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.
- Reversing Job Market Opens Door to Larger Biden Stimulus – Ben White, Politico
- The December Numbers Were Awful, but the Economy Has a Clear Path to Health – Neil Irwin, New York Times
- December’s Jobs Report Confirms Trump Is Set to Be the Worst Jobs President on Record – Catherine Rampell, Washington Post
- Biden's First 100 Days Require 200 Million Vaccinations – Richard P. Wenzel, The Hill
- Schumer Faces Impatient Left, Divided Right in New Senate Role – Mike Dorning and Laura Litvan, Bloomberg
- Democrats Are Finally Unafraid to Be the Party of Free Money – Lucia Graves, New Republic
- The Case Against the $2,000 Checks – Timothy Noah, New Republic
- America's Cities Need a New Federal Partnership – Paige Gebhardt Cognetti et al, The Hill
Donald Trump’s Final Days – Wall Street Journal Editorial Board