US Deficit Soars to $3.1 Trillion

By Yuval Rosenberg

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.

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