by Greg Valliere, AGF Management Ltd.
TALK ABOUT AN OPENING GAMBIT !! Nancy Pelosi unveiled a massive $3 trillion stimulus bill yesterday — weighing in at 1,815 pages — that included aid to marijuana growers and curbs on President Trump’s ability to fire whistleblowers. House progressives denounced the measure as inadequate.
THE HOUSE WILL PASS THIS BILL within a few days, but it obviously has no chance of enactment. Actually, it gives fodder to conservative deficit hawks who want to slow down — or do virtually nothing — while taking a close look at what the first $3 trillion has accomplished, and how the nationwide end to the lockdown will affect the economy.
BUT THERE’S A CONSENSUS THAT ANOTHER BILL IS NEEDED — just not Pelosi’s mammoth package. There’s widespread agreement in Washington that state and local governments need assistance soon; without it, the chances of bankruptcies and more layoffs will rise because local revenues have dried up, while more money goes to medical personnel and other emergency programs.
WE REITERATE OUR THEME that Donald Trump is the key — he wants another stimulus bill because more emergency spending should help the economy, which could help his re-election prospects. Trump has accepted the premise of another bill; Congress is just arguing over the details.
THE CENTERPIECE OF PELOSI’S BILL is $1 trillion in payments to state and local governments. Our sense is that Republicans and Trump could agree to about half that amount — as long as no money goes to propping up poorly run pension funds. More money for hospitals and testing is virtually certain.
OTHER ELEMENTS OF PELOSI’S measure include direct payments of $1,200 to individuals, $2,400 to couples and $1,200 to dependents (up to three) while continuing the $600 unemployment checks (which many Republicans believe is a disincentive to job-seeking). In a proposal designed to appeal to big-state lawmakers, Pelosi would reverse curbs on the state and local tax break, which has no chance but will enliven campaigns in the Northeast and West Coast.
REPUBLICANS CERTAINLY WILL PRESS for liability protection, which could wind up in a final bill, and they may re-visit aid to small businesses, with strict restrictions on who’s eligible. Trump’s push for a payroll tax cut has meager support on Capitol Hill, even from Republicans, but some type of tax break for business meals and entertainment could prevail in the final measure.
BOTTOM LINE: Another terrible jobs report next month, with unemployment surging to nearly 20%, would force the Republicans to act; even Mitch McConnell has been grudgingly conceding that another bill may be necessary.
THE FINAL PRODUCT won’t cost $3 trillion — perhaps it will be half that amount — and it may not come until July, but still more stimulus from Washington looks likely.
Pelosi’s bill is simply a campaign document, a starting point for negotiations that
won’t get serious until June.
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This post was first published at the AGF Perspectives Blog.
