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I noted in a recent blog that even though Democrats and Republicans have been vocal about the need for some form of a second stimulus package to pick up where the original CARES program left off, both parties have remained at loggerheads since August about the amount of funding that will be made available and when. And with approximately 11 million Americans out of work because of the pandemic, the urgency is only rising as each day passes.
Where Things Are
Briefly, a recap of where the debate over the second stimulus package stands:
- On Tuesday, September 15, the Bipartisan Problem Solvers Caucus unveiled a plan for a second stimulus package to the amount of $1.5 trillion. If passed, this package would generate checks of around $1200 for qualified individuals, which is the same as the first round of stimulus funding.
- President Trump is reportedly supportive of this figure, which is much higher than many Senate Republicans are comfortable supporting. The President has gone so far as to suggest redirecting $300 billion of unused pandemic relief funds as a way of making the final funding amount more palpable to GOP Senators once a proposal works its way through Congress. The President revealed more of his thinking on this issue in a tweet on September 16, which stated clearly: “Go for the much higher numbers, Republicans, it all comes back to the USA anyway (one way or another!).”
- But $1.5 trillion is also well below the $2.2 trillion mark that the Democrats have been holding firm for weeks. As Democratic Speaker Pelosi iterated on Thursday, September 17: “When we go into a negotiation it’s about the allocation of the resources. But it’s hard to see how we can go any lower when you only have greater needs.” Democrats point out that they have dropped their request substantially from the $3.4 trillion passed as part the comprehensive HEROES Act in May.
- The Senate is scheduled to break on October 9 until after the election, but the House is prepared to postpone its October 2 break until a deal is brokered. What this could mean is that Senate Majority Leader Mitch McConnell could either compel the Senate to stay in session or return before the election for a vote on a second stimulus package.
Stimulus and the Supreme Court
The passing of Supreme Court Justice Ruth Bader Ginsburg on September 18 might have shifted the ground considerably in terms of the urgency of discussions focused on the second stimulus package. All attention turned suddenly to the timing and process of the President naming his nominee for the now-vacant seat and, more contentiously, on the timing of the candidate’s vetting and appointment. As Senate Republicans begin to align with the proposed plan to schedule a floor vote before Election Day, the partisan debate only intensifies and discussion of the second stimulus package falls more steadily onto the backburner.
As the Washington Post noted on September 22:
One of the most jarring dynamics at play is that it has now been six months since the Senate passed a coronavirus relief bill to mitigate the worst public health crisis since 1918 and worst economic crisis since 1933. But the chamber can quickly kick into high gear to fill a Supreme Court vacancy. That says something about institutional priorities, which is to say that dealing with the contagion that has killed more than 200,000 Americans is not their highest priority. The markets tanked on Monday because investors realized the court vacancy means another COVID-19 bill probably will not pass anytime soon.
Stimulus and the Government Shutdown
Slightly more optimistically, Forbes magazine speculates that the apparent willingness of the two parties to smooth-track a Continuing Resolution agreement to avoid a partial government shut-down at the end of September does show “that the two parties can find mutual ground” when they want to. Sadly, as the article also notes, “every day that passes without a bill has real-life consequences for struggling Americans.”
That said, economists at Wells Fargo Securities reportedly “peg the chances of a deal” on a second stimulus package being settled before the election as a dismal one-in-four. The thinking captured in a WFS research note is far from reassuring: “Ultimately, we think the prospects for [a new stimulus bill] are unlikely, as the current position of the two parties appears to be a bridge too far. Both sides seem dug in and willing to wait until the election.”
The Possible Fallout
If an agreement cannot be reached before the election, the fallout is difficult to predict. Chair of the Federal Reserve Jerome Powell has acknowledged that a substantial portion of the 11 million people out of work “were working in industries that are likely to struggle” without a second injection of stimulus money.
Others predict that the slight decline in jobless claims realized in recent weeks could reverse as some sectors, notably hospitality and food-and-beverage, are heavily impacted. In the worst-case scenario, Americans who cannot find work will continue to rack up costly debt (or deplete savings) to stay afloat financially.
I will update this blog as we learn more details about this and related financial issues.