Plan B, as in Bust

Plan B, as in Bust

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Plus, an unprecedented collapse for the U.S. economy
Thursday, July 30, 2020

Plan B, as in Bust

Plan A went nowhere fast. Plan B isn’t looking much better. With congressional negotiations on a coronavirus aid package at an impasse, lawmakers scrambled Thursday to try to address the scheduled expiration Friday of enhanced unemployment benefits for millions of Americans and the broader devastation wrought by the pandemic — or at least make a good show of it.

Sen. Ron Johnson (R-WI) tried to unanimously pass legislation to continue emergency federal unemployment benefits, but at 66% of an individual’s lost wages, or about $200 per week rather than the $600 a week that has been in place since March. Senate Minority Leader Chuck Schumer (D-NY) blocked the effort.

"They’ve woken up to the fact that we’re at a cliff, but it’s too late," Schumer said of the standalone unemployment extension Thursday, according to Politico. "It’s too late because even if we were to pass this measure, almost every state says people would not get their unemployment for weeks and months. All because of the disunity, dysfunction of the Republican caucus."

Schumer in turn tried to unanimously pass the $3 trillion package passed by the House in May. Republicans blocked it. Later, Sen. Martha McSally (R-AZ) tried to unanimously pass a one-week extension of the $600 benefit. Schumer blocked it, calling it "a stunt," and again tried to pass the Democratic bill, which was again blocked.

Senate Majority Leader Mitch McConnell (R-KY) set up a likely vote next week to address the expiring unemployment benefit. The Hill’s Jordain Carney reports: "Senate Republicans successfully brought up a bill they will use as a vehicle for their competing unemployment proposals, none of which appear to have the votes needed to actually pass next week." She adds that McConnell did not say what plan he will try to force a vote on, but other GOP senators say they expect it will be the plan from Johnson and Sen. Mike Braun (R-IN).

Sens. Mitt Romney (R-UT), Susan Collins (R-ME) and McSally have a competing bill that would reportedly let states enact an 80% wage replacement or a flat $500 weekly supplement that would scale down by $100 a month in September and another $100 in October.

"We’ve had enough rope-a-dope. We’ve had enough empty talk. It’s time to go on the record," McConnell said from the Senate floor, Carney reports.

Any Senate plan would require 60 votes for passage, meaning at least seven Democrats would need to join all Senate Republicans.

Why it doesn’t matter:
All the maneuvering amounted to little more than political theater, with negotiations having devolved into partisan bickering, finger-pointing and attempts to gain leverage. "The legislative shenanigans were not meant to actually enact policy, but rather to help further the political blame game as Congress prepared to leave town without an agreement," The Washington Post reports.

The bottom line:
"The next meeting between Schumer/Pelosi and Mnuchin/Meadows will be at 8p tonight," CNN’s Phil Mattingly reports. "To this point they've managed to meet three times, for more than three total hours, and make roughly 0 progress toward a deal."

The official expiration tomorrow of the $600 enhanced unemployment payments appears inevitable, though the deadline could provide some incentive for a deal. If the benefits expire as expected — the last checks have already gone out millions of out-of-work Americans face a sharp, sudden drop in income. The Washington Post’s Jeff Stein highlighted the severity of the potential cutoff in aid: "If unemployment benefits go away completely, more than 30 million Americans will see an income cut of between 50 percent and 75 percent -- virtually overnight."

Bloomberg’s Steven Dennis writes (sarcastically, in case it needs to be said) that all is not lost: "The Senate managed to designate July National Blueberry Month after failing to act on virus relief/UI benefits."

Read more, if you can stomach it, at The Washington Post.

GOP Senators Propose $1,000 Stimulus Checks for Adults and Children

Four Republican senators on Thursday introduced a competing idea for the next round of coronavirus direct payments, The Hill’s Naomi Jagoda reports:

"Under the bill from GOP Sens. Bill Cassidy (La.), Steve Daines (Mont.), Mitt Romney (Utah), and Marco Rubio (Fla.), both adults and children would receive stimulus payments of $1,000.

"The payments that Congress provided for in legislation enacted in March, known as the CARES Act, were $1,200 per adult and $500 per child. …

"Under House Democrats' proposal, called the Heroes Act, families would receive payments of $1,200 per non-dependent adult and $1,200 per dependent for up to three dependents. The HEALS Act would provide payments of $1,200 per adult and $500 per dependent."

Under every proposal, eligibility for the full payments would be limited to individuals making up to $75,000 and married couples with incomes of up to $150,000, with payments phasing out above those levels.

An Unprecedented Collapse for the U.S. Economy

The U.S. economy shrank in the second quarter at the fastest pace on record by some measures, with gross domestic product falling by 9.5% on a quarterly basis as businesses closed and millions of Americans stayed home in response to the coronavirus pandemic.
On an annualized basis — the rate for the full year, assuming the quarterly results were repeated in each quarter — the economy shrank at a rate of 32.9%, the fastest since 1946, according to Deutsche Bank.

"The collapse was unprecedented in its speed and breathtaking in its severity," The New York Times said Thursday. "The only possible comparisons in modern American history came during the Great Depression and the demobilization after World War II, both of which occurred before the advent of modern economic statistics."

Although the numbers are shocking, they were not unexpected; economists polled by Dow Jones had expected to see a decline of 34.7%.

Mark Zandi, chief economist at Moody’s Analytics, said the report "highlights how deep and dark the hole is that the economy cratered into in Q2. It’s a very deep and dark hole and we’re coming out of it, but it’s going to take a long time to get out."

The White House put a relatively positive spin on the report Thursday, with President Trump’s Council of Economic Advisers saluting Americans’ resiliency and the strength of the economy heading into the crisis. "The magnitude of this contraction reflects the gravity of the economic sacrifice Americans made to slow the spread of COVID-19 and prevent greater tragic loss of life and health," the council said in a statement. "The country mitigated pressures on hospital capacity and allowed medical professionals the time to learn how to more effectively treat this disease. The Trump Administration will continue to support America as we build a bridge to the other side of this crisis."

But that bridge is looking harder to cross as the size of the crisis — and the lack of recent progress (see new unemployment figures, below) — has come into sharper focus. "A couple of weeks ago there was a lot more optimism that we would see a strong V-shaped recovery," Edward Moya, an analyst at currency trading firm OANDA, told Politico. Now, however, "there is a lot of bad news about how some areas are handling the virus. And every day we don’t have a new stimulus agreement in place is hurting the economy."

Jobless Claims Edge Higher Again

Initial jobless claims rose for the second week in a row, with 1.43 million workers filing for state unemployment benefits. Another 830,000 people applied to the Pandemic Unemployment Assistance program, which provides benefits for self-employed and gig workers, bringing the weekly total to well over 2 million. It was the 19th week straight that unemployment claims have exceeded 1 million, a level that hadn’t previously been reached.

The data confirm many economists’ fears that the recovery is losing steam and may be reversing course. "What's more worrying is that months after the virus arrived, we still have more people losing their jobs each week than at any point during the Great Recession," said Justin Wolfers of the University of Michigan. "The short-term virus-related economic suppression is turning into a more enduring recession."

Quote of the Day

"Over his entire career, I can’t recall a single forecast that he made that was accurate. You know, there’s the old joke about the economist that predicted seven out of the last four recessions. Kudlow makes that guy look good."

An unnamed banker who used to work with White House economic adviser Larry Kudlow at investment bank Bear Stearns, in a blistering Vanity Fair profile of Kudlow by William D. Cohan.

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