While it has been debated for months, the next phase of economic relief is still weeks away. But now there is general agreement that something must be done, something that was not always the case. However, its appearance remains highly debatable within the Republican conference, and time is running out.
Republicans have focused on the last week of July to reach an agreement on the next round of stimulus. Senate Majority Leader Mitch McConnell has been steadfast on that schedule for weeks and the administration is on board. An extremely important point: that timeline meets the most important stimulus cliff there is: the improved unemployment insurance implemented by the CARES Act ends on July 31.
The value of the cliff.
The size
McConnell has said that the House proposal is not an initiative, and that any Republican proposal would be significantly less than $ 3 trillion. Privately, McConnell has told the White House that the next phase should be around or below the $ 1 trillion mark, people familiar with the discussions tell me. It hasn’t budged from that, but there are some within the White House, aware of the political repercussions and the depth of the problems in the economy, who are pushing for more.
The mermaid
If Congress does not enact another stimulus measure, up to $ 1 trillion in spending will disappear from the economy in the third quarter. For an economy kept afloat by billions in federal spending in the past three months, that such assistance simply disappears, as the country continues to struggle with the pandemic, could be devastating. It would also be, according to the Republican senator I spoke with on Tuesday, “political malpractice.”
Behind closed doors
To underscore how serious Republicans are on that timeline, and how things remain in the early stage, Treasury Secretary Steven Mnuchin attended the Senate GOP lunch behind closed doors on Tuesday and the discussions were “very, very important “according to a GOP senator. It provided an update on the economy and status of the $ 2.2 trillion CARES Act, but beyond that, not much. There was no talk of state and local funding, or a new round of stimulus checks or other central debates in the next round. It was not intended to be the start of serious discussions about the next phase, it was simply an update from the Treasury secretary.
“We will take our time and make sure we are reflective,” Mnuchin told reporters about the current situation. “Whatever we do, it will be much more specific.”
The urgency
I asked a Democratic senator what it would be that would ultimately bring Republicans to the table in the next stimulus package, particularly given that Democrats have had theirs on the table, and across the House, for weeks. The answer? “Despair. At some point they will have no choice when you look at the scale of the economic devastation.”
That may be true, but it is not yet. Several people in the Republican lunch room told me that several Republican senators stood up to emphasize caution about the size and scale of the next package. There is simply no widespread urgency to move another stimulus package into the conference at this time. The comfort level with the end of July timeline extends almost across the board, say lawmakers and aides. That’s something with an unemployment rate above 13%.
Keep in mind
There remains a very real divide within the conference on continuing large-scale spending. That divide is reinforced by a series of influential outside conservative groups that pressure Republicans not to spend more. It makes no sense that it will sink the next effort: Among political and political needs, lawmakers and attendees agree that more needs to be done. But the chances that the next round will have the unanimous support of the Republican Party is extremely unlikely.
So what is really going on?
Republican chairpersons of the key committees that drafted the first emergency aid package said each of their employees has focused on implementing that law, identifying potential holes or problems with it, and analyzing what else can be done or needed. beyond that.
“We don’t have specific proposals or language yet,” Senate Banking Committee Chairman Mike Crapo, who is central to several components of the upcoming package, told me. “We have many areas in which we believe we may need to make some additional adjustments, make additional significant changes, or add new” provisions. Crapo’s point, which coincided with that of the other presidents, is that the process is still at the stage of gathering information and the initial proposal.
Key policy issues
This is not a complete list, but it reflects some of the main issues that will need to be addressed in the coming weeks:
Unemployment insurance
There is a significant divide within the Republican conference on how to tackle the improved $ 600 increase to unemployment insurance. There is a widespread belief among Republicans that $ 600 was too generous and had a negative impact on the job market.
“Unfortunately, we made a mistake and encouraged some people not to go to work,” Senator John Cornyn, R-Texas, told me.
But whether to reduce it, or try to eliminate it entirely, or replace it with a job voucher (which has become a popular proposition) is still hotly debated. One thing it is not: Democrats, who extended the enhanced benefit to the end of the year in their bill, see this as a red line problem. How this is resolved is, in the words of a Democratic aide, “it is going to be the ugliest part of this process.”
Direct payments
Mnuchin has made it clear that there are more direct payments (or stimulus controls) on the table, and told Republicans behind closed doors on Tuesday that no problem has garnered a more positive response across the country than stimulus controls, according to one person in the room. That, more than anything else, is why Trump himself is open to the idea, according to a person involved in the early stages of White House discussions. But there is no unified support in the White House for a second round of controls, nor is there unified support within the Senate GOP.
“I don’t think it’s a good idea right now,” Senator Pat Toomey of Pennsylvania told me Tuesday.
The reality, according to attendees, is that there will likely be some form of direct payments on any Senate GOP proposal, but they will be reduced and targeted at low-income individuals.
State and local financing
This is another problem with a fairly significant divide within the Republican conference. Many remain wary of giving funds to Democratic governors with pre-coronavirus budget problems. But the coalition of groups pushing for a significant infusion of cash for states and localities is powerful and successful. Add Federal Reserve Chairman Jerome Powell to the list of (cautious) advocates of state and local assistance, and it seems clear that there will be hundreds of billions of dollars for states and localities in any upcoming stimulus bill. But the structure of those funds, and how exactly they are dispersed, remain very open questions.
Small business
Liability protections
This remains a red line for Republicans to support any new proposal. Cornyn and McConnell are drafting their proposal, and Cornyn told me Tuesday that he hoped to launch it in July. Democrats have big problems with a broad idea, so threading the needle here will be extremely important.
Infrastructure
There will be no large-scale infrastructure package including this bill. Period. Despite the rumors on Wall Street and the lingering talk that an infrastructure deal in the $ 1 trillion range may happen here, that’s simply not in the discussion. Absolutely.
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