Trump Stakes Out a Negotiating Position on Coronavirus Aid

Trump Stakes Out a Negotiating Position on Coronavirus Aid

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Plus: 36.5 million jobs lost
Thursday, May 14, 2020

Trump ‘Open’ to Sending More Money to States: Report

President Trump complained last week that providing additional federal funding to help states recover from the coronavirus crisis would be unfair to Republicans “because all the states that need help — they’re run by Democrats in every case.”

At the same time, Trump said that “reimbursing for the plague” would be different than bailing out states “that have been mismanaged over a long period of time” — essentially leaving the door open to possibility of providing some additional relief, albeit perhaps with some additional conditions as well.

Now The Washington Post reports that White House officials believe — and have privately signaled — that they’d be willing to provide tens of billions of dollars to states in order to secure wins on some of their priorities, like tax breaks and liability protections for businesses, in negotiations with Democrats. The president is reportedly more open to the idea of state aid than to another round of direct payments to individuals.

Trump really wants more tax cuts: “The White House is telling all of us they want to get a payroll tax through the end of the year and provide some capital gains breaks and incentives for businesses to bring their supply chains back to this country,” one unnamed source — a “veteran Republican close to Trump” — told the Post. “They say if they can get some of that for money for states that’s relatively controlled, they’ll look hard at that kind of deal.”

A deal still won’t be easy: The tens of billions of dollars cited by the Post is still far short of the $500 billion that the National Governors Association has called for, which is the amount provided states in the $3 trillion package introduced by House Democrats this week. And lawmakers, including many Republicans, will likely resist the White House’s tax cut proposals, which many say aren’t targeted to those most affected by the pandemic and economic shutdown.

Another potential obstacle: While White House officials have reportedly assured conservative leaders that any new money will be directed only toward addressing pandemic-related issues, that’s easier said than done, the Post’s Robert Costa, Jeff Stein and Seung Min Kim write: “budget experts say it will be difficult, if not impossible, to prevent funding from being redirected by state leaders, or used for unrelated programs.”

More aid to states is likely, but how much? Trump will face increasing pressure to provide more money to help states plug budget holes ripped open by the pandemic, and to give states more flexibility in how they use the funding already provided. Some of that pressure will come from Republican governors and lawmakers pressing for help. Concerns about perilous state finances and potentially severe cuts to services ahead of the November election will only add to the pressure.

“With those political considerations at the mind, some top Republicans have privately shifted from opposing new cash for states altogether to limiting the package’s size and scope,” the Post says. “One idea circulating among lawmakers has included tying the amount of aid allocated to each state to its revenue losses since the pandemic began, said two outside advisers to the White House.”

Poll of the Day: Americans Want Congress to Do More on Pandemic

Americans want Congress to do more to address the coronavirus pandemic and its economic toll, according to a new Politico/Morning Consult poll. About seven in 10 voters say that controlling the spread of COVID-19 and providing economic stimulus should be top priorities for Congress.

Nearly three-quarters of Republican voters say Congress should prioritize economic stimulus, compared to 45% who said reducing the budget deficit should be a top congressional concern.

The poll of 1,994 registered voters was conducted May 8-10 and has a margin of error of 2 percentage points.

3 Million Americans Filed for Unemployment Last Week, Lifting Two-Month Total Above 36 Million

Nearly 3 million Americans filed new unemployment claims last week, the Labor Department said Thursday, lifting the total over the past eight weeks to 36.5 million.

Last week’s total was higher than economists’ consensus expectations of 2.7 million new claims, but represents a drop of nearly 200,000 from the previous week. “The weekly count of claims filings still remains massive relative to the norms that existed prior to the spread of COVID-19, but at least the figures have declined in each of the most recent six reported weeks,” J.P. Morgan economist Daniel Silver wrote in a note to clients.

White House economic adviser Kevin Hassett called the numbers “better than expected” and told reporters that the new data showed signs of an economic rebound. “The fact that we came in under 3 million suggests that the turning on of the economy is beginning, and it’s beginning to show up in the data,” he said.

Continuing claims rose by 456,000 to a record 22.83 million, but the previous week’s total was revised down to 22.38 million, a change that Paul Ashworth, chief U.S. economist at Capital Economics, said suggests that the number of people returning to work nearly matches those losing jobs.

“What the continuing claims figures and the insured unemployment rate are more reliably telling us is that the unemployment rate was close to peaking at the start of May, as the number of people returning to their jobs almost offset new job losers,” Ashworth wrote in a note. “With most states only beginning to ease their lockdowns within the last 10 days, we expect a much bigger swing in hiring versus firing over the next couple of weeks, which suggests the unemployment rate will begin to drop back.”

Still, economist Ian Shepherdson of Pantheon Macroeconomics said he was pushing back his target for when new claims would drop below 1 million from mid-June to the end of next month.

How much is unemployment insurance helping? A new report from the Hamilton Project at the Brookings Institution finds that unemployment insurance offset only a small portion of lost income in March, but covered about half of lost wages and salaries in April, when states and the federal government paid out $48 billion in unemployment benefits. “The unemployment system has sent out more money in April of 2020 than it did in the first four months of 2009 during the Great Recession,” the authors write.

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U.S. Cities Projected to Lost $360 Billion in Revenue From Pandemic

The coronavirus pandemic is projected to cost U.S. cities up to $134 billion in lost revenues this year and more than $360 billion through 2022, with the shortfalls varying significantly by state and the makeup of local revenue streams, according to a new analysis by the National League of Cities, an advocacy group.

The analysis was based on calculations of how expected joblessness in each state will affect collective revenue for cities, towns and villages in the state, based on a projection that every 1 percentage point increase in unemployment results in a 3% drop in tax revenues. The analysis also factored in assessments of state revenue streams, with those more dependent on sales or income taxes hit harder than those that rely on property taxes.

The report projects that Pennsylvania’s cities, towns and villages will be hit hardest, with 2020 revenue losses of 40%. Municipalities in Kentucky, Hawaii, Michigan and Nevada are also projected to lose more than a third of their collective revenue. Connecticut is projected to suffer the smallest decline, at 9.3%.

“If America’s cities are not provided the funds from the federal government, we won’t be a part of the economic solution,” Clarence Anthony, the league’s chief executive officer, told Bloomberg News. “This survey, and the findings, puts a face on the impact of the pandemic and the need for city leaders to get direct funding to respond quicker than at the state level, where most of the funding has gone in the past.”


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