2nd Stimulus Package Update: Politicians Still Can't Agree On Type Of Aid Or How Much To Spend
(CBS Detroit) -- Both Democrats and Republicans agree on the need for a second round of economic stimulus. What they disagree on is what form that stimulus should take and how much it should cost. Little progress has been made since the election. What can be done in the lame-duck session leading up the inauguration of president-elect Joe Biden remains to be seen.
As House Speaker Nancy Pelosi said Friday, "our focus in the Congress now, in this lame duck, continues to be on COVID relief. This is a red alert, all hands on deck. As Leader Schumer and I discussed yesterday, this is an emergency of the highest magnitude..."
President Trump recently tweeted his support for another big round of stimulus once again.
Though the White House has also stepped back from the $1.9 trillion proposal it was supporting in the lead up to the election.
A large stimulus package would likely include an array of things similar to the revised $2.2 trillion HEROES Act that passed the House in early October. Those include a $1,200 stimulus check, additional federal unemployment benefits and aid to cities and states. Treasury Secretary Steven Mnuchin, then negotiating on behalf of the Trump administration, was pushing back on the aid to cities and states when negotiations broke off.
The Biden plan, as proposed, would also contain an additional $200 per month for recipients of Social Security and student loan forgiveness. Other measures include emergency sick leave, additional money for small businesses and no personal expenditures for COVID testing, treatment and vaccines.
>>READ: Stimulus Package Update: What Will A Biden Administration Mean For More Aid?
The Biden administration would see the revised HEROES Act as a jumping-off point to further negotiations. "I think the Biden folks might start with Pelosi's bill," says Harry Holzer, Professor of Public Policy at Georgetown University and former Chief Economist for the U.S. Department of Labor. "Maybe they would like to end up somewhere close to the bipartisan caucus in the House, [which] suggested a $1.5 trillion bill."
Senate Majority leader Mitch McConnell also agrees that more needs to be done, though his scope is much more limited. According to Politico, Pelosi and Schumer "...are looking at something dramatically larger. That's not a place I think we're willing to go," he said. "But I do think there needs to be another package. Hopefully we can get past the impasse we've had now for four or five months and get serious."
Two sources of that impasse are the amount of additional federal unemployment payments and aid to cities and states. Republicans see the former -- at least the $600 per week the Democrats are requesting -- as overly generous and a disincentive for the unemployed to return to work. Evidence does not support that claim.
They view the latter as "blue state bailouts," though budget shortfalls are hitting states and cities across the political spectrum. State and local governments depend on revenue from sales and property taxes. But every state, except Vermont, has to balance its budget. "Sales tax revenues are falling [and] property tax revenue will probably be affected as well," says Yeva Nersisyan, Associate Professor of Economics at Franklin & Marshall College. "So then their revenues are falling. They're going to start laying off people, cutting services… education, policing, firefighters, those kind of services that state and local governments provide."
>>READ: 'Stimulus Checks Are The Least Important,' When Drafting Aid Package, Says Economist
The Senate's last failed attempt at a stimulus package amounted to $500 billion and did not include stimulus checks. But Senate Republicans see recent positive economic news as supporting their position for a more limited package. Employers added 638,000 jobs in October, down from 672,000 in September. With that, the national unemployment rate fell to 6.9 percent, even as growth slowed. The number of long-term unemployed rose by 1.2 million. Of the 11 million currently unemployed, one-third have been out of work for at least 27 weeks.
Stimulus talks have not continued since the election, but when they do, McConnell will probably take a more active roll, as reported in the New York Times. "There hasn't been any discussion yet between McConnell and Pelosi, but McConnell is not going to rely on Mnuchin anymore to do the dealing," according to Senator Charles E. Grassley of Iowa, chairman of the Senate Finance Committee. "I think he's intending to take it over and try to get something going."
In the meantime, COVID-19 numbers have been moving decidedly in the wrong direction. On Friday, 184,000 new cases were reported in the United States, setting a record for the fourth day in a row. A daily count of 200,000 seems imminent. Hospitals in many parts of the country are running out of hospital beds and medical staff to treat patients. Some states are resorting to field hospitals.
The United States set COVID-19 records for a fourth consecutive day, with more than 184,000 cases reported Friday and over 68,000 people hospitalized with the virus. An average of over 1,100 Americans have died of the virus per day over the last week, as officials nationwide announce new measures in response to the surge. The upward trend is expected to continue.
>>READ: Stimulus Package Update: What Happens To The Economy Without A Second Stimulus?
Despite the runaway pandemic, there has been plenty of positive news on the vaccine front. Last week, drug-maker Pfizer claimed its coronavirus vaccine was 90 percent effective in preventing COVID-19 in human trials. Moderna's coronavirus vaccine has since showed similar results in trials. Emergency federal approval could come within weeks. But the logistical nightmare of distributing hundreds of millions of doses of the vaccine will likely last much longer.
In that time the pandemic and the resulting economic slowdown are likely to worsen. Another round of adequate economic stimulus becomes even more important.
"There have been signs of the recovery flattening, as the virus caseload is getting worse," says Harry Holzer, Professor of Public Policy at Georgetown University and former Chief Economist for the U.S. Department of Labor. "That's going to dampen the recovery. That's going to make people more reluctant to go shopping, to eat in restaurants, etc. The stimulus bills that Congress passed in March and the president signed I think were very helpful in number one protecting workers who had been laid off and people who would've been poorer. I think it did a very good job in helping them and also stimulating the recovery. Absent a second round of stimulus, I think more people will suffer and the economic recovery will weaken."