Biden Calls for Trillions More in Covid Relief

By Yuval Rosenberg

Biden Calls for Trillions More in Coronavirus Aid

President-elect Joe Biden said Friday that he is working on a
new multi-trillion-dollar coronavirus relief package that would
include increasing the $600 direct payments provided in legislation
passed last month to $2,000.

"Six hundred dollars is simply not enough when you have to
choose between paying rent or putting food on the table and keeping
the lights on," Biden said.

The package, which Biden said will be announced next Thursday
ahead of his inauguration on January 20, will also call for
billions of dollars for vaccinations, tens of billions to help
schools reopen safely and more money for state and local
governments as well as enhanced unemployment benefits.

"The price tag will be high," Biden said. Asked about a rumored
price tag of some $2 trillion, Biden said: "The answer is yes, it
will be in the trillions of dollars." Biden said that failure to
provide additional aid would result in "a broader economic
cost."

Biden said he would also focus on getting aid to minority-owned
small business and called for an increase in the federal minimum
wage to $15.

Axios
reported Thursday that Biden is considering a
two-step approach to coronavirus relief. That would involve first
asking for $1,400 payments along with money for vaccine
distribution and aid to state and local governments and then
pursuing a $3 trillion tax and infrastructure package.

Economists expect a smaller package: Democrats are set to
control both chambers of Congress, but a slim majority in the House
and a 50-50 split in the Senate mean that it may be difficult to
get thee votes required to pass another package along the lines
Biden is proposing. At the very least, the margins in the House and
Senate could be an early test of Biden’s ability — and that of
congressional Democratic leaders — to wrangle members of their own
party and win support from Republicans, who pressed to keep the
last relief package from topping $1 trillion.

Bloomberg News
reports that, after Democrats won control of the
Senate this week with victories in two Georgia Senate runoffs, Wall
Street economists predicted that any new stimulus package would
come in at $1 trillion or less: "JPMorgan Chase & Co. predicted a
new stimulus package worth $900 billion; Goldman Sachs Group Inc.
said it expected about $750 billion in new aid; and Bank of America
Corp. analysts projected a bill in the ‘ballpark’ of $1
trillion."

$2,000 checks not a lock, either: Sen. Chuck Schumer
(D-NY) said Wednesday that providing $2,000 coronavirus relief
checks would be a top priority for the newly seated 117th Congress.
"One of the first things that I want to do when our new senators
are seated, is deliver the $2,000 checks to the American families,"
Schumer, set to become the Senate Majority Leader, told
reporters.

Sen. Joe Manchin (D-WV) may have different ideas. In a sign of
how challenging it may be to reach agreement on another relief
package, Manchin told The Washington Post on Friday that getting
people vaccinated, not $2,000 checks, should be the top priority
for the new Congress and that any additional spending should be
targeted to people who need it most.

"I don’t know where in the hell $2,000 came from. I swear to God
I don’t. That’s another $400 billion dollars," Manchin said.

Initial reports that Manchin said he would
"absolutely not" support $2,000 payments sent
stocks sharply lower on Friday, but the senator later clarified
that he may support more checks if they were targeted.

Manchin last month led a bipartisan group of moderate senators
who crafted a $900 billion compromise coronavirus relief package
that helped break a months-long congressional deadlock on
additional aid. He and other centrists will have newfound power in
an evenly divided Senate, though some Republicans have also voiced
support for $2,000 payments and their backing could help the larger
payments to pass.

The bottom line: The latest
unemployment numbers (see below) highlight the need for additional
economic support. We should have more details about Biden’s
proposal next week — and the contours of the public debate over
another round of aid should become clearer soon after.

Jobs Recovery Falters in
December

U.S. payrolls shrank by 140,000 in December, bringing the
jobs expansion that started in April to a halt, the Department of
Labor announced
Friday.

The job losses were concentrated in the leisure and
hospitality sector, which lost nearly half a million jobs during
the month as restaurants and bars closed in response to the
dramatic resurgence of Covid-19 throughout the country.

The unemployment rate held steady at 6.7%, following seven
straight months of declines.

Good news amid the bad: Beyond leisure
and hospitality, the labor market displayed solid gains. "Outside
of consumer-facing sectors the remainder of the economy continues
to show resilience," Michael Gapen, chief U.S. economist at
Barclays, told
Bloomberg. "It does show that if we can get
control of the pandemic, then we can restore economic activity and
labor market conditions over the course of this year. It’s a
pandemic-driven number, a pandemic-driven composition."

The reversal in the labor market should be short-lived,
said Joseph Brusuelas, chief economist at the consulting firm RSM.
"While the trend in hiring has slowed in recent months — December’s
decline was the first since April — we expect that this is more of
a temporary lull in hiring than the breakout of a new trend that
results in soaring unemployment," Brusuelas wrote in a
note Friday. "Rather, we expect that mass vaccine
distribution this year will create the conditions for faster growth
and employment."

Michael Pearce of Capital Economics said the report
indicates underlying strength. "With employment in most other
sectors rising strongly, the economy appears to be carrying more
momentum into 2021 than we had thought," he said in a note to
clients.

But pain persists for millions: While
the unemployment rate is lower than most economists expected at
this point in the recovery, millions of workers who have left the
labor market are not included in the statistic. Taking those
workers into account, along with others who may be misclassified by
the Bureau of Labor Statistics, the unemployment is closer to 8.6%,
according to
calculations by economist Jason Furman, who led
the Council of Economic Advisers in the Obama
administration.

State and local governments need assistance:
State and local governments also shed jobs in
December.

"State & local government employment fell by a further
45,000 which, unlike previous months, was not due to a fall in
education payrolls, and so probably reflects broader budget
constraints starting to bite," Capital Economics’ Pearce
wrote.

The state and local sector will need more money from
Congress, Catherine Rampell of The Washington Post said. "Already,
state and local governments have shed about 1.4 million jobs since
February on net; most of them are in education. More layoffs — of
teachers, police officers, public hospital employees, etc. — are
probably coming," she
wrote. "One of the lessons from the Great
Recession was that public-sector job losses significantly slowed
down the ability of the private sector to recover. Congress must
prevent this foreseeable problem from happening again."

Expect the debate over state and local aid to be front and
center in the coming weeks, said RSM’s Brusuelas: "The fiscal
challenges faced by the states and municipalities are significant,
illustrated by the loss of 45,000 jobs in December. In our
estimation, we expect this to be one of the primary narratives in
the debate on fiscal aid ahead of the benefits cliff approaching in
March."

Help is on the way: The $900 billion
stimulus and relief package signed into law in late December should
provide a significant boost to the economy, softening the blow from
the resurgent virus. "Without that stimulus package, over 10
million people would have lost unemployment insurance benefits at
the end of December," Heidi Shierholz of the Economic Policy
Institute told
Marketplace. "That would have been a huge drag on
the economy that we will not see."

Capital Economics’ Pearce said that while the labor market
could be in for a few more rough weeks, he expects the economy
overall to keep growing. "With coronavirus infections still rising
nationally, payrolls could fall further in January. But with most
of the high-frequency indicators suggesting that the rest of the
economy is still holding up and additional fiscal stimulus starting
to feed through, we still expect first-quarter GDP growth to be
positive."

Poll of the Day: 75% of Voters Are Worried About the
Deficit

Three-quarters of voters surveyed in a new
Hill-HarrisX poll say they are very or somewhat
worried about the federal budget deficit.

"The national deficit is a sleeper issue while the COVID crisis
continues, but has all the markings of a issue that could
strategically be elevated by Republicans in the next presidential
cycle," Dritan Nesho, CEO and chief pollster at HarrisX, told
Hill.TV. He added that whether the deficit becomes a front-burner
issue will depend to a large extent on how the economy rebounds
from the coronavirus recession and what effect the Biden
administration has on the budget outlook — "and what the real-world
impact of that is on inflation, the price of consumer goods,
interest rates, and general financial market jitters."

The deficit for fiscal year 2021 is on pace to total
$2.3 trillion, according to the Committee for a
Responsible Federal Budget, down from a record-shattering $3.1
trillion in 2020.

The Hill-HarrisX poll was conducted online from
December 30, 2020 to January 3, 2021 among 3,787
registered voters and has a margin of error of 1.59 percentage
points.


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