Pelosi Sets Deadline for Stimulus Deal

By Yuval Rosenberg

Stimulus Deal or No Deal? Pelosi Sets Tuesday Deadline

It may not have a made-for-TV theme song, but Nancy Pelosi’s
ultimatum does pack some dramatic punch: 48 hours or we’re
done.

House Speaker Pelosi (D-CA) said Sunday that a deal must be
reached within 48 hours if a coronavirus relief package is to pass
before the election. “We don't have agreement in the language yet,
but I'm hopeful,” she told ABC’s George Stephanopoulos. “I'm
optimistic because, again, we’ve been back and forth on all of
this.”

Pelosi and Treasury Secretary Steven Mnuchin have been going
round and round over the potentially massive bill for weeks, with
Democrats lowering their bid to $2.2 trillion and the White House
offering a package worth $1.8 trillion. But money isn’t the only
thing keeping the sides apart. Crucial details about specific
provisions of the legislation are still in dispute, including the
federal response to the still uncontrolled pandemic. “The testing.
The tracing. The treatment. The mask-wearing. The separation. The
sanitation. And all that goes with it,” Pelosi said.

In a call with Democratic leaders Monday, Pelosi said there were
still numerous sticking points between the two sides, including aid
for state and local governments, unemployment payments, child care
funding and various health care provisions. The liability
protections for businesses that Republicans want look like a
particularly difficult issue, with one lawmaker reportedly saying
that “there isn't a single Democrat who could vote for a bill with
those provisions.”

Pelosi and Mnuchin “continued to narrow their differences” in a
call on Monday afternoon, a Pelosi spokesperson said. “The Speaker
continues to hope that, by the end of the day Tuesday, we will have
clarity on whether we will be able to pass a bill before the
election. The two principals will speak again tomorrow and staff
work will continue around the clock.”

Trump says he wants even more: Over the weekend,
President Trump said he would match the Democrats on spending, or
even raise their offer. “I'd go higher than her number, who knows
what her number is, but if you said a trillion-eight, two trillion,
if you said two trillion-two, so many numbers — I'm willing to go
higher than that, because it wasn't the people's fault,” Trump told
Charles Benson of Milwaukee station WTMJ.

Trump is willing to “go pretty far” to make a deal, White House
spokesperson Alyssa Farah said Monday, adding that the Trump team
isn’t concerned about Pelosi’s timeframe. “This 48-hour deadline is
really an artificial deadline. The American people need help. We’re
going to get it to them whether it’s 72 hours, 24 hours or longer,”
Farah said.

McConnell says he’ll consider it: Senate Majority Leader
Mitch McConnell (R-KY) has been cool to Trump’s call for a major
deal, saying instead that Senate Republicans would support a much
smaller package, which he plans to bring up for votes this week.
But McConnell did leave the door open, if only a crack, to a bigger
deal: “If Speaker Pelosi ever lets the House reach a bipartisan
agreement with the administration, the Senate would of course
consider it.”

White House Chief of Staff Mark Meadows reportedly
said that McConnell would bring any such deal to the floor for a
vote – a step further than merely “considering” it – but McConnell
has not confirmed that stance publicly. "There are some in the
Senate that would support it. Whether there's enough votes to get
to the 60-vote threshold, that's up to Leader McConnell," Meadows
said. “He has agreed that he's willing to go ahead and put forth
the bill if we have a bipartisan agreement."

The odds are still very long: While the politicians keep
talking up a potential deal, most observers have concluded that it
will be very difficult to reach an agreement, at least before the
election.

Politico’s Ben White said Monday that reaching a deal before the
election “seems like a near impossibility.” While a deal is not
entirely off the table, the signs all point to failure, despite the
ongoing drama. “It all feels like theater of the absurd at this
point,” White said Monday.

White also highlighted a comment from Isaac Boltansky of
the investment bank Compass Point: “When it comes to the stimulus
talks we are still where we have been for months: absolutely
nowhere. Even the moments of slight progress . . . are little more
than mirages in the swamp.”

Senate Control Matters More Than
Presidential Race for 2021 Stimulus: Goldman Sachs

The election contest between President Trump and former vice
president Joe Biden has been called the most consequential of our
lifetime — and more voters say
the race matters to them than in decades past. But
when it comes to the size and scope of any coronavirus relief
package that might pass in 2021 — because, let’s face it, it’s
probably not happening this year — who controls the Senate will
mean more than who’s president, Goldman Sachs says.

“Next year, fiscal policy depends on the election outcome, but
in our view it depends more on the outcome of Senate elections than
the presidential election result,” Goldman Sachs economist Alec
Phillips wrote in a research note Monday. While House Speaker Nancy
Pelosi and the White House are working on a roughly $2 trillion
package, many Senate Republicans oppose spending that much and are
instead set to vote on a roughly $500 billion plan.

“Regardless of who wins the White House, if the Senate remains
under Republican control we would expect Congress to enact a
stimulus proposal much closer to the current Senate Republican
proposal than to either President Trump’s or Speaker Pelosi’s,”
Phillips says.

Phillips adds that Democratic control of Congress and the White
House would likely result in the greatest increase in spending:
“This would likely include a stimulus package in Q1, followed by
infrastructure and climate legislation. In this scenario, we would
expect legislation expanding health and other benefits, financed by
tax increases, to pass in Q3.”

The size of a potential Democratic Senate majority will also
matter, Phillips argues, with a narrow edge (50 or 51 seats) likely
resulting in less fiscal stimulus than a more sizable majority.

If Republicans hold onto the Senate, the Goldman Sachs
economist expects Republicans to look to limit the size of any
stimulus bill, with the final package likely coming in “well under
$1 trillion.”

Number of the Day: $259 Billion

The Washington Post’s Rachel Siegel and Jeff Stein
report that, even as lawmakers struggle to reach a
deal on another coronavirus relief bill, $259 billion in funds
approved in March to back Federal Reserve lending programs may
never be used:

“In March, Congress allotted $454 billion to the Treasury
Department to support the central bank’s emergency lending
programs, including those for struggling businesses and local
governments. Of that pot, only $195 billion has been specifically
committed to cover any losses the Fed might take, including though
loans that companies fail to repay. Seven months into the crisis,
the remaining $259 billion still has not been committed to any of
the Fed’s specific programs or for any other purpose, and it is
unlikely that it will be anytime soon.
“The fate of this money — and its inability to address
remaining cracks in the economy — show the surprising limits of the
nearly $3 trillion in emergency aid Congress approved early in the
pandemic. Federal Reserve and Treasury Department officials say
there are ways the money could be repurposed to more directly reach
businesses and workers but say they cannot do so without
congressional approval.”


Read more at The Washington Post.

Court Rejects Trump Effort to Cut Food Stamps

A federal judge on Sunday rejected a Trump administration plan
to cut $5.5 billion from the Supplemental Nutrition Assistance
Program over the next five years. The proposed rule change would
allow the Department of Agriculture to restrict states’ abilities
to waive work requirements for food stamp beneficiaries in areas
facing severe economic distress — a move that could remove 700,000
people from the nutrition assistance program.

In a 67-page ruling, Chief U.S. District Judge Beryl A. Howell
said the administration had failed to explain how its rule “makes
sense” or to justify the effect the changes would have on thousands
of food stamp recipients — a failure made worse by the growing
importance of the program amid the coronavirus pandemic.

Supreme Court Agrees to Hear Case Over Border Wall Funding

The Supreme Court announced Monday that it will hear a challenge
to President Trump’s diversion of military funds to pay for
construction of his wall along the border with Mexico. The court
also agreed to hear a challenge to the Trump administration’s
policy requiring asylum seekers to remain in Mexico while their
cases are processed.

A federal appeals court ruled in June that the administration’s
use of $2.5 billion in funds appropriated for the Defense
Department was unlawful, but the Supreme Court in July allowed
construction of border barriers to continue.

Lawyers for the American Civil Liberties Union in the border
wall case say that by the time the high court hears the case, the
Trump administration will have used all the money, The Washington
Post’s Robert Barnes
reports.

“Trump, who ran for office in 2016 promising that Mexico would
pay for the border wall, has obtained more than $15 billion in
federal funds for his signature project, including $5 billion
provided by Congress through conventional appropriations,” Barnes
writes. “As a practical matter, much of the $2.5 billion has been
spent and the portions of the wall funded by it have been built. As
of the summer, about 40 miles of two projects in New Mexico and
Arizona had yet to be completed.”

The border wall funding case will likely be heard early
next year.

Quote of the Day

“Headline rates matter less and less than ever before. It’s
all in the nitty-gritty. It’s all in the treatment of losses. It’s
all in the depreciation. That’s where the battle gets
fought.”

– Mihir Desai, a Harvard Business School professor,
in a Wall Street Journal
article looking at the likelihood that corporate
tax rates will be going up next year if Democrats control both
Congress and the White House.

Dodgers vs. Rays — who ya
got? Send your tips and feedback to yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis