Coronavirus Relief Talks Collapse

Coronavirus Relief Talks Collapse

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Plus, 1.8 million jobs added in July, but recovery slows
Friday, August 7, 2020

Trump Readies Executive Action as Coronavirus Relief Talks Break Down

That thud you heard today was the coronavirus relief talks collapsing, as negotiators said their latest meeting brought them no closer to a deal. “Unfortunately we did not make any progress,” Treasury Secretary Steven Mnuchin told reporters. Senate Minority Leader Chuck Schumer called Friday’s talks “disappointing.”

Trump administration officials said that in the absence of an agreement they would recommend that the president move forward with executive orders over the weekend to address the economic devastation caused by the pandemic.

What comes next:
The talks are done, at least for now. “One side needs to completely change their position and neither side is interested. Some intervening event may change that — or it may not,” Politico’s Jake Sherman said Friday. Sherman added that lawmakers will likely “agitate” over the issue over the next few weeks, while noting that the debate over 2021 fiscal year funding starts up in September.

In the meantime, President Trump is expected to sign one or more executive orders addressing some of the issues that have been part of the negotiations, possibly including an eviction moratorium, student loan flexibility, a suspension of payroll taxes and unemployment aid — though the legality and effectiveness of addressing those issues though executive action is very much in question.

“This is not a perfect answer — we’ll be the first ones to say that,” White House Chief of Staff Mark Meadows said. “But it is all that we can do and all the president can do within the confines of his executive power, and we’re going to encourage him to do it.”

Schumer and House Speaker Nancy Pelosi said that executive orders would be “unworkable, weak and narrow,” saying that they “barely scratch the surface of what is needed to defeat the virus and help struggling Americans.”

The key differences on a bigger deal:
Fundamentally, the White House is still pushing for a “skinny” deal that Democrats dismiss as insufficient — Pelosi labeled it “anorexic” — to meet the needs of Americans in the face of the pandemic. Democrats are pushing for a much larger package, and while the two sides have made some progress on elements of a deal, they remain far apart on the overall size of response needed.

No meeting in the middle:
At a press conference before their negotiating session, Pelosi and Schumer said that the White House had rejected an offer to meet in the middle on a roughly $2 trillion package. Pelosi said that Democrats had offered Thursday to cut $1 trillion from the cost of their $3.4 trillion offer if Republicans would agree to raise their $1 trillion offer by the same amount, leaving the two sides much closer to a deal in the range of $2 trillion to $2.4 trillion.

"Yesterday, I offered to them, ‘We'll take down a trillion, if you add a trillion in.’ They said absolutely not," Pelosi told reporters Friday. The cost reductions, she said, would be achieved by cutting the duration of some programs.

Asked about the possibility of raising their offer by $1 trillion, Mnuchin called the idea “a non-starter." He did not respond when asked why, but Meadows indicated that shortening the duration of some programs wouldn’t qualify as real cost reductions in his eyes. "I don't know that that's a reduction as much as she's just changing the time frames. So I don't think that she's come off of her number other than just making it shorter," he said.

Schumer laid much of the blame for the lack of progress on Meadows, the former North Carolina congressman and leader of the conservative House Freedom Caucus known more for blowing up deals than making them. “They’re the ones stuck. Basically what’s happening is Mr. Meadows is from the Tea Party, you have 20 Republicans in the Senate greatly influenced by them, and they don’t want to spend the necessary dollars to help get America out of this mess. Ideology sort of blinds them,” Schumer told reporters ahead of Friday’s talks.

After the unproductive meeting, Schumer told reporters that the White House negotiators had said they couldn’t go much above their existing $1 trillion offer. “We’re hopeful that they will think about it and come back and tell us they’re willing to meet us halfway,” he said.

Can they possibly still reach a deal?
“I told them to come back when they’re ready to do a $2 trillion bill,” Pelosi told reporters after Friday’s meeting. CNN’s Phil Mattingly reports that some Senate Republicans — those that aren’t staunchly against another relief package altogether — have indicated that a $2 trillion price tag is a non-starter for them. Schumer, meanwhile told reporters that “Senate Democrats can't go south of $2 trillion” and that the Democratic-led House wouldn’t have the votes to pass anything less than $2 trillion. “Therein lies a pretty major problem,” Mattingly says.

Reading between the lines, that suggests there may be some wiggle room for a roughly $2 trillion deal, though Mattingly reports that Republicans have been “pretty clear the topline needs to have a ‘1’ in front of it.”

No additional talks are scheduled, but Mnuchin said Friday that if the two sides can agree on aid to state and local government, a deal could still be reached. Democrats want some $915 billion in additional money for state and local governments, while Republicans have offered about $150 billion. “The president is not going to do a deal that has a massive amount of money to bail out state and locals,” Mnuchin said.

Trump late Friday issued a misleading tweet claiming that Democratic leaders were only looking for money to bail out Democratic cities states — a tweet that suggests negotiations really are dead. “Pelosi and Schumer only interested in Bailout Money for poorly run Democrat cities and states. Nothing to do with China Virus! Want one trillion dollars. No interest. We are going a different way!”

Snarky Opinion of the Day: Where’s Trump’s Art of the Deal?

The Washington Post’s Paul Waldman:

“What this deadlock needs is a master negotiator, someone whose extraordinary skills can break through the parties’ differences and craft a deal both sides can live with, giving Americans the help they need.

“Someone like President Trump, the man who wrote ‘The Art of the Deal’!

“You’re laughing, I know. But think about how extraordinary that is: During a difficult and complex negotiation, with incredibly high stakes for the country, we take it as a given that not only would the president of the United States much rather be off playing golf; it’s also probably best for everyone if he isn’t involved at all, because he’d only make things worse.

“And this is the man who sold himself to voters as a virtuoso of negotiation whose supernatural deal-making talent would enable him to break through any challenge the government faced.”

1.8 Million Jobs Added in July, but Recovery Slows

The U.S. economy added 1.8 million jobs in July, the Labor Department said Friday, and the unemployment rate dropped to 10.2%, down from 11.1% the month before. The jobs number beat consensus estimates of 1.5 million new jobs, and the unemployment rate fell nearly half a percentage point more than expected.

Showing job growth for the third straight month, the July report confirms that the recovery continues to rumble along. “Overall this is a favorable report and indicates that the economic recovery which began in May has continued at least through July,” economist Michael Feroli of J.P. Morgan said in a note to clients.

Still, while the July jobs number was positive, it was far smaller than the 2.7 million new jobs seen in May and 4.8 million recorded in June. The latest jobs report essentially provides a snapshot of conditions in mid-July, or about three weeks ago, and more recent data suggests that the surge of the coronavirus in some states, combined with the expiration of federal aid programs including the $600-per-week boost to unemployment benefits, have taken a toll on economic growth.

The beginning of a stall?
Some economists are worried that the slowdown in hiring will persist and possibly turn negative, threatening a double-dip recession. Economist Ernie Tedeschi of Evercore ISI said that “after several months of extraordinary monetary & fiscal support, we've recovered ~40% of the jobs lost since Feb.” But we “still have a ways to go, and while July was a good report it was slower than May & June. And much of that fiscal support is already exhausted.”

Even so, there is a high degree of uncertainty among the experts. J.P. Morgan’s Feroli said that growth does appear to have slowed in recent weeks, but he does not expect to see a reversal, as some fear, writing that “it seems reasonable to expect continued positive job growth in August and beyond, albeit at a more moderate pace than seen over the past three months.”

A plea for fiscal support:
Joseph Brusuelas, chief economist at the consulting firm RSM, said Friday that in his view, the U.S. is “clearly in the worst labor market since the Great Depression.” Separately, he told Politico that it is "absolutely critical to the economy" for Congress to make a deal for a new round of fiscal stimulus. “If the talks fail, the political sector is creating the conditions for at best a double dip recession or much longer downturn than would occur otherwise,” he said.

Mark Zandi of Moody’s Analytics struck the same note. “It is critical that lawmakers agree to another substantial fiscal rescue package before Congress goes away on its August recess for the fragile economy to avoid backsliding into recession,” he told Politico.

A long way to go:
Whatever the prospects may be for growth over the next few months, the economy still has 12.9 million fewer jobs than it did in February (see the chart below). And if the pre-pandemic job growth trend is factored in — absent Covid-19, the economy was on course to continue adding jobs — the number of missing jobs comes to more than 13 million.

The key factor in recovering those jobs, some experts say, is gaining control over the coronavirus. “The economy is unlikely to go anywhere fast until the pandemic is over; that is, there is an effective vaccine that is widely distributed and adopted,” Zandi said.

Chart of the Day: How the $600 Unemployment Boost Helped

The $600 federal boost to unemployment benefits helped lift households spending and stabilize the economy, according to a recent report by the JPMorgan Chase Institute.

The report says that about one in five U.S. workers received unemployment insurance benefits in June, five times greater than the previous recorded high. It finds that households receiving unemployment benefits increased their spending by 10% in the early months of the coronavirus outbreak even as average household spending of employed Americans fell by 10% as the economy shut down early in the pandemic.

“The fact that spending by benefit recipients rose during the pandemic instead of falling, like in normal times, suggests that the $600 supplement has helped households to smooth consumption and stabilized aggregate demand,” the report says.

The report also says that workers who received their unemployment benefits shortly after losing their jobs showed no decline in spending while those that waited two months to receive benefits saw large spending declines on the order of 20%.

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