Pelosi and Mnuchin Race for a Coronavirus Aid Deal

Pelosi and Mnuchin Race for a Coronavirus Aid Deal

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Plus: A record monthly deficit
Thursday, March 12, 2020

Pelosi and Mnuchin Race to Reach a Coronavirus Aid Deal

President Trump called for unity in his 11-minute Oval Office address to the nation on coronavirus Wednesday night, but that unity was hard to come by on Capitol Hill Thursday as the president and congressional Republicans opposed a response package proposed by House Democrats and negotiations on the legislation continued between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin.

Here’s your news update:

  • Pelosi and Mnuchin race to reach a stimulus deal: Pelosi and Mnuchin spoke by phone at least five times Thursday as they sought to finalize a multi-billion-dollar economic relief plan.
  • The Senate cancels its recess: Senate Majority Leader Mitch McConnell said the Senate will stay in session next week rather than leaving for a planned recess.
  • Biden and Sanders call for a stronger government response: Both Democratic presidential candidates delivered speeches Thursday criticizing the administration’s handling of the pandemic and laying out how they think the government should respond.
  • Federal Reserve takes extraordinary action: The Fed said it would pump $1.5 trillion into the short-term lending markets that banks use, a move meant to ensure that financial markets remain stable and liquid. The central bank also said it will change the mix of securities it buys under an existing $60-billion-a-month program.
  • Stocks plunge again: The S&P 500 index fell by 9.5%, its worst day since 1987. “Investors are looking for bold government stimulus. So far we haven’t seen a lot of detail and there isn’t much confidence it will happen quick enough,” Nathan Thooft, Manulife Investment Management’s head of global asset allocation, told Bloomberg News.
  • March Madness has been canceled: The NCAA called off its men’s and women’s basketball tournaments. And Major League Baseball suspended its spring training games and said it would delay the start of its regular season by at least two weeks.

Trumps’ Speech Fails to Reassure

The administration had to correct or walk back a few policy announcements Trump made, clarifying that trade with Europe will continue and that the 30-day travel restrictions from Europe would not apply to American residents and citizens. Trump had also claimed that private health insurers had agreed to waive co-pays and prevent surprise medical bills for coronavirus treatment, but the insurers’ trade group and the White House later clarified that insurers had agreed to waive co-payments on testing, not treatment.

“From the misstatements to the omissions to his labored demeanor, the president sent a message that shook financial markets, disrupted relations with European allies, confused his many viewers and undermined the most precious commodity of any president, his credibility,” The Washington Post’s Dan Balz wrote.

Pelosi and Mnuchin Push Toward a Deal

The House speaker told reporters at a morning news conference that Democrats agreed to “most” of the GOP’s proposed changes. “He had some suggestions,” Pelosi said. “All very reasonable. I don’t think that any of them would prevent us from moving forward with the bill.” She rejected a suggestion from House Minority Leader Kevin McCarthy’s that lawmakers delay a planned recess by 24 or 48 hours to keep talks going. "We don't need 48 hours, we need to just make a decision to help families right now," she said.

What Trump proposed: Besides announcing travel restrictions from Europe, Trump proposed financial relief for workers who are ill, quarantined or caring for others and he said would ask Congress to provide $50 billion in funding for the Small Business Administration to provide low-interest loans to businesses disrupted by the pandemic. He also called on Congress to enact a payroll tax cut.

What House Democrats proposed: House Democrats late Wednesday night unveiled their own multi-billion-dollar economic response package, which calls for paid sick leave, free coronavirus testing, additional food aid and expanded unemployment insurance. The legislation would also boost federal funding for state Medicaid costs by 8 percentage points. It does not include Trump’s payroll tax cut or his proposed expansion of loans for small businesses.

You can read a more detailed breakdown of the bill from the Associated Press, and we’ll have more information once the final bill is produced.

Why Trump and Republicans rejected the Dems’ bill: Trump objected to what he called “goodies” in the bill. “There are things in there that have nothing to do with what we’re talking about,” he told reporters. “So, it’s not a way for them to get some of the goodies that they haven’t been able to get for the last 25 years.”

An unnamed administration official told Bloomberg News that those items included an estimated $50 billion increase in federal funding for Medicaid and changes that the White House feared could allow federal money to go to health care providers who perform abortions.

A White House official told Roll Call that the administration supports many of the policies in the House Democrats' bill, but not the ways they are implemented in the legislation.

Congressional Republicans, meanwhile, had their own criticisms of the Democratic package. McConnell panned the House bill Tuesday morning as “an ideological wish list that was not tailored closely to the circumstances." And House Minority Leader Kevin McCarthy of California derided the plan as “completely partisan” and “unworkable.”

The main concern for Republicans was the requirement that employers provide permanent paid sick leave to their workers. “McCarthy and others said there should be an option to exempt some businesses from a paid leave mandate, and that such a measure should include a sunset clause,” Bloomberg reported.

The bottom line: As negotiations continued, both sides reportedly said they were closing in on a deal and a House vote was reportedly still expected Thursday. It’s unclear when that might happen and if it will be on a package that has the support of the White House. The Senate is gone for the weekend, so final passage of any negotiated deal won’t happen until next week.

Trump’s Payroll Tax Cut Would Cost Nearly $1 Trillion: Analysis

The Trump administration is pushing for a massive temporary tax cut in response to the economic disruptions caused by the coronavirus pandemic. The proposal, which is still being discussed in the White House despite receiving a cool reception on Capitol Hill, calls for the suspension of all Social Security payroll taxes starting next month through the end of the year.

According to Jim Tankersley of The New York Times, who spoke to White House economic advisor Peter Navarro about the details of the plan, the temporary cut would eliminate the Social Security and Medicare taxes paid by both employees and employers. Currently, workers pay 6.2% for Social Security and 1.45% for Medicare, and their employers pay the same. Self-employed workers, who cover the full 15.3% tax on their own, would also be relieved of their obligations.

Estimates of the cost of the tax cut proposal vary. The Tax Foundation says the revenue loss would likely exceed $900 billion, while the Committee for a Responsible Budget puts the cost at about $840 billion.

On top of the payroll tax cut, Trump has also proposed substantial assistance to industries affected by the outbreak, such as airlines and cruise ships, which could total tens or hundreds of billions of dollars more.

All told, Trump’s stimulus package would likely exceed $1 trillion — enough to push the annual deficit toward the $2 trillion mark for the year.

In a note to clients Thursday, Chris Krueger of Cowen Research compared the proposal to other recent stimulus and emergency spending packages: “For historical context, Congress authorized $65B in recovery spending post 9/11 (+ $15B for airlines), $787B stimulus in 2009, $100B in 2005 post Katrina, $7B in 2009 for H1N1, $51B in 2012 post Sandy & $5.4B in 2015 for Ebola.”

Deficit Hits Record $235 Billion in February

The federal deficit for the month of February rose to a record $235 billion, according to the Monthly Treasury Statement released Wednesday. Some key details:

  • The deficit for the 2020 fiscal year, which began last October, now stands at $625 billion, compared to $544 billion a for the same period year ago – a roughly 15% increase.
  • Total monthly receipts were $188 billion, up 12% from a year ago, while total outlays came to $423 billion, up 5%.
  • Adjusted for calendar effects, such as the timing of weekends and holidays, the deficit came to $238 billion.
  • The Treasury Department estimates that the total deficit for the 2020 fiscal year will exceed $1 trillion.

Needless to say, the deficit watchers at the Committee for a Responsible Federal Budget were not pleased with the news, especially in light of the health crisis currently threatening the U.S. “It is beyond distressing that we may be entering a period of national emergency with record-high levels of borrowing,” CRFB’s Maya MacGuineas said in a statement. “We ran higher deficits in February than any time in our nation’s history – and that was before any large effects of the coronavirus outbreak.”

Chart of the Day: Hospital Beds

As hospitals prepare for an onslaught of coronavirus patients, one problem could be a shortage of beds. “Although the U.S. is a rich country, it doesn’t do much of its health care in hospitals,” says economist Noah Smith. “[A]s a result, it has fewer beds relative to its population than most other countries struck by the pandemic.”

Smith argues that the U.S. should start building makeshift hospitals immediately: “The U.S. may be unable to match China’s speed, where a new hospital was reportedly built in just 10 days. But if it starts now, the government can expand capacity substantially.”


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