Aid talks resume, then stall quickly
No deal in sight, sides trade blame
WASHINGTON — A new attempt to restart economic relief negotiations between the White House and Democrats ended minutes after it began on Wednesday.
“The bill’s not going to happen, because they don’t even want to talk about it, because we can’t give them the kind of ridiculous things that they want that have nothing to do with the China virus,” President Donald Trump said during a news conference Wednesday evening.
His comments came hours after House Speaker Nancy Pelosi, D-Calif., and Treasury Secretary Steven Mnuchin spoke for the first time since the talks fell apart last week. But their conversation did not break the impasse, instead leading to another round of finger-pointing.
Pelosi and Senate Minority Leader Charles Schumer, D-N.Y., issued a statement after Pelosi’s conversation with Mnuchin, accusing the administration of “refusing to budge.” That was followed by a statement from Mnuchin in which he accused Pelosi of mischaracterizing their conversation and proclaimed that the Democrats “have no interest in negotiating.”
At the center of the relief negotiations was an effort to renew key parts of the
$2 trillion Coronavirus Aid, Relief, and Economic Security Act, which Congress passed in March. That law offered enhanced unemployment benefits to 30 million Americans, extended eviction protections, and included a number of other provisions meant to soften the economic impact of the coronavirus pandemic.
The jobless aid and eviction protections expired at the end of July.
During his news conference, Trump touted executive actions that he took over the weekend, which he said would limit evictions, extend a new form of jobless aid and defer payroll taxes, among other things.
Mnuchin on Wednesday renewed a push for a more limited relief package of “a little more than $1 trillion,” saying that Democratic demands for spending more could be discussed down the road.
“We can always come back later in the year or January and do a sixth bill,” Mnuchin said on Fox Business Network. “We don’t have to do everything at once.”
“If the Democrats are willing to be reasonable, there’s a compromise,” Mnuchin said. “If the Democrats want to focus on politics and don’t want to do anything that’s going to succeed for the president, there won’t be a deal.”
EXECUTIVE ACTIONS
Trump for the time being is allowing his executive actions deferring payroll taxes and providing a temporary $400-a-week federal boost in unemployment aid to play out. States are asked to pay 25% with existing CARES Act funds.
Mnuchin on Wednesday reiterated the administration’s call for Congress ultimately to forgive the payroll tax liabilities. That could cost $100 billion, according to an estimate from the Committee for a Responsible Federal Budget.
Mnuchin also said the Treasury Department is working on guidelines for the payroll tax deferral. A key challenge for the department will be how to assuage some employers’ concerns that they could get stuck with large bills once the deferral period ends, if they passed the savings along to employees.
The treasury secretary also indicated that Trump’s executive order, which delays levies that fund Social Security from Sept. 1 through the end of the year for those earning up to $104,000, would be optional for companies to implement.
“We’re going to create a level of certainty for small businesses who want to do this,” he said.
Trump said Wednesday that deferring payroll taxes would be a great benefit for Americans and that he would make the cut permanent if reelected. He insisted that his move would not damage the Social Security system even though payroll taxes go toward Medicare and Social Security trust funds.
“We’re taking it out of the general fund,” Trump said on how he would pay for Social Security if the payroll tax were paused.
Asked how that would work in light of the ballooning deficit, he replied: “We’re going to have tremendous growth.”
At the news conference, Trump displayed some charts that purported to back up the assertion.
“It’s coming back at a level that’s far greater than anybody anticipated,” Trump said.
The Constitution gives Congress the power to set tax policy, and lawmakers would most likely object to any attempt to bypass their authority. The executive branch does have wide latitude, however, to enact regulations regarding tax collection, and it can defer taxes, as it did with the payroll tax and with the threemonth delay of the traditional April 15 tax filing deadline.
“They clearly can delay pretty much anything for a year,” said Daniel Hemel, a tax law professor at the University of Chicago.
In addition, “we’re looking very seriously at a capital gains tax cut and also at an income tax cut for middle-income families,” Trump said at the White House on Monday evening. “We’re looking at expanding the tax cuts that we’ve already done, but specifically for middle-income families, and you’ll be hearing about that in the upcoming few weeks.”
Mnuchin said Wednesday that he believed a reduction in capital gains taxes would benefit the economy but that it must be done through legislation.
Mnuchin added that he believed congressional action would also be needed in order to waive the deferred payroll taxes, as Trump has suggested he would like to see happen. Later Wednesday, Trump suggested he had the power to waive those deferred taxes, saying, “I will completely forgive all the payroll taxes.”
TALKS STALLED
In their statement Wednesday, Pelosi and Schumer said that “Democrats have compromised. Repeatedly, we have made clear to the administration that we are willing to come down $1 trillion if they will come up $1 trillion.”
“However, it is clear that the administration still does not grasp the magnitude of the problems that American families are facing,” they said.
In his own statement, Mnuchin disputed Democrats’ version of the call but effectively confirmed that talks have stopped.
“Earlier today, Speaker Pelosi and I spoke by phone,” Mnuchin said. “Her statement is not an accurate reflection of our conversation. She made clear that she was unwilling to meet to continue negotiations unless we agreed in advance to her proposal, costing at least $2 trillion.”
He added that “The [Trump] Administration is willing to move forward with legislation that allows for substantial funds for schools, child care, food, vaccines, hospitals, [aid] for small businesses, rental assistance, broadband, airports, state and local government assistance, and liability protection for universities, schools, and businesses.”
He closed his statement by saying, “The Democrats have no interest in negotiating.”
The two parties are not in the same ballpark on the overall cost of the bill, which Democrats have said cannot be less than $2 trillion. Republicans including Mnuchin have said $2 trillion is too high.
The Senate has nominally been in session this week, after Majority Leader Mitch McConnell, R-Ky., delayed a planned August recess in hopes of voting on a coronavirus relief bill. But there are few senators in the Capitol, and no negotiations or votes have been taking place. The House is out of session.
The Senate appears likely to recess today for the remainder of the month. And it looks increasingly possible that there will be no deal on coronavirus legislation until sometime in September, when an Oct. 1 government shutdown deadline will force legislative action of some kind.
Asked Wednesday whether it was possible there would be no deal until that deadline approached, Pelosi said: “I hope not, no. People will die.”
LOAN PROGRAM
Meanwhile, the CARES Act loan program for small businesses closed with almost $134 billion in remaining funds and with plans for a new round of aid on hold.
The Small Business Administration, which runs the Paycheck Protection Program with the Treasury Department, stopped accepting new loan applications at 11:59 p.m. Saturday. More than 5.2 million loans totaling $525 billion have been approved since the program launched April 3, according to a report posted by the Small Business Administration on Wednesday. The average loan amount was $101,000.
The $134 billion in remaining funds returns to the Treasury Department unless Congress votes to reappropriate the money. A proposal from Senate Republicans calls for using $190 billion in leftover Paycheck Protection Program money and new funding to extend the current program through Dec. 31 while allowing smaller and disadvantaged companies hardest hit by the pandemic to get second loans.
Senate Democrats have introduced a similar proposal that differs on some details; for example, it would restrict eligibility to companies that have 100 or fewer employees rather than the 300 or fewer in the Republican plan. Democrats have also called for more funding for the Small Business Administration’s separate Economic Injury Disaster Loan program, while Republicans have suggested offering new long-term, low-interest loans.
A group of U.S. corporate leaders led by Starbucks Corp.’s former head, Howard Schultz, have pressed lawmakers for additional, longer-term support for small businesses, including federally guaranteed loans that could be turned into grants, at least partially, for those hardest hit by the pandemic.
REOPENING CRITICIZED
Separately on Wednesday, a top official at the Federal Reserve criticized the decision by many states to reopen businesses this spring before getting the virus fully under control, saying those choices have hindered an economic recovery in the U.S.
Eric Rosengren, president of the Federal Reserve Bank of Boston, said states in the South and West that allowed businesses to reopen after shutting down for a brief period did register an initial burst of economic activity. But spikes in infection rates soon followed, and economies in those states are now lagging those in the Northeast as consumers have become more cautious and bars and restaurants have been shut down again in some states.
Rosengren’s comments, delivered online, are some of the most specific yet by a Fed official tying the health of the economy to the nation’s ability to control the virus. Fed Chairman Jerome Powell has emphasized generally that recovery from the recession depends on conquering the pandemic, but Rosengren’s remarks delved into the difference in infection rates, both within regions of the United States and in the U.S. compared with Europe.
“Limited or inconsistent efforts by states to control the virus based on public health guidance are not only placing citizens at unnecessary risk of severe illness and possible death — but are also likely to prolong the economic downturn,” Rosengren said in prepared remarks.
“Despite the sizable interventions by monetary and fiscal policymakers … the recovery may be losing steam, as activities in many states are once again restricted [officially or voluntarily] to slow the virus’s spread,” Rosengren said.
Rosengren also pointed to the high current savings rate in the United States as evidence that Americans have been reluctant to spend, despite stimulus checks of $1,200 that were sent to most Americans in the spring, and the supplemental federal unemployment aid of $600 a week.
Government shutdowns of many businesses have discouraged consumer spending, but so has the individual choice to avoid restaurants, movie theaters, gyms and other public places deemed too risky as the virus surges in parts of the country.
“As long as the virus poses significant threats to public health, a full economic recovery will be very difficult as individuals, often voluntarily, avoid activities that place their health at risk,” Rosengren said.
Information for this article was contributed by Laura Litvan, Laura Davison and Mark Niquette of Bloomberg News; by Erica Werner and Jeff Stein of The Washington Post; by Alan Rappeport of The New York Times; and by Christopher Rugaber of The Associated Press.