House Democrats led by 80-year-old House Speaker Nancy Pelosi (D-Calif.) completed a new $2.2 trillion dollar stimulus bill, passing around goodies to just about everyone, including cash-strapped cities and states looking for a government handouts because of keeping economies shut down for too long in the six-month-old Covid-19 crisis. Pelosi originally passed the $3.4 trillion Heroe’s Act May 31, only to watch it die the House with little Republican interest. Sen. Majority Leader Mitch McConnell (R-Ky.) countered with a $650 billion package, deemed unacceptable to Pelosi and House Democrats. To put a deal to bed, 57-year-old Treasury Secretary Steven Mnuchin, 74-year-old President Donald Trump’s point person for the negotiations, must compromise Pelosi will need to come back to reality, euphoric about the prospects of another $2 trillion plus package, unacceptable to Republicans.
Senate Republicans, especially Senate Banking Committee Chairman Sen. Mike Crapo (R-Ind.), can’t fathom spending over two trillion dollars, instead looks to Pelosi come down about $700 billion, making the new bill more in line with Trump’s spending priorities. Trump bristles at the prospect of funding cities and states after failing to open up businesses after the lockdown in April and May. Yet Pelosi’s latest proposal is far closer than the initial $3.4 trillion spending plan, far greater that Republicans were willing to go. Pelosi said the House would postpone voting on the legislation until Republicans had a chance to review the contents. Today’s House package would reinstate the $600 a week extended unemployment benefit, especially helpful to workers in restaurants around the country. Pelosi’s bill as it stands gives another $1,200 payment to most individual taxpayers.
Unlike Democrats, Republicans are reluctant to keep adding to the spiraling national debt, now approaching $29 trillion with the federal budget deficit running at a whopping $3.4 trillion and climbing. Speaking with Mnuchin for an hour-and-a-half, Pelosi spurred a Wall Street rally, rocketing the Dow Jones Industrials up 500 points before settling down at around 300 points up. Federal Reserve Board Chairman Jerome Powell, 68, told the White House and Congress to find more fiscal stimulus because the Fed is at its wits end when it comes to helping the economy recover from the Covid-19 recession, worse than the 2008 Financial crisis. If Pelosi would get off her high horse and compromise with Mnuchin, they’d get a reasonable stimulus bill maybe $1.5 trillion. One month out from the Nov. 3 election, both sides want to look like they’re helping ordinary citizens cope with the recession.
Debating last night in Cleveland, 74-year-old President Donald Trump offered a very different vision for the U.S. economy. Biden told voters that Trump’s bad economic management caused the recession, not Covid-19 with its economic lockdowns. While calling Trump a “clown” and a “liar,” Biden said he would raise taxes, even knowing the county’s in one of the worst recessions since WW II. Trump said he would continue to feed the economy rocket fuel, slashing more taxes and regulations. Biden came away sounding like he’d wind up plunging the economy into another great depression. Biden admitted that he’d move the economy toward the Green New Deal, retrofitting buildings and eliminating the internal combustion engine, adding untold trillions to the cost of doing business in the United States. Anyone with any economic savvy had to get alarmed.
Pelosi’s problem has been her unwillingness to face reality that any new stimulus bill must help the economy, not plunge the economy into massive debt. With Disney announcing potentially 28,000 new layoffs and American Airlines threatening another 40,000 job cuts, both sides must reach a compromise before the economy craters. Wall Street can only hold up so long before the lack of earnings triggers a massive sell-off, dropping major stock averages another 40%. Pelosi’s priority allocates $438 billion to cash-strapped cities and states. If she really wants relief for local and state governments, she need to slash funding to the Payroll Protection Program [PPP], extended unemployment benefits or direct payments to individuals and families. She can’t get everything without redirecting her priorities because the GOP won’t settle for more than $1.5 trillion.
Time is running out on both parties before the Nov. 3 election to come up with a new stimulus compromise. Pelosi knows Republicans won’t go for a wish list but a reasonable bill that does a little damage for the national debt as possible. There’s no need to reinstate the entire $600 unemployment benefit, something that could be pared down to $300 a week. While there’s always a need for more Covid-19 testing, the extra $75 billion isn’t a high priority, nor is $200 billion for education, another area that could go back to states and local government to set their own priorities. Pelosi and Mnuchin should sit down and play with the numbers to prioritize a leaner stimulus bill covering the high priority areas. Republicans have no interest in providing $1200 payments to illegal aliens. There’s plenty of room in Pelosi’s budget to recalculate priorities to fit into the White House’s already flexible spending plan.
