Pittsburgh, Pennsylvania 2020-10-17 09:11:48 –
(CBSNewYork) – Discussions on a possible second stimulus package continued last week between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin. And the House and the White House seem to be moving towards some kind of middle ground. This middle ground, however, is still a long way from anything the Senate could approve of.
How far exactly? If Senate Majority Leader Mitch McConnell is to be believed, well over a trillion dollars.
Pelosi and Mnuchin spoke at length on Thursday afternoon. And during these discussions, a major obstacle was overcome. According to a spokesperson for Pelosi, both sides now appear willing to include a national strategic testing plan and not complain about the specific language.
President and Secretary Mnuchin spoke at 3:30 p.m. today for 1 h 22 min. The secretary said he would accept Democrats’ language for a national strategic test plan with “minor” changes and that language would be shared tomorrow. The President looks forward to considering it. (1/4)
– Drew Hammill (@Drew_Hammill) October 15, 2020
Both parties already agree on the need for another round of stimulus checks of up to $ 1,200. Additional federal funding for unemployment insurance, on top of what states already provide, are also in the mix. The CARES Act included a weekly supplement of $ 600. A second stimulus package would likely include another payment in the range of $ 400 to $ 600 as well.
There is still some distance between what House Democrats want to spend and what the White House has officially proposed. The House passed a $ 2.2 trillion package a few weeks ago. The White House offered $ 1.8 trillion last weekend. President Donald Trump has also made it clear that he is prepared to spend even more, so the magnitude of the $ 400 billion gap is unclear.
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As the president said in a town hall Thursday night, “We are negotiating. I am ready to sign a great beautiful stimulus. I want it to be big, I want it to be bold. Nancy Pelosi and I, if we take something, the Republicans will take it.
It was probably news for McConnell. Much larger than the $ 400 billion gap is the roughly $ 1.5 trillion gap between the total cost of a potential Pelosi-Mnuchin deal and what Senate Republicans would be willing to spend.
The Senate is set to vote next Monday on a proposal for additional wage assistance totaling around $ 500 billion. McConnell last month called the $ 2 trillion price tag “bizarre.” He has also stated on several occasions that he will not even present a full package. (Pelosi, for her part, was also not interested in stand-alone measures.) But yesterday McConnell told reporters that “we are in talks with the Treasury secretary and the speaker on a higher amount. And President Trump seems poised to make the majority leader understand the need for a broader stimulus package.
The Speaker also raised Leader McConnell’s comments today about his refusal to submit a full package to the Senate. The secretary said the president would weigh in with Chief McConnell if a deal was reached. (3/4)
– Drew Hammill (@Drew_Hammill) October 15, 2020
The state of the stimulus talks therefore remains fluid, even though time is running out to reach an agreement before election day. However, the need for a second round of stimulus is becoming increasingly urgent.
Job growth is slowing and layoffs are increasing. Last week 898,000 people applied for unemployment benefits for the first time, the highest level of new jobless claims in two months. Another 373,000 who are not eligible for traditional unemployment have requested assistance in the event of an unemployment pandemic.
The first round of stimulus checks goes back months for most people. And now unemployment aid is starting to run out for those who lost their jobs at the start of the pandemic. It will only continue. The additional weekly CARES Act benefit of $ 600 ended in July. And in the weeks and months to come, whatever unemployment benefits are provided by states, they will also start to run out.
>> READ: Stimulus Package Update: What Happens To The Economy Without A Second Stimulus?
“So we hear a lot about the additional $ 600,” notes Yeva Nersisyan, associate professor of economics at Franklin & Marshall College. “Are people going to get it, or is Congress going to get it or not?” But a more important question is whether we will extend the period during which people can collect unemployment. It depends on the state. From 13 to 26 weeks, this is the period during which the unemployed can receive unemployment. And for a lot of them, I think by the end of the year it’s going to run out. For those who don’t, maybe early next spring, that’s when he’ll run out.
Currently 25 million people, or more than 15 per cent of the working population, receive some kind of unemployment benefit. The reduction in income for a large segment of consumers will surely affect the entire economy. “Evictions and seizures seem inevitable, with no other incentive,” Nersisyan says. “Because if people have lost their jobs and don’t have unemployment benefits, how are they going to pay their rent and their mortgage?”
“We would also see a lot more closures of small businesses, which is very unfortunate,” Nersisyan continues.
David Joy, chief market strategist for Ameriprise Financial, agrees. “I think we’re going to need that extra fiscal stimulus bridge because a lot of the original stimulus is running out. And that means unemployment benefits go down, mortgage abstention and rents go down. So we still need that bridge to make sure that the economic recovery impacts all members of the economy and puts people back to work. We need a healthy economy in all of society. “
The economy is stagnating. “We are not yet fully convinced that the economy has gained enough strength to support the recovery we have experienced over the past three months and more,” says Joy. “And that’s why you see a number of interested observers calling for yet another round of stimulus. You see the Federal Reserve calling it, you see the private sector calling it. And so there is always the feeling that the economy continues to need a little more help. “
Will Washington answer the call for more stimulus?