After weeks of fizzling negotiations, there is a modicum of renewed hope for a bipartisan deal on another coronavirus relief bill. Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi have spoken several times over the past few days trying to bridge a seemingly intractable divide between Republicans and Democrats. On Tuesday, the two spoke by phone for nearly 50 minutes and reviewed provisions from the updated Heroes Act proposal that Democrats had unveiled on Monday evening. The two did not reach an agreement, but decided to speak again on Wednesday. Mnuchin is expected to come to Wednesday’s meeting with a counteroffer, according to two people with knowledge of the talks.
Stimulus Gap Between Democrats And Republicans
The updated Heroes Act that Pelosi and House Democrats unveiled the on Monday scaled back the proposal’s cost from $3.4 trillion to $2.2 trillion. This leaves not only a sizeable gap between Democrats and the White House, but also a chasm between Democrats and Senate Republicans. The White House has indicated that a $1.5 billion proposal from a bipartisan group in the House was “not a showstopper.” While that divide may be surmountable, the gap between the $300 billion proposal that Senate Republicans most recently voted on and the updated Heroes Act may prove insuperable.
There are a plethora of issues dividing the two sides, including how much aid is needed to safely reopen schools and for coronavirus testing and tracing; however, the most contentious items relate to the magnitude of federal weekly unemployment benefits as well as aid to states and cities.
Scale Of Federal Unemployment Benefits
The updated Heroes Act proposes to renew the $600 per week federal unemployment booster that expired at the end of July. Republicans have argued that the $600 weekly payment was overly generous and created a disincentive to return to work. Despite numerous studies debunking that theory and July statistics from the Bureau of Labor Statistics showing 2.5 unemployed people per job opening, the scale of unemployment benefits has been divisive.
Expect Mnuchin to counter with a lower weekly rate to extend unemployment benefits, probably in the range of $300 to $400 a week. If this sounds like deja vu, it is in many ways. These are the same negotiating positions that Democrats and Republicans have had for weeks with Republicans offering to extend unemployment benefits at roughly $300 per week and Democrats insisting on maintaining the $600 rate. “If we can reach an agreement on state and local and unemployment, we can reach an overall deal. And if we can’t, we won’t,” Mnuchin said back in early August; a statement as true today as it was back then.
The positions on unemployment benefits may be more malleable given current economic conditions. Even left-leaning economists like Jason Furman have called for a compromise. With an unemployment rate of 8.4 percent, “the case for compromising on the $600 per week unemployment insurance is much stronger,” said Furman, who chaired Obama’s Council of Economic Advisors and is currently a professor with Harvard’s Kennedy School of Government. “That might have made sense when the unemployment rate was 15 percent. Coming down to something like President Trump’s number of $400 a week ... I’d like to see Democrats say, ‘At 8.4 percent unemployment, we can do that,’” he continued.
$1,200 Second Stimulus Checks
While Senate Republicans excluded a second stimulus check in the slimmed down Heals Act, they have voiced support for the additional direct payment over the past few months. White House officials as well as Democrats have also been in favor of a second round of checks. Therefore, this may be an easy area for Mnuchin to proffer when he reconvenes with Pelosi. There is still no guarantee that a second stimulus check will materialize and Americans should not bank on receiving another round of direct payments just yet.
State and Local Aid
The most divisive topic so far has been the amount of additional funding for states and cities struggling to cope with hemorrhaging budgets as a result of the coronavirus pandemic. Pelosi alluded to the divide in comments yesterday. “We’ll get back together tomorrow to see how we can find common ground on how we again help state and local government play the role that it does,” she said.
It is unclear what Mnuchin may come back with, but given previous obstinance by Republicans, don’t expect much movement by Mnuchin on this topic just yet.
Will This Negotiating Round Be Any Different?
With precious few days before the House is scheduled to recess, the time to strike a deal is limited. Pelosi mentioned that the September 30 expiration of the airline payroll support program may help nudge the sides to compromise given the importance of the provision to Trump. This may have a hint of truth, but the reality is that the July 31 expiration of the $600 in federal unemployment benefits for close to 30 million Americans wasn’t enough of a driving force to get the two sides to compromise. There is little reason to expect that the expiration of a provision like airline payroll support will truly catalyze negotiations.
Both sides are posturing that they prefer a deal. “Well we’re in a negotiation and hopefully we’ll come to a bipartisan agreement that will remove all doubt that the legislation will pass and be signed by the president,” Pelosi said. “That’s my goal.” It would also help members of Congress on both sides of the political aisle as they return home to face their constituents. “The next 24 to 48 hours are key. This is game time,” Representative Josh Gottheimer, a leader of the Problem Solvers Caucus, said in an interview Tuesday. “Many of us have made it clear we can’t go home before the election and potentially inauguration without helping people, small businesses, local governments.”
Absent a deal, Pelosi may well bring the updated Heroes Act to the floor for a largely symbolic vote that is unlikely to garner much, if any, Republican support. However, at this late stage of the game, millions of Americans need more than symbolism, they need stimulus relief.