US Deficit Soars to $3.1 Trillion

US Deficit Soars to $3.1 Trillion

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Plus, Trump’s trust problem on pre-existing conditions
Friday, October 16, 2020

Pelosi Cites Progress in Relief Talks, but Warns of Poison Pills

Happy Friday!

House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin said after a nearly 90-minute negotiating session Thursday that they had made some progress toward a coronavirus relief package. In particular, they said that the White House would accept Pelosi’s demands regarding language for a national coronavirus testing plan, with only “minor” changes.

Don’t get your hopes up, though.

Pelosi told fellow Democrats that, even as the two sides near agreement on that issue, they remain split on other elements. “Many other disagreements remain,” Pelosi wrote in a letter to House Democrats Thursday evening. “These include but are not limited to funding for state and local government, tax benefits for working families, support for vulnerable small businesses, and child care funding.”

Pelosi added that the White House proposal “contains multiple deadly poison pills,” including a provision shielding businesses from coronavirus-related lawsuits, which Pelosi said “forces workers to risk their lives in unsafe workplaces with no legal recourse.”

Republicans divided: White House economic adviser Larry Kudlow on Friday said that Pelosi was moving the goalposts in talks, suggesting she doesn’t really want to compromise. Kudlow told Fox Business that, even if the parties reach a deal, it would be “almost impossible” to pass a comprehensive relief package before the November elections. "Maybe some of it could be executed," he said. "But you certainly couldn't get a grand, large deal.”

As we mentioned before, Senate Republicans remain a significant obstacle. Senate Majority leader Mitch McConnell made clear yesterday that his caucus objects to a package as big as the $1.8 trillion or more that Trump has proposed in urging lawmakers to “go big or go home.”

“He’s talking about a much larger amount than I can sell to my members,” McConnell said Thursday. McConnell plans to put a roughly $500 billion package on the Senate floor next week.

"What I’m going to put in the floor is what Senate Republicans, 52 out 53 of us, feel like is an appropriate response," McConnell said. "You are correct there were discussions going on between the secretary of the Treasury and the speaker about the higher amount. That’s not what I’m gonna put on the floor.”

Would presidential pressure make a difference?
Administration officials suggested that Trump could overcome those objections. “If Speaker Pelosi wanted a deal I think we could round up enough Senate Republicans to get a deal,” Kudlow said Friday. Mnuchin similarly suggested that Trump would press McConnell if a deal was reached. “The Secretary indicated that the President would weigh in with Leader McConnell should an agreement be reached,” a Pelosi spokesman wrote on Twitter, describing Thursday’s talks.

It’s not clear how much influence Trump could have at this point. “Trump’s erratic approach to the negotiations makes it uncertain whether he can or would exert the necessary political pressure to move Senate Republicans to take a vote many of them do not want to take, especially at a moment when the president is down in polls and some Republicans have begun to distance themselves from him,” The Washington Post reports.

Trump himself said at his NBC town hall Thursday night that he hasn’t yet pressed Senate Republicans, blaming Pelosi for the lack of a deal. Talking Points Memo highlighted this exchange:

“I’m ready to sign a big beautiful stimulus,” Trump told NBC News’ Savannah Guthrie.

“Are Senate Republicans with you?” Guthrie asked.

“They’ll go,” Trump responded.

“So far, they have not said they would,” Guthrie pressed.

“Because I haven’t asked them to, because I can’t get through Nancy Pelosi,” Trump said.

Pelosi likes her hand: Trump’s changing positions appear to have only strengthened Pelosi’s resolve to secure a larger deal. The Post reports that Pelosi told members of her caucus Thursday afternoon that Democrats now have “maximum leverage” to get the package they want.

“The president’s even said this morning that he wants more. He said the night before that, ‘Go big or go home,’” Pelosi reportedly said.

“So, this is not the time to say, ‘Okay, let’s fold.’ This is what we have been building up to.”

The bottom line:
Mnuchin is expected to travel to the Middle East in the coming days, so while the two sides are still talking, a deal isn’t likely to come together quickly.

Deficit Triples to $3.1 Trillion —or 16% of GDP, Largest Since 1945

The federal budget deficit topped $3.1 trillion in the 2020 fiscal year, the U.S. Treasury announced Friday, marking the largest annual deficit in U.S. history.

As a share of the economy, the deficit-to-GDP ratio rose to 16%, the highest level since 1945, the last year of World War II.

The huge increase from 2019’s nearly $1 trillion deficit was driven by the government’s response to the coronavirus pandemic, which included massive levels of income support for individuals and grants and loans for businesses. “Unprecedented times call for unprecedented deficits,” William Hoagland of the Bipartisan Policy Center told The Wall Street Journal. “Today’s deficit figure is the result of six months of fighting the pandemic and its economic fallout.”

In the 2020 fiscal year, which concluded at the end of September, the government spent about $6.5 trillion – roughly $2 trillion more than the $4.5 trillion spent in 2019. Revenues in 2020 came to $3.4 trillion, modestly lower than the year before.

The cost of servicing the national debt fell, however, thanks to low rates, with net interest costs dropping by nearly $31 billion, to $345 billion.

More deficits ahead:
Although a new, trillion-dollar coronavirus package has been hung up in negotiations in Washington, some kind of relief bill is expected to pass in the next few weeks or months in an effort to prevent the economy from sliding backward.

But the economy is in a difficult place as winter approaches, Brian Riedl of the conservative Manhattan Institute told The Washington Post, with much of the easy recovery already behind us. “The growth is leveling off. The economic recovery is leveling off,” he said. “Which means the deficit numbers will continue to be pretty bad.”

Trump’s Trust Problem on Pre-Existing Condition Protections

President Trump insists that he has a plan to protect people with pre-existing conditions if the Supreme Court invalidates the Affordable Care Act — something that could happen after the election, thanks to a lawsuit by Republican attorneys general that is supported by the White House. But according to new poll data from the Kaiser Family Foundation, most Americans don’t believe him.

“Slightly more than half (53%) including majorities of Democrats (90%) and independents (57%) say they ‘do not think President Trump has a plan to maintain protections for people with pre-existing health conditions,’” Kaiser researchers said Friday. The majority of Republicans, however, do trust the president on the issue, with 85% saying they think Trump “has a plan.”

When it comes to maintaining protections for people who have pre-existing conditions — protections that were established by the Affordable Care Act and would no longer be valid if the Supreme Court invalidates the law, as the Trump administration is seeking — opinions are even clearer: the great majority of Americans do not want to see those protections overturned.

“Eight in ten adults (79%) say they do not want to see the Supreme Court overturn the protections for people with pre-existing conditions established by the Affordable Care Act and a majority of U.S. adults (58%) also say they do not want to see the Supreme Court overturn the entire 2010 law,” Kaiser researchers said. “Majorities of Republicans (66%), independents (81%), and nine in ten Democrats (91%) say they do not want to see the Supreme Court overturn the pre-existing condition protections in the ACA. Nine in ten Democrats (89%) and two-thirds of independent (66%) also say they do not want to see the Supreme Court overturn the entire law while three-fourths of Republicans (76%) say they would like to see the entire law overturned.”

The number of people who say they don’t want the protections overturned has been increasing dramatically, KFF said, with percentages rising by double digits for respondents in both parties over the last 11 months.

Point/Counterpoint of the Day

“The talk is that a lot of folks became unemployed, most regrettably, but they’re sticking with it and they’re going out and starting new businesses. They’re going to be small businesses, but that’s the great part of American capitalism: Gales of creative destruction!”

White House economic adviser Larry Kudlow, in an interview with the Fox Business Network

"Self-employment is absolutely helping us to adapt to the pandemic ... But it's really nowhere near enough to make up for the massive shortfall in overall employment that we still have. Not even close.”

Adam Ozimek, chief economist at Indeed

Headline of the Day

From Politico’s afternoon Playbook newsletter: “We regret to inform you that Larry Kudlow is saying things again”

Graphic of the Day

The latest NPR/PBS NewsHour/Marist poll asked likely voters to describe President Trump in one word. The result of the open-ended question, both good and bad, are represented in the word cloud below.

On the positive side, NPR’s Domenico Montanaro reports, people called Trump "good," "great," "successful" and "strong." On the negative side, "incompetent" was overwhelmingly the most common word used, followed by "liar," "failure," "bad," "horrible," "disaster," "arrogant" and "buffoon."

A majority of likely voters polled, 52%, said that Trump's presidency has been a failure, compared with 45% who said it has been a success. By a nearly 3-to-1 margin, the likely voters polled said that the coronavirus is a “real threat” as opposed to being “blown out of proportion.” Voters were more narrowly divided on whether Trump or Democratic nominee Joe Biden would do a better job of handling the economy, with 47% choosing Trump and 48% saying Biden.

Read more, including the words voters used for Biden at NPR.

Views and Analysis