a Democratic Party more concerned with
partisan politics than fighting COVID-19."

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