Agreeing to a $900 billion stimulus bill that’s an a appetizer to the cash printed by the Federal Reserve Board to keep the government running, Democrats and Republicans settled on a big compromise, providing $600 payments to U.S. taxpayers, more payroll protection to small businesses, expanded unemployment benefits and more cash to deliver vaccines around the country. But before the ink dried on the new deal complaints were already voiced by various groups wanting more, including local and state governments that got aced out of today’s deal. States and cities will get their bailout in due time sometime after President-elect Joe Biden gets inaugurated Jan. 20, 2021. For right now, the public will have to be content with a second round of $600 stimulus checks and a continuation of $300 a week government-enhanced unemployment benefits. While some always complain, Congress finally delivered.
No deal was possible with Democrat and Republicans at loggerheads before the Nov. 3 presidential election. No matter what the protests coming from 74-year-old President Donald Trump and his acolytes, no deal was possible on Capitol Hill until Trump’s defeat. There’s little doubt that that had Trump won reelection, 78-year-old Sen. Majority Leader Mitch McConnell (R-Ky) would not have bent over backwards for Democrats. With Trump out of the picture, McConnell was able to cut a deal, the same can be said for 80-year-old House Speaker Nancy Pelosi and 70-year-old Senate Minority Leader Chuck Schumer (D-N.Y.). Neither Pelosi nor Schumer wanted to cut any deal with Trump, forcing cash-strapped businesses and workers to wait until they finally tossed him out of office. Now that the deal’s done, Wall Street has a lot to digest but will no doubt rally, at least for one day.
Wall Street has long digested an expected stimulus deal since after the Nov. 3 election, realizing that stimulus was in the works. Whether the stimulus helps the economy is anyone’s guess. What’s knows for sure is that the Federal Reserve Board sees the economy in a serious recession, if not depression. Fed Chairman 67-year-old Jay Powell urged Congress for months to find more fiscal stimulus, knowing the Fed had done everything possible to keep interest rates at rock bottom. Buying U.S. treasuries and maintaining zero percent interest rates tells the real picture about the U.S. economy, not watching the Dow Jones Industrials, Nasdaq or S&P 500 hit record highs. Wall Street always looks ahead for better days. But if corporate earnings continue to shrink, bankruptcies and foreclosures rise, Wall Street will switch from buying to selling, triggering another market correction.
Getting stimulus certainly doesn’t hurt the economy, other than raising the national debt and federal budget deficits. Sen. Pat Toomey (R-Pa.) practically derailed the stimulus bill insisting that the Fed lose its power to continue adding unlimited funds to the nation’s biggest banks. Shelby thought the Fed had overstepped its boundaries and threatened to bury the U.S. economy in debt printing more cash to bailout various businesses. Toomey’s fear of hyperinflation from printing too much money has been largely disproved because there are so many people out of work, it’s created strong deflationary pressures. Only certain assets like real estate and gold have seen an escalation in prices, not ordinary consumer goods. Today’s cash-strapped consumers, that account for about two-thirds of U.S. Gross Domestic Product [GDP], are not buying because they face burdensome debt.
Today’s stimulus bill, while long overdue, is welcomed relief to an economy sputtering because the Covid-19 crisis has been a stubborn drag on the economy. Fed Chairman Powell admitted that there’s only so much help the Fed can do to reverse the effect of Covid-19. Providing much-needed funds to assure deliveries of vaccines around the country could have a positive effect on the economy in the months ahead. Both parties praised today’s stimulus deal as a major milestone. “We’ve agreed to a package of nearly $900 billion with targeted policies that help struggling Americans who’ve already waited entirely too long,” said McConnell, acknowledging that the deal was long overdue. Consumers can now look forward to a new round of $600 checks, with cash-strapped individuals getting a moratorium on evictions. Recipients of unemployment compensation get an additional $300 a week.
Whatever Democrats didn’t get in today’s bill, they’re likely to get more cash for cities and states after Biden’s inauguration. “We know the new administration is going to be asking for yet another package,” McConnell said. “It’s not like we won’t have another opportunity to debate the merits of liability reform and state local government in the very near future,” hinting at bailouts for what Trump calls poorly managed “blue states.” Today’s deal protects 12 million Americans whose unemployment coverage under the March 27 $2.2 trillion CARES Act expires Dec. 26. Sealing deal today is welcomed relief to Covid-19 ravaged U.S. workers looking at a slow recovery to full unemployment, not expected until 2022 if not later. With the election over and Trump out of the picture, Democrats took the negotiations more seriously, cutting a deal far less than their $3.4 trillion HEROES Act.
