Still Scrambling for a Stimulus Deal

Still Scrambling for a Stimulus Deal

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Plus, more economic distress signals
Thursday, December 17, 2020

Scramble for a Stimulus Deal Will Likely Drag Into the Weekend

Congress is still scrambling to finalize another Covid relief deal, with negotiators haggling over elements of the legislation and billions in spending ahead of a Friday night deadline, when lawmakers had hoped to pass a $900 billion aid package paired with a $1.4 trillion omnibus government spending bill.

Senate Minority Leader Chuck Schumer (D-NY) said Thursday that, while a deal is close, “a few final issues must be hammered out.” Senate Majority Leader Mitch McConnell (R-KY) said members of Congress were now “highly likely” to be working through the weekend to pass the rescue package and that lawmakers may have to buy some more time by passing a stopgap government-funding bill to prevent a partial government shutdown when current funding lapses at 12:01 a.m. ET on Saturday.

The sticking points on a Covid rescue deal reportedly include which Americans would be eligible for direct relief payments and disagreements over an extending an eviction moratorium and health care and disaster relief funds as well as money for entertainment venues. Republicans are also pushing to formally end the emergency Federal Reserve lending programs created by the CARES Act passed in March.

As Emily Cochrane reports in The New York Times:

“Democrats were making a last-ditch effort to provide emergency aid to states, which they argued was critical to helping states weather the pandemic and avoid huge layoffs and cuts in services that could reverberate through the economy. Republicans were working to limit the power of the Federal Reserve to bail out businesses, municipalities or other institutions in the future.”

Republicans including Sens. Pat Toomey on Pennsylvania and Mike Crapo of Idaho are reportedly pressing for language that would prevent the Treasury Secretary from restarting the Fed lending programs for small and midsized businesses as well as state and local governments. Those programs are set to end this month.

“In the future, if some kind of dire emergency occurs, at that point the Fed and Treasury should come to Congress if they believe any kind of extraordinary program is needed,” Toomey told reporters Thursday. “What this does is that nobody can revive or create a duplicate of the programs that received Cares Act money.”

Democrats warn that the proposal would limit the incoming Biden administration’s paths for promoting economic recovery. “They are trying to take away some options for the new president to deal with some challenges to the economy,” Senator Ron Wyden, the top ranking Democrat on the Senate Finance Committee, told reporters, according to Bloomberg News.
Toomey told reporters that his push was not meant to hamstring the Biden administration or hurt the economy, noting that he’s sought to ensure that the programs end this year since well before November’s election.

A short government shutdown might be possible:
Any senator could block quick passage of a stopgap spending bill, and — in what could be seen as a sign of how Congress now works, or doesn’t —Democrats are wary of a measure that would ease pressure on negotiators to finalize a Covid relief package, according to Politico.

"I know people who are going to object to that, that want to keep pressure on the process until we get a deal," Senate Majority Whip John Thune (R-SD) told Politico. "Government shutdowns are never good. If it's for a very short amount of time on a weekend hopefully it's not going to be something that would be all that harmful."

The bottom line:
Congressional leader remain optimistic that they’ll get a deal done, but the process is likely to spill over into the weekend.

Economy Sending More Distress Signals: Layoffs Jump, Personal Income Drops

The resurgence of the coronavirus is weighing heavily on the labor market, with more than 1.3 million people making new unemployment claims last week, an unexpected increase of 63,000 from the week before.

About 885,000 people applied for initial unemployment benefits at the state level, the Labor Department announced Thursday, the highest weekly total since September. Another 455,000 made initial claims for Pandemic Unemployment Assistance, the federal program that aids self-employed and gig workers — and that is scheduled to expire at the end of the month if Congress fails to renew it in the relief package currently under negotiation.

All told, more than 20 million people were receiving some kind of unemployment aid as of November 28, the Labor Department said.

Some comments on the report (with emphasis added):

  • The labor market is showing clear signs of deterioration. ... We expect the trend to persist amid a sharp rise in virus cases and subsequent business restrictions weighing on employment conditions.” – Eliza Winger, Bloomberg

  • U.S. weekly jobless claims continue to head in the wrong direction. The labor market outlook is bleak as the winter wave of the virus is going to lead to more shutdowns.″ – Edward Moya of the currency trading firm OANDA, via AP

  • “[L]ast week was the 39th straight week total initial claims were greater than the worst week of the Great Recession. – Heidi Shierholz of the Economic Policy Institute

  • “Bottom line: Unemployment claims are rising again, a key sign the economic recovery is in trouble. ... 14 million unemployed Americans will lose unemployment aid by January 1 unless Congress acts swiftly.” – Heather Long, Washington Post

In another sign the economy is headed in the wrong direction, the Bureau of Economic Analysis announced Thursday that personal income fell in every state during the third quarter. “State personal income decreased 10.0 percent at an annual rate in the third quarter of 2020, after increasing 35.8 percent in the second quarter,” the agency said. “Personal income decreased in every state and the District of Columbia, ranging from –29.9 percent in West Virginia to –0.6 percent in Georgia.”

A huge reduction in Covid-related relief payments drove the decline, the BEA said, with transfer receipts for programs related to unemployment and health care falling by $1.3 trillion, following a $2.4 trillion increase in the quarter before.

“The data highlight the benefits of economic stimulus at a time when unemployment is high and a spike in U.S. coronavirus cases coupled with fresh restrictions keeping businesses closed are weighing on hiring,” Bloomberg’s Katia Dmitrieva wrote.

Trump Again Vows to Veto Annual Defense Bill

President Trump said again Thursday that he will veto the annual defense bill passed by Congress, which authorizes $741 billion in spending and sets military policy.

Trump has cited various reasons in vowing to veto the defense bill, which has been passed for 59 straight years. He has insisted that it include an unrelated repeal of Section 230 of the Communications Decency Act, which protects tech firms from being held legally liable for content posted on their platforms, and objected to a provision renaming military bases named after Confederate leaders. He has also claimed that the bill would benefit China.

“I will Veto the Defense Bill, which will make China very unhappy. They love it,” Trump tweeted Thursday. “Must have Section 230 termination, protect our National Monuments and allow for removal of military from far away, and very unappreciative, lands. Thank you!”

Trump reportedly will veto the bill directly rather than by employing what’s known as a “pocket veto,” which would involve allowing the bill to expire by refusing it sign it within 10 days. It’s not clear when Trump may exercise his veto, but once he does, Congress would have to vote again to override him. Both the Democratic-controlled House and the Republican-led Senate passed the defense bill with majorities larger than would be needed to do so.

Russian hack makes defense bill a ‘must-sign piece of legislation’:
Thomas Bossert, a former homeland security adviser to Trump and deputy homeland security adviser to President George W. Bush, warned Thursday that the recently uncovered Russian hack of the U.S. government and hundreds of private companies, makes it all the more important that the annual defense bill is enacted — and makes presidential leadership critical at this moment.

Among other important provisions,” Bossert wrote in a New York Times op-ed, “the act would authorize the Department of Homeland Security to perform network hunting in federal networks. If it wasn’t already, it is now a must-sign piece of legislation, and it will not be the last congressional action needed before this [cybersecurity breach] is resolved.”

What’s next:
A veto override would be the first of Trump’s presidency, and the timing could present some problems for Congress.

“Democrats and Republican alike fear that Trump will drag out his opposition to the National Defense Authorization Act until the last possible moment, which, by law, would be Dec. 23, when lawmakers expect to be long gone from Washington,” Politico reports. “If Trump runs out the clock, it would give the House and Senate just a handful of days in late December to deliver the historic rebuke of his veto. If they fall short, lawmakers could quickly pass the bill in the next Congress, but it would be a humiliating failure after the law has been enacted each year for nearly six decades.”

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