by Greg Valliere, AGF Management Ltd.
SO IT’S COME TO THIS: Republicans Donald Trump and Mike Pence apparently wouldn’t be caught dead wearing a mask, and their macho stance has now infected Congress, where Republicans are returning to work next Monday and Democrats are staying at home. Welcome to the politicization of the coronavirus.
DEMOCRATS WERE AGHAST THAT THEIR LEADERS wanted the rank-and-file to return next week, calling it “reckless,” based on recommendations from scientists. They angrily demanded that the House recess should extend well into the spring — and they have prevailed, even though tough guy Mitch McConnell will bring the Senate back in session next Monday. This has policy implications.
McCONNELL WILL FOCUS on confirming judges, of course, but he also wants to get a head-start on his version of the next virus relief bill, which faces a bitter debate. Each party has dramatically different views of what should be in the measure.
THE McCONNELL VERSION: He and at least half of Republicans first want to ascertain how well the previous stimulus bills have performed, then they will agree to another measure with two important caveats:
1. Aid to state and local governments — several hundred billion dollars — must not include any bailouts to pension funds, many of which (Illinois in particular) have been poorly run. Trump agrees with this caveat.
2. There has to be some type of exemption from class action lawsuits filed against
businesses, hospitals, front-line medical workers, etc. Restaurant owners who re-open quickly fear suits if customers become sick. Trump probably will agree to liability waivers, but House Democrats — who are heavily bankrolled by the legal profession — will not agree to sweeping liability protection.
BY THE TIME THE HOUSE COMES BACK TO WASHINGTON, McConnell will have a draft bill and then the horse-trading will begin. A key area of dispute may be infrastructure; Trump and the Democrats want this to be included, while McConnell and GOP deficit hawks want to deal with infrastructure in a separate bill.
STILL ANOTHER GOVERNMENT CHECK to individuals may be included in the next bill, but neither McConnell nor most Democrats favor a big payroll tax cut, which Trump wants. More aid to corporations might be included, but there’s a widespread belief in both parties that aid to small businesses has been a fiasco, so it’s unclear whether they will throw more money at this program.
THE ODDS STILL FAVOR ANOTHER MASSIVE BILL — including the Democrats’ goal of huge aid for state and local governments — because Trump will insist on a deal, based on the premise that he needs a recovering economy and strong markets if he wants a second term; he’s in trouble, his polling numbers continue to slide. Trump will get a bill, but fighting over it will last well into summer.
IF NEITHER HOUSE CAN EVEN AGREE on when to be in Washington, we’re in for a long slog before this next bill passes. The public overwhelmingly favors going slow on re-opening everything, but macho Mitch McConnell doesn’t care; he wants to get the jump in this bitter battle.
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