WASHINGTON—Republicans and Democrats have been in a stalemate since July over the size and scope of the next pandemic stimulus package, and now, Wall Street is concerned that the current fight over confirming a replacement for Justice Ruth Bader Ginsburg will diminish prospects for reaching a deal prior to the November election.
Testifying before the House Financial Services Committee on Sept. 22, Treasury Secretary Steven Mnuchin said that while the economy is recovering, “some industries particularly hard hit by the pandemic require additional relief.”
“I believe a targeted package is still needed, and the administration is ready to reach a bipartisan agreement,” he said.
Instead of passing a comprehensive stimulus, the White House has been pushing for a series of smaller bills that target the most damaged sectors of the economy. It also supports sending another round of $1,200 in individual payments.
White House press secretary Kayleigh McEnany on Sept. 22 accused House Speaker Nancy Pelosi (D-Calif.) of being “unserious” and “engaging in political drama.” During a press conference, McEnany said it’s possible for both sides to reach a deal, “should she become serious in these negotiations.”
Senate Republicans on Sept. 8 introduced a targeted COVID-19 bill, which included a continuation of the $300 per week in enhanced unemployment benefits through Dec. 27, liability protection for businesses, and more money for health care funding, schools, and the Paycheck Protection Program for small businesses.
The White House accused Democrats of blocking the proposal. The bill failed to meet the Senate’s 60-vote threshold needed to break a Democratic filibuster, a tactic used to delay or prevent legislative action.
“So at this point, the onus is really on Speaker Pelosi,” McEnany said. “We encourage her to send one-off bills, perhaps airline funding, or other elements that we could work through the process to get to the American people. It’s always been this president’s priority to do that.”
Democrats rejected a “piecemeal” approach to the relief package and made it clear they wouldn’t pass measures separately.
In May, House Democrats passed the HEROES Act, a more than $3 trillion aid package, which included $600 per week in enhanced unemployment benefits through this year and support for state and local governments. Pelosi last week reiterated that a bill worth less than around $2.2 trillion wouldn’t pass in the House.
About a dozen moderate House Democrats may support a GOP resolution to compel a vote on emergency aid for small businesses, the Hill reported. The centrist Democrats may support a discharge petition that allows unused Paycheck Protection Program (PPP) funds to be spent.
House Majority Leader Steny Hoyer (D-Md.) said on Sept. 23 that moderate Democrats shouldn’t sign a discharge petition, as it would weaken the party’s negotiation position.
“I would hope that no Democrat would sign a discharge petition, which turns over control of the House floor to the other party, the minority party,” he told reporters.
Even though the economic recovery seems to have continued into August and September, analysts are worried that the expansion could lose steam if the policymakers fail to reach a deal on a fiscal package. They’ve already started observing some weaknesses.
“While retail sales continued to climb into August, the 0.6 percent increase that month was the softest gain in three months,” Michael Feroli, chief U.S. economist at JPMorgan, said in a report.
He added that sales data excluding autos, gasoline, and construction materials “declined for the first time since April.”
“In August, manufacturing output also posted its smallest monthly gain since the recovery began. And the downward trend for initial jobless claims filings—a measure related to layoffs—has become very modest in recent months,” he said.
While the legislative stalemate over a relief package continues, Ed Yardeni, a veteran Wall Street strategist, believes another round of large stimulus is unnecessary at this stage.
“I reckon that there is still enough of this government stimulus that will keep the economy growing, probably through September, October, maybe November,” Yardeni told CNBC on Sept 22.
“And hopefully along the way, we’ll see employment continue to pick up, so the economy can grow on its own without necessarily needing another, or at least another big, stimulus package.”