President Trump ended the negotiations this week but intends to re-start negotiations after the elections. House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steve Mnuchin, the two lead negotiators, have made some headway on a compromise bill over the past two weeks, but they are still $500 billion apart on a final price tag. The level of funding for state and local governments (and what the funding can be used for), the scope of liability protections for businesses and schools, and non-COVID-19 related spending remain the key areas of disagreement.
We don’t expect a final bill to be crafted before the elections, but dynamics could change if the markets react badly to the lack of further stimulus or if Trump or Pelosi feel greater political pressure to cut a deal. As of today, there is insufficient urgency on both sides to come to an agreement.
Stimulus Light Bills
House and Senate members and various interest groups will continue to advocate for passing key parts of the proposed stimulus legislation individually. In particular, there is interest in advancing additional small business loans, direct assistance to the airline industry and its employees, and a second round of tax rebate checks for eligible individuals as standalone measures. All three funding requests have broad, bipartisan support. While separating these individual provisions from the larger stimulus bill might seem reasonable, it makes little political sense to some political leaders who fear that will sap support for the broader effort.
There has been a lot of discussion this week about providing $25 billion – $29 billion to support airline industry employees. Congress is not scheduled to be in session to act on it over the next week or two, though votes could be called if an agreement is reached. Both Pelosi and Mnuchin have responded favorably to a standalone bill for airline employees, but they need to finalize this today or tomorrow if a vote can occur next week. Immediate action is required to avert over 30,000 employees being furloughed by the largest airline carriers.
Read more in Washington Weekly, published 9 Oct. 2020.