/Stimulus Talks on Verge of Failure as Both Sides Trade Blame

Stimulus Talks on Verge of Failure as Both Sides Trade Blame

We said a few days ago that even given the best case scenario of a stimulus deal by weekend, any compromise was certain to result in too little spending to do remotely enough good. And on top of that, with even that vote not happening until next week, any new unemployment supplement payments would not hit recipients’ wallets until the end of August.

The state of play is much worse. The Senate has been sent home, an admission that a deal is somewhere between remote and not happening. Mitch McConnell has sat out the talks, at least in part because the Republicans are so divided that they can’t be herded anywhere. Oh, and needless to say, no one is betting on a breakthrough before the supposed deadline of Friday.

Some snippets from the press. First, The Hill:

Congress and the White House are barreling toward an end-of-the-day Friday deadline set by the main negotiators: House Speaker Nancy Pelosi (D-Calif.), Senate Minority Leader Charles Schumer (D-N.Y.), White House chief of staff Mark Meadows and Treasury Secretary Steven Mnuchin…

“We might not get a deal,” said Senate Appropriations Committee Chairman Richard Shelby (R-Ala.). “There’s a lot of pessimism here. … Are we too far apart?”

Sen. Lisa Murkowski (R-Alaska) told reporters it “doesn’t look like” there will be a deal this week. And asked if he was optimistic there would be a deal, Sen. Mike Rounds (R-S.D.) responded “nope.”

In a sign that a breakthrough isn’t imminent, senators were told Thursday they could go home, but to plan to come back if an agreement is struck.

From Politico:

Negotiations between the White House and Democratic congressional leaders on a new coronavirus relief package were on the brink of failure Thursday night, both sides said after a fruitless three-hour meeting in Speaker Nancy Pelosi’s office….

After their 10th face-to-face session with Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows, Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) blamed the White House for failing to reach a bipartisan agreement that would allow the resumption of federal unemployment payments or provide hundreds of billions of dollars in new aid to state and local governments. Democrats are pushing a relief package costing more than $3 trillion, while the White House and Senate Republicans want to keep the price tag closer to $1 trillion.

“We have always said that the Republicans and the president do not understand the gravity of the situation,” Pelosi told reporters afterward. “And every time we meet with them, it is reinforced.”

“Right now, I would say the president only has two choices,” Schumer said. “The first is to negotiate with Democrats; he knows Republicans can’t pass a bill, you probably can’t even get a majority of Republican senators to vote for any bill, let alone the House.”

And CNN:

A three-hour meeting Thursday evening between senior administration officials and Democratic leaders yielded little progress as both sides seemed resigned to the likelihood that Congress won’t reach a major stimulus deal amid an economic crisis…

It’s unclear if the two sides will meet on Friday. White House chief of staff Mark Meadows and Treasury Secretary Steven Mnuchin plan to brief Trump later Thursday night and Friday morning as they decide whether to continue to negotiate with Democrats…

Democrats have argued that passing anything less than a large-scale package is a non-starter and have pushed back against the idea of passing anything piecemeal.

But the two sides have been far apart on a top-line price tag for a stimulus package, making an overarching deal hard to reach. Pelosi told CNN this week that she wants a price tag of $3.4 trillion, a number that Republican negotiators have balked at. Meadows said earlier Thursday that the White House top-line number was now “north” of the initial GOP offer of $1 trillion.

“My frustration is that we could’ve passed a very skinny deal that dealt with some of the most pressing issues,” Meadows said Thursday evening.

One of the biggest sticking points: aid to state and local governments.

Democrats have made a boost in aid to state and local governments a key priority and a House-passed Democratic proposal provided $500 billion to states and $375 billion to local governments. In contrast, the initial Republican proposal didn’t include additional funding for states or cities, but gave them more flexibility to use some of the $150 billion allocated in the CARES Act relief legislation for revenue shortfalls.

In the meantime, Trump acts as if he can adequately plug the growing hole in the economic dike with executive orders. With all spending bills having to originate in Congress, this is loopy. Trump can probably implement an eviction freeze, since courts have upheld state-level eviction freezes by governors. Trump also seems to think he can eliminate payroll taxes. Even his own team has doubts. From the Financial Times:

Mr Shelby said he thought Mr Trump could do a “lot of things” by executive order, including suspending the payroll tax. But Chuck Grassley, another longtime Republican senator, poured cold water on the idea. In addition to questioning whether Mr Trump had the legal authority, he said the idea made no economic sense.

And it’s not as if a payroll tax holiday accomplished much. Businesses hire based on demand, not based on comparatively small changes in net payroll costs. True, it could make a small difference in how long businesses struggling to make it hang on or delay headcount cuts, but another PPP jolt would be far better. Workers get a bit more net pay, but with Covid-19 grinding on, many will use any extra dough for savings (and paying down debt is a form of saving) rather than spending. And of course, you need to be employed to benefit.

In other words, the cynical take is the most accurate: this gambit has more to do with putting the Social Security trust in the appearance of distress faster than goosing the economy.

In the meantime, if and when there is a deal, the airlines are at the head of the line. Hubert Horan said at the start of the week that when the current airline payroll support ran out in October, the airlines would implement big schedule cuts. I flew at the end of March when airlines had reduced their flights to bare bone levels, and it was difficult to find anything more than one or two flights from A to B if either A or B was not a huge hub, and even then, with terrible layovers. Someone apparently got the memo. Again from the Financial Times:

Meanwhile, a union-backed push to extend payroll support for US airlines until the end of March is gaining steam. Sixteen Republican senators on Wednesday signed a letter supporting another $25bn for airlines to avoid mass furloughs. Their support for the additional aid, already backed by a majority of lawmakers in the Democratic-controlled House, raises pressure to include it in a final package.

The airlines received $50bn in aid in March to keep pilots, flight attendants and other employees on payroll until September 30, with the expectation that passenger traffic would have recovered by then. But data from the Transportation Security Administration shows traffic is still down 75 per cent compared with a year ago.

I could go on about how disastrous a skinny deal, no deal, or even a better but late deal would be, but readers are very familiar with this terrain from their own information-grazing and personal knowledge.

It is conventional for accounts of political sausage-making to be almost entirely about the process at the expense of the ramifications. But the bloodless tone also reflects the fact that our supposed leaders are too far removed from any consequences to care, at least until it is way too late.

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