Over the Cliff

Over the Cliff

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Plus, House Democrats pass a spending package
Friday, July 31, 2020

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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