Pressure has been mounting on the US government to enact a massive aid package in light of the coronavirus pandemic, but the Republicans’ proposal was killed in the Senate due to partisan squabbling.
Donald Trump has long framed economic growth as his key accomplishment as president, but the new coronavirus looks set to plunge the economy into a recession. It has already wiped all gains the stock market had made since he took office and is now threatening to cause an unemployment rate unseen since the Great Depression.
With the financial security of millions of Americans (and his own re-election) at stake, Trump is interested in pushing through an economic relief package as soon as possible. That hasn’t happened so far because the Democrats blocked two procedural votes on Sunday and Monday.
The Senate battle
The Dems claimed that the GOP’s $1.8-trillion stimulus package, which would provide $1,200 in direct payments to millions of Americans, lacks congressional oversight and proposes insufficient assistance to hospitals.
Republicans have blasted the Democrats for filibustering the bill, describing it as “mindless obstruction.” Senate Majority Leader Mitch McConnell warned it the Senate might not be able to have another vote until Friday or Saturday, while time is running out for many Americans who have lost their income as a result of businesses laying off workers or shutting down.
“Democrats playing politics with an important stimulus bill is unconscionable,” says Michael Springmann, an attorney who served as a diplomat in the Reagan and former Bush administrations. “It is just a continuation of their failed efforts to oust Trump through impeachment.”
“It is Democrat governors who have shut down California, New York and Illinois—with no provision for helping those thrown out of work by closing businesses for fear of the virus.”
Springmann suggests that the Democrats’ plan to “portray Trump as cuddling big business while leaving the working man out in the cold,” in the hope that this will “resonate in the November elections”.
House Speaker Nancy Pelosi has rolled out the Democrats’ own $2.5 trillion counterproposal, which increases the direct payments offered to individuals to $1,500 and offers some measures that were not included in the Republican’s wish list, such as student loan forgiveness and new carbon offset guidelines for airlines.
“The Senate Republicans’ bill, as presented, put corporations first, not workers and families,” she said in a statement. House Republicans have already criticised her own proposal as a “socialist wish list of policies that have nothing to do with the public health and economic emergency.”
Treasury Secretary Steven Mnuchin and Senate Minority Leader Chuck Schumer are now said to be “very close” to a compromise that would be closer to the Republicans’ vision rather than Pelosi’s one. It would notably include strict oversight over the Treasury’s yet-obscure Exchange Stabilisation Fund, which is designed to lend money to businesses, and increase federal funding for hospitals. The new agreement is expected today in the morning, but the timeframe of a vote on it is still unclear.
A sloppy political system
The chaos surrounding the emergency stimulus package is not at all surprising, believes Kevin Down, professor of finance and economics at Durham University Business School.
“The US political system does not function well in an emergency, except when there is consensus and the last time that happened was in the aftermath of the Japanese attack on Pearl Harbor in 1941,” he says.
Prof Down notes that there are two problems with this system as evident from the ongoing chaos: “The first is the ‘holdout’ problem, when a small group holds out in the hope of getting concessions of some sort.”
“The second problem is the way in which private interest groups use these opportunities to fleece the taxpayer, putting pressure on Congress people to hold out on their behalf. An egregious example is Boeing, which by rights should go into bankruptcy, but will likely now get a massive handout from the US taxpayer. But all the big corporate interests will be sticking their noses in the public trough. Never let a good crisis go to waste.”
However damaging the crisis might be to the economy, he adds, it is better to “get the package right” rather than rush it out.
Businesses reflect on the crisis
Some businesses appear to share this take. Mark Aselstine, founder of the SF Bay Area-based wine club Uncorked Ventures, says that the Senate bill in its current version “won’t do much” to help his business.
“People are literally just trying to get by, those without the same concerns, see their wealth getting destroyed in the markets,” he laments.
“As far as the healthcare provisions, I can’t speak to specifics simply because they’re changing in real time. But I absolutely think that getting this right, including healthcare options for the coronavirus will be worth waiting an extra two days.”
“The results of this pandemic on my business are yet to be determined. If it lasts until June, I’ll be fine. Now if it takes 12 months? That’s a lot tougher.”
Paul Port, general manager of the Florida-based door service provider Access Experts 24/7, says the business has decreased by over 60 per cent due to the pandemic.
Although the Senate bill proposes loan guarantees for impacted companies, Port doesn’t believe that loan relief would be “fair” in this situation. His proposal: to move up all the due dates for the outstanding bill payments (such as loan repayments and rent payments) to a period of at least 30 days.
The example of Geoff Harries, the founder of America’s first brewpub Buffalo Bills in Hayward, California, shows that some American businesses are struggling not because of the pandemic, or at least not in the first place because of it.
A friend of Harries, who asked to remain anonymous, says Harries “was scrambling to make his payroll and his mortgage payment” because a $1-million-plus expansion project had “drained his brew pub of cash due to over charges by the City of Hayward”.
“The entire project wasn’t huge but the City, now controlled by Democrats, just has gone off the hook with charges like this. I pay attention to things like this because entrepreneurs can’t start business without huge problems from the Cities who are not business friendly,” the friend said.
A direct payment of $1,200 per person “won’t go far,” they added. “Less regulation would be better to instigate in this business climate and let the marketplace determine success.”