Stimulus struggle leaves no easy answers
WASHINGTON – With stimulus negotiations all but over after President Donald Trump announced Tuesday that he rejected Democrats’ offer and would wait until after the elections, Americans will have to wait at least another month for urgently needed aid.
Negotiations collapsed Tuesday after Trump tweeted that he wanted to wait until after the election to move forward on COVID-19 relief talks. Later Tuesday, he said he supported standalone relief provisions for $1,200 stimulus checks and support for airlines, but passing stand-alone provisions is unlikely.
Here’s where negotiations stand now and what it means for you:
What happened to the negotiations?
Trump announced he was halting the months-long negotiations over a COVID-19 relief package Tuesday, rejecting Democrats’ offer and postponing negotiations until after the election.
The Democrats’ package would have offered another round of $1,200 checks to Americans, enhanced jobless benefits and money for struggling small businesses and airlines, which have suffered severe layoffs.
Trump accused Democrats of “not negotiating in good faith” and said he wanted Senate Majority Leader Mitch McConnell to “focus full time” on confirming Trump’s Supreme Court nominee, Amy Coney Barrett, to fill the seat vacated by Justice Ruth Bader Ginsburg’s death.
Trump partially reversed course late Tuesday night, tweeting that he supported stand-alone bills on stimulus checks and relief for airlines, which have warned of mass furloughs and layoffs after the coronavirus-related collapse in travel.
Pelosi spokesperson Drew Hammill said Pelosi and Treasury Secretary Steve Mnuchin spoke Wednesday morning about the prospects of a stand-alone airline relief bill. Pelosi referred him to the fate of a stand-alone airline bill to avert furloughs Democrats had tried to advance last week under rules that would have required unanimous approval from lawmakers. Republicans blocked it from passing under those rules.
White House Chief of Staff Mark Meadows, one of the lead negotiators, reiterated Trump’s point to reporters Wednesday, saying “the stimulus negotiations are off.”
He said a comprehensive bill was going to lack Republican support in the Senate, where lawmakers have balked at a higher price tag for relief packages. “It became very obvious over the last couple of days that a comprehensive bill was just going to get to a point where it didn’t have really much Republican support at all,” he said. “It was more of a Democrat-led bill which would have been problematic, more so in the Senate than in the House.”
Could a stand-alone bill pass?
Despite the president’s exhortations of lawmakers to pass a bill quickly, the Republican-controlled Senate is out of session for the next two weeks, and the Democratic-controlled House is not scheduled to return until after Election Day. Congressional Democrats seemed cool Wednesday to the idea of stand-alone bills, saying comprehensive legislation was still needed.
Pelosi, in an interview on ABC’s “The View,” said a stand-alone bill on stimulus checks would be akin to a vanity project for Trump, saying
“all he has ever wanted in the negotiation is to send out a check with his name printed on it.”
“He’s just again rebounding from a terrible mistake that he made yesterday, and the Republicans in Congress are going down the drain with him on that,” she said of his Twitter posts.
Rep. Andy Levin, D-Mich., called the end of negotiations a “heartbreaking betrayal” by Trump and said he had enough of the president’s “whiplash” on proposals. Asked about a stand-alone bill, Levin said, “I don’t think it makes sense to cherry-pick” parts of a proposal instead of a comprehensive deal.
Sen. Elizabeth Warren, D-Mass., told reporters Wednesday that “it’s not possible to deal with this economy without getting control over this virus,” citing the need for a plan to contain the pandemic.
Will I get another stimulus check? Anything?
The stimulus package being on hold threatens to delay a second round of $1,200 direct payments to Americans by at least a month.
A stand-alone bill to authorize another round of stimulus payments to individuals is even less likely, according to analysts at Goldman Sachs, because neither party has made it a priority even though both appear to support such payments as part of a broader package.
Analysts worry that piecemeal relief measures could quickly become a renewed negotiation over a broader fiscal package.
For those who are suffering financial strains, wealth advisers suggests creating a budget and recommend that people reach out to creditors as soon as possible because lenders will likely have hardship plans available for those who need help.
Will this affect the election?
The lack of a deal on stimulus means that both sides are heading into an election with no relief in sight for
Americans struggling because of the pandemic. The effect on the elections and whether it could harm or help either side, though, is unclear.
Kyle Kondik of the University of Virginia Center for Politics said stimulus could have helped Trump in the last month before the election but wondered that with so many other events in the news cycle, “and so little that seems to really move the numbers, that I question whether the actual act of ending negotiations on stimulus moves the needle much.”
But the “actual state of the economy, and how people feel about it, could have some impact, and one wonders what the economic situation will be for the next several weeks in the lead-up to the election.”
Lawmakers facing tough reelection races staked out their positions on stimulus too, calling both sides to come back to the table.
Sen. Lindsey Graham, R-S.C., whose reelection race in South Carolina was just moved to “toss-up” by the nonpartisan analysts at the Cook Political Report, tweeted early Wednesday that he would “strongly recommend” his GOP colleagues and Trump examine the provisions of the $1.5 trillion relief framework proposed by the House Problem Solvers Caucus, a bipartisan group. House Democratic leaders said they opposed the group’s framework, calling it too small to respond fully to the pandemic.
Sen. Doug Jones, D-Ala., facing a tough reelection race in a state Trump won by almost 30 percentage points in 2016, said he did not support a “piecemeal” relief plan, adding that people in Alabama had other issues beyond those that the president wanted to advance separate plans on.
Jones called it “inappropriate” to let the president “pick the winners and the losers” of stimulus relief like a bailout for airlines alone rather than other industries.
How’s it hitting the stock market?
When Trump asked White House officials to halt stimulus negotiations until after the election, it sent the Dow Jones industrial average tumbling 376 points on Tuesday. Financial markets had been bolstered by hopes of a deal. On Wednesday, stocks did an about-face and recovered the prior day’s losses after Trump appeared to backtrack his decision, urging Congress to provide aid to the struggling airline industry. The blue-chip Dow rallied more than 500 points.
What’s the effect on the economy?
Federal Reserve Chair Jerome Powell urged Congress Tuesday to pass a robust package, warning that providing too little relief would weaken the nation’s recovery.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said at a virtual annual meeting held by the National Association for Business Economics. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”
The U.S. economy is at a crossroads, with some analysts saying a failure to pass another stimulus package would tip the nation back into recession as the pandemic continues to spread. Economists believe the U.S. emerged from recession in May and has since recouped about half the 22 million jobs lost in the early spring as businesses have reopened – but recovering the rest will be tougher.
Some economists worry that the nation could slip back into a downturn in the final months of the year and the first quarter of next year. Such a relapse just months into recovery is known as a double-dip recession.
But some analysts have argued that the U.S. economy can go without a new stimulus package until after the election. In fact, Mike Wilson, chief U.S. equity strategist and chief investment officer at Morgan Stanley, said Tuesday on CNBC’s “Closing Bell” that the economy can still avoid a double-dip recession even with a delayed stimulus package.
“I don’t think we need stimulus in the next 30 days for the economy to stay afloat. There is no risk of a double-dip recession in the next 30 days if we don’t get the stimulus done,” Wilson said. “It is now just a timing question before or after the election. Our best guess is probably after the election.”