by Greg Valliere, AGF Management Ltd.
COULD WE SEE A BIDDING WAR over which party can offer the most generous stimulus checks by early August? That’s possible, in light of President Trump’s comments yesterday that he wants to send out checks that would exceed the previous $1,200 in payments that were mailed out in the spring.
WITH THE COVID-19 VIRUS BACK with a vengeance, White House officials worry that the economy could falter later this summer. That could be disastrous for Trump, who’s counting on a strong economy to boost his shaky re-election prospects.
SO TRUMP TOLD FOX BUSINESS NEWS yesterday that he supports sending another round of stimulus checks to individuals. “I actually support sending larger numbers than the Democrats,” he said. The stalled Nancy Pelosi bill, which costs $3 trillion, would send checks of $1,200 to individuals and up to $6,000 for large families.
CONGRESSIONAL REPUBLICANS are leery of passing a massive new package, which could send this year’s deficit to over $4 trillion. And there’s widespread opposition to extending the $600 weekly unemployment benefit, which is viewed as a disincentive to getting people back to work. Trump opposes that extension but favors some type of bonus to people who return to work, along with the stimulus checks and, possibly, new payroll tax cuts.
MOMENTUM HAS BEEN SLOW on moving another stimulus bill. Republicans want to see how the last bill worked (not all of the money has been spent), and they will take a careful look at this morning’s unemployment report. They certainly won’t support anything as massive as the $3 trillion House bill, which included everything but the kitchen sink, including subsidies for marijuana growers.
THE NEXT STIMULUS BILL probably will be the last one, so if the train is leaving the station, everyone will try to get their favorite provisions attached — liability
reform, tax incentives for business meals, infrastructure spending, state and local
government aid, etc. The bazaar will be open for wheeling and dealing when Congress returns in two weeks.
IT’S POSSIBLE THAT THIS BILL could sink from from its own weight, but we think a $1 trillion-plus package will win enactment just before the August recess begins, largely because Trump will push hard for anything that could help his election prospects — and fat checks to individuals surely could help him this fall.
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IN THE MEANTIME, the one-upmanship will continue over imposing new sanctions on China. The House and Senate have passed sanctions on Chinese officials involved with human rights abuses against Uighur Muslims and protesters in Hong Kong. The measure heads to President Trump’s desk today.
SECRETARY OF STATE MIKE POMPEO upped the stakes yesterday with a thinly-veiled threat to U.S. companies not to rely on shipments from Chinese firms tied to crackdowns on human rights. In a memo from the Departments of State, Commerce, Treasury and Homeland Security, the U.S. made it clear that the deep freeze between the two countries is far from over. More anti-China legislation is likely to move this fall.
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