Coronavirus Relief Talks Collapse

By Yuval Rosenberg

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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