The White House is “deep in discussions” with congressional leaders on a fourth pandemic stimulus plan — a possible $2 trillion spending spree the administration believes will help push unemployment below 10 percent and bolster President Trump’s chance in the 2020 election, according to people with direct knowledge.
The Trump administration is hammering out the nuts and bolts of the plan with key congressional leaders, so the exact details haven't been finalized, these people add. But there is enough agreement on key issues with Democrats led by House Speaker Nancy Pelosi that White House officials now believe they can pass the measure before Congress breaks for its August recess, these people add.
The stimulus plan could include payroll tax cuts advocated by the White House and its economic team led by economic adviser Larry Kudlow and Treasury Secretary Steven Mnuchin, and aid to "blue" or Democrat-controlled states such as Illinois, California and New York, which had economies and budgets decimated by the spread of the coronavirus and the subsequent business shutdowns that are only now abating. Other items likely to be in the bill will be significant infrastructure spending, an extension of unemployment benefits, and liability protection, which prevents businesses from being hit with lawsuits as they reopen during a possible second wave of the pandemic.
Republican congressional sources say Senate Majority Leader Mitch McConnell would trade aid to blue states for the liability protection aspect of the bill. Republicans are also eying the next stimulus plan — the fourth over a five-month period — as possibly the last one since it would bring the total amount of government spending to bolster the economy amid the pandemic lockdowns to well over $10 trillion when you add in various programs by the Federal Reserve to stop the economic downturn from turning into another Great Depression.
Timing is key, Trump administration officials say. Getting unemployment below double digits is critical to Trump’s reelection as the presumed Democratic presidential nominee Joe Biden leads in most polls, people with direct knowledge of the matter tell FOX Business. Some Trump officials believe the new stimulus will spur an already improving economy to reach the below-10 percent unemployment target, but they are also keenly aware the last jobs report before the election will be released Oct. 2, which means money must start flowing in August since the unemployment survey will be completed on Sept. 12.
Unemployment remains well above its 3.5 percent pre-pandemic lows, though the economic numbers are improving — a key selling point Trump will use with voters as the election nears. Last week the economy gained 2.5 million jobs and unemployment for May fell to 13.3 percent from 14.7 percent in April, when the shutdowns were in full force. On Tuesday, another key economic measure, retail sales, showed an 18 percent increase in May.
A White House spokesman had no comment. Press officials for Pelosi and McConnell had no comment.
Some private economists are predicting the economy will continue to show signs of strength as the various stimulus programs spread out to businesses and individuals and as businesses continue to reopen, thus boosting the president’s reelection effort. As FOX Business reported, Wells Fargo chief economist Jay Bryson told clients on Monday that the recession likely ended in April or May and characterized it as one of the shortest and deepest on record, according to a person who heard Bryson speak. Bryson predicted that unemployment would fall to 9 percent by the end of the year and 6 percent by the end of 2021 (a Wells Fargo spokeswoman had no comment).
White House and congressional Republicans want to build on those numbers in the new stimulus bill. At the top of their stimulus wish list: Additional tax cuts, liability protection for businesses opening up after the pandemic, and incentives for people to return to work rather than remaining on unemployment insurance. Democrats are looking for an extension of unemployment benefits, and direct state aid to appease one of the party's biggest constituencies: state and local government employee unions.
There will be some extension of federal unemployment benefits, but the focus for Republicans will be on incentivizing people to get back to work. Texas Congressman and leader of the House Ways and Means Committee Kevin Brady has introduced legislation with a so-called back-to-work bonus for people who get off unemployment and return to their jobs. That bill will likely be absorbed into the larger stimulus.
Many big states controlled by Democrats, such as Andrew Cuomo, the governor of New York, Gavin Newson of California, and J.B. Pirtzker of Illinois, are facing large budget gaps and massively underfunded pension liabilities, so in order to avoid cuts to the government workforce, they are asking Pelosi to make state aid a top priority in the next stimulus plan. It's unclear how McConnell and the Republicans will view a state bailout package, but they might compromise and approve the state aid for the liability protection, according to a person with direct knowledge of McConnell's thinking.