Trump's Big U-Turn: A $1.8 Trillion Stimulus Offer

By Yuval Rosenberg

Trump's Big U-Turn: A $1.8 Trillion Stimulus Offer

He calls her a “nut job.” She questions his mental health.
Together, they have to work out a roughly $2 trillion package to
rescue the economy.

It might sound like a pitch for the worst rom-com ever, but it’s
actually, sadly, the current state of affairs between President
Trump and House Speaker Nancy Pelosi.

Just days after cutting off negotiations on a comprehensive
coronavirus relief package, Trump on Friday appeared as eager — or
desperate — as ever to get a deal done,
tweeting: “Covid Relief Negotiations are moving along.
Go Big!” Later, in a phone interview with Rush Limbaugh, Trump

said: “I would like to see a bigger stimulus
package than, frankly, either the Democrats or the Republicans are
offering.” The president acknowledged that his latest position is
“the exact opposite” of his previous one.

The White House,
reportedly scrambling to revive the talks that
appeared dead earlier this week, put together its largest proposal
yet for Treasury Secretary Steven Mnuchin to present to Democrats,
a $1.8 trillion package, up from an earlier $1.6 trillion.

The package,
approved by Trump, isn’t bigger than what
Democrats have offered. House Democrats last week passed a $2.2
trillion bill, and Pelosi has steadfastly refused to go below $2
trillion, so the two sides still have a way to go on both the
overall cost of the package and, more importantly, many of the
details.

The White House offer reportedly includes some $300 billion for
aid to state and local governments, for example — an increase from
earlier proposals but still shy of the $436 billion Democrats want.
It also would reportedly extend the duration of the $400 in weekly
enhanced unemployment benefits the White House has proposed and
would provide $1,000 per child in direct payments, up from the $500
Congress provided in March.

“Today, the Secretary returned to the table with a proposal that
attempted to address some of the concerns Democrats have,” Pelosi
Deputy Chief of Staff Drew Hammill tweeted. “Of special concern, is
the absence of an agreement on a strategic plan to crush the virus.
For this and other provisions, we are still awaiting language from
the Administration as negotiations on the overall funding amount
continue.”

The big question: Even as the negotiators make progress,
reaching a deal and getting it passed into law are very different
things, as
Politico points out.

Senate Republicans, who haven’t been part of the ongoing talks,
are nowhere near as eager as Trump now says he is to “go big,” with
many firmly against a deal on the order of $2 trillion. “I’ve got a
significant percentage of my members who think we’ve done enough
and who are alarmed by the amount of national debt,” Senate
Majority Leader Mitch McConnell (R-KY) said Thursday.

So even if the White House and Pelosi reach a deal, securing 60
votes in the Senate won’t
be easy and time will be tight as the Senate prioritizes
the confirmation hearings of Judge Amy Coney Barrett to the Supreme
Court. “It’s going to be hard to get through the House with many
Republican votes, and it could land in the Senate as late as the
end of this month or on the doorstep of early November,” Politico
suggests. “What do they do with a bill at that point? Probably
ignore it.”

Trump could still change all that. He is reportedly now engaged
in the process, reaching out to Republican senators to drum up
support. “The direct involvement of Trump himself and his
willingness to put down an offer far above the preferences of
congressional Republicans adds a dynamic new element to
long-stalled negotiations,” CNN’s Phil Mattingly
and Ted Barrett
wrote.

Even as Trump presses for action, though, McConnell on Friday
cast doubt on the chances of something getting done as negotiators
“elbow for political advantage” before the election. “I’d like to
see us rise above that like we did back in March and April, but I
think that’s unlikely in the next three weeks,” he
said.

In the meantime, Trump and Pelosi are still questioning each
other’s mental faculties, which may not matter but probably doesn’t
help.

The bottom line: Pelosi and Mnuchin
have spoken every day this week and the negotiators reportedly plan
on working through this weekend, and potentially through next
weekend as well, to reach an agreement. So there’s a renewed sense
of urgency to get a deal done and this week’s neck-snapping turns
have yielded some genuine progress. But the chances of another
stimulus bill passing before the election may not have shifted
much.

Cost of Interest on National Debt Falls Despite Surging
Deficit: CBO

The federal government estimates that it has paid billions of
dollars less in interest on the national debt in the 2020 fiscal
year, despite an increase in the size of the debt on an annual
basis.

“Net outlays for interest on the public debt decreased by $46
billion compared with the same period in 2019,” the Congressional
Budget Office said in its latest monthly
budget review, released Thursday.

The reason for the decrease? “[L]ower interest rates and lower
inflation more than offset the effects of a larger federal debt.”
(H/t to former Council of Economic Advisers head Jason Furman for

noticing this detail; we’ve replicated his
marked-up chart from the CBO report below.)

The Wall Street Journal’s Kate Davidson also
noted the reduction in outlays on interest: “Lower
interest rates reduced the cost of servicing the debt in fiscal
2020, giving policy makers more capacity to finance the recovery
effort. The yield on the 10-year Treasury note was 0.779% late
Thursday, down from 1.732% a year ago.”

A long-term trend. Joseph Brusuelas, chief
economist at the consulting firm RSM,
said Friday that “long-term interest rates have
undergone a profound structural shift that is likely to keep yields
at extremely low levels in the near to medium term.” According to
his firm’s model, the long-term downward pressure on interest rates
will continue, keeping the 10-year Treasury below 1% through at
least 2025 (see the chart below).

“Most important,” Brusuelas said, “our interest rate models
imply that under current economic conditions, debt accumulation
does not provide the outsized risk to the economic outlook through
an interest rate shock, inflation and lower growth than previously
thought.”

As a result, the U.S. likely has more room to spend as necessary
to boost an economy still struggling amid the coronavirus pandemic.
Or, as Brusuelas puts it: “the United States has the fiscal space
to adopt the required policy changes to increase productivity and
long-term growth.”

A new
report from the Brookings Institution also makes
the point:

"[T]he fact that rates are so low despite the recent
increase in debt does mean that the amount of debt that the
U.S. can easily sustain is a lot larger than people used to think.
That means there should be much less fearmongering about the debt,
and more focus on other national priorities. Furthermore,
with interest rates this low, now is a great time to increase
public investment, because there are likely many investments the
government can make that will yield returns greater than the
interest rate that will have to be paid on the debt. Such
investments make future generations better off, not
worse."

Health Care Stat of the Day: More Uninsured Children

The uninsured rate for children has been climbing every
year of the Trump administration, according to a
new report from the Center for Children &
Families at Georgetown University.

“After reaching a historic low of 4.7 percent in 2016, the child
uninsured rate began to increase in 2017, and as of 2019 jumped
back up to 5.7 percent,” the report says. “This increase of a full
percentage point translates to approximately 726,000 more children
without health insurance since the beginning of the Trump
Administration when the number of uninsured children began to rise.
Much of the gain in coverage that children made as a consequence of
the Affordable Care Act’s major coverage expansions implemented in
2014 has now been eliminated.”

RIP, Whitey Ford. The angels
have put together quite a pitching rotation this year. Tom Seaver,
Bob Gibson and now the Chairman of the Board. Tonight, another
Yankees ace has a chance to become a legend. Will Gerrit Cole, he
of the $324 million contract, send the Yankees to an ALCS matchup
against his old Astros teammates? Oh, and LeBron James has a chance
to bring a championship back to Los Angeles.

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