with Brent D. Griffiths
There is something for every House Democrat to oppose in the massive economic relief package House Speaker Nancy Pelosi (D-Calif.) just rolled out. Republicans are already pronouncing it dead on arrival: House Minority Leader Kevin McCarthy (R-Calif.) called it a “Pelosi-led pipe dream that stands no chance of becoming law.”
Team Pelosi needs to muscle it through the House anyway to keep the heat on Senate Republicans who say they feel no rush to provide new rescue funding.
Democrats pushing new spending are getting some unexpected momentum from Federal Reserve officials.
Fed officials underlined the stakes Tuesday as they delivered warnings that the economy will suffer an even more severe hit if the pandemic shutdowns persist without additional help from Washington.
“There may well need to be more fiscal stimulus in order to boost economic growth so that we can grind down that unemployment and get closer to full employment,” Dallas Federal Reserve Bank President Robert Kaplan told CNN International. He was one of several Fed policymakers to warn Tuesday that the country is in for a long, uneven slog toward economic recovery, with heavy downside risks remaining.
On Capitol Hill, the new Democratic rescue package drew immediate pushback from within Pelosi’s own ranks.
Congressional Progressive Caucus co-chairs Pramila Jayapal (D-Wash.) and Mark Pocan (D-Wis.) are lobbying to delay the bill’s consideration because it doesn’t include their request for a federal paycheck guarantee program.
And leadership aides are nervous that the 1,800-page measure’s $3 trillion price tag — doubling what Congress has spent backstopping the economy — will spook moderate Democrats wary of the surging deficit.
Senate Republicans dismissed the package before reviewing it. Senate Majority Leader Mitch McConnell (R-Ky.) called it “a big laundry list of pet priorities.” And Lindsey Graham (R-S.C.), asked whether the chamber needs to pass a bill before Memorial Day, replied, “Oh, God, no,” per The Post’s Erica Werner.
Pelosi nevertheless is pushing for a Friday vote. “It’s going to be a bear, but it’s almost too big to fail,” one top Democratic aide tells me.
Central bank officials agree Congress should hurry up and deliver more relief.
In addition to Kaplan, Minneapolis Fed President Neel Kashkari, in a virtual event, said the U.S. government “has the ability to raise the funds to support the American people.” And he warned the country is in for an “uneven crawling back” to a healed economy.
Cleveland Fed President Loretta Mester said Tuesday the shape of the recovery depends on a number of factors, including “a solid enough bridge of economic relief and support.” She called on Congress to do more in a Friday radio interview, arguing “states and the local governments are definitely going to need more help, and I think the federal government should be thinking about the best way to do that.” The House Democratic bill centers on directing $1 trillion to state, local, territorial and tribal governments, per Erica.
St. Louis President James Bullard painted the grimmest picture, warning in a speech that an extended shutdown could bring "business failures on a grand scale and you will be taking risks that you would go into depression.” He said the threat argues for starting to lift restrictions, per Bloomberg. “We cannot hit the pause button for very long in major economies around the world, certainly not in the U.S. There’s a 90-day limit or shelf life on this policy, maybe 120 days shelf life.”
Federal Reserve Chair Jerome H. Powell has made the case himself for Congress to spend more to keep businesses and workers afloat through the shutdown, as we noted here yesterday, and could reemphasize the point this morning at a 9 a.m. virtual event hosted by the Peterson Institute for International Economics.
The House Democratic package, on top of the aid to state and local governments, devotes a lot more money to individuals.
Among the its larger items, it includes:
- $200 billion to hazard pay for essential workers;
- Another round of direct payments to Americans of up to $6,000 per household;
- $175 billion in rent, mortgage and utility assistance, and a 15 percent bump in food stamp benefits;
- An extension through January of the $600 extra in weekly unemployment insurance that now runs through July;
- A restoration of the deduction for state and local taxes, benefiting higher-income earners in blue states;
- And $75 billion for coronavirus test and contact tracing.
Goldman Sachs economists predict that Congress will end up approving half the amount of relief House Democrats are pitching in the bill, but that it will take three years to do so. That includes $550 billion they expect to be approved this year. They wrote in a Monday night note, “without an obvious forcing event this month, we do not expect Congress to enact the next round of fiscal measures until late June."
The reopening debate
Americans have grown more pessimistic about when large gatherings will return.
A new poll finds that change has occurred in just a few weeks: “Americans are curbing their expectations about when it will be safe for gatherings of 10 or more people, with about 2 in 3 adults now saying it will not be until July or later before those events can happen, according to a Washington Post-University of Maryland poll,” Dan Balz and Scott Clement report.
“Fully half of all Americans say in the poll that they think it will not be safe for gatherings of 10 or more until midsummer, including nearly one-quarter who say it will not be safe until 2021 or later. Just about 1 in 5 say they believe such gatherings are safe now or will be by the end of this month. The timeline has shifted substantially in just the past few weeks, as the number of covid-19 cases and deaths continue to rise. In a similar poll in mid-April, 51 percent of all Americans said they thought gatherings of 10 or more people would be safe by the end of June. That has fallen to 32 percent in the latest survey, with 66 percent saying it will take longer for gatherings to be safe.”
Latest on the federal response
PPP continues to trip up small businesses.
The guidance has been a mess for both those aiming to secure a loan and others who have but don't understand the forgiveness terms. “Around three-quarters of the $670 billion loan program has been allotted, and some business owners approved for loans are wading through a thicket of rule changes to determine whether they still qualify,” the Wall Street Journal's Ruth Simon and Peter Rudegeair report.
“The Treasury Department and the Small Business Administration have issued nine ‘interim final rules’ and more than 40 pieces of guidance in the form of ‘frequently asked questions’ since the program’s April rollout. The most recent updates came last week, after more than four million loans totaling over $500 billion had been approved. Treasury Secretary Steven Mnuchin said Monday that the government was looking at additional technical fixes to the program. Small businesses and lenders are still awaiting guidance that will be used to determine whether and how loans are forgiven.”
The Fed outlined terms for its lending program. And the central bank promised full disclosure on PPP recipients: “The Federal Reserve outlined how it will make loans through another of its lending programs and said Tuesday that it will provide detailed monthly information about who is getting the funds. As part of its Term Asset-Backed Loan Facility, a financial crisis-era program aimed at the asset-backed securities market, the Fed said it will issue up to $100 billion in three-year loans,” CNBC's Jeff Cox reports.
The Fed said it will provide monthly disclosures on the program and the Paycheck Protection Program. Per Jeff, "The disclosures will include the name of participants, amounts borrowed, interest rates charged and value of pledged collateral. The information also will include costs, revenues and fees for the programs.”
Student loan borrowers' wages are still being garnished: “The paychecks of about 54,000 people are still being shorted to repay past-due student loans, despite a federal moratorium that has been in place for six weeks, according to court documents filed late Monday by the Trump administration,” Danielle Douglas-Gabriel reports.
“But while consumer advocates view the revelation as an indictment of the administration’s failings, the Education Department says it shows the federal agency is doing everything within its power to help borrowers. The Trump administration in March imposed a 60-day moratorium on the collection of defaulted student loans by the federal government during the novel coronavirus pandemic, which Congress codified in the last stimulus package and extended through Sept. 30.”
Has coronavirus broken the backbone of the U.S. economy?
The pandemic could change the economy and small businesses forever: “The White House and Congress have made saving small businesses a linchpin of the financial rescue, even passing a second stimulus for them late last month. But already, economists project that more than 100,000 small businesses have shut permanently since the pandemic escalated in March, according to a study by researchers at the University of Illinois, Harvard Business School, Harvard University and the University of Chicago,” Heather Long reports.
“Analysts warn this is only the beginning of the worst wave of small-business bankruptcies and closures since the Great Depression. It’s simply not possible for small businesses to survive with no income coming in for weeks followed by reopening at half capacity, many owners say. The result is likely to further shift the balance of power — and jobs — toward big businesses that have a better chance of surviving the uncertain year ahead by borrowing money or drawing on large cash reserves. Emergency actions by the Federal Reserve, backed by the Treasury, have made borrowing money almost free for large companies.”
Health experts cautioned lawmakers about hastily reopening the country.
States could be in trouble if they move too quickly, they said: “Anthony S. Fauci, the nation’s top infectious disease expert, predicted Americans would experience ‘suffering and death that could be avoided,’ as well as additional economic damage, if states ignore federal guidelines, including delaying reopening of most businesses until they see dramatic declines in cases,” Yasmeen Abutaleb, Anne Gearan and John Wagner report.
“Most states already are ignoring at least some of the federal guidelines. Pennsylvania, where Trump announced he will travel this week for an event meant to cheer on economic revitalization, is among states Trump says are moving too slowly … In his first congressional testimony since Trump declared the coronavirus pandemic a national emergency on March 13, Fauci bluntly laid out the dangers of ignoring federal reopening guidelines. Rather than the small ‘flare-ups’ that Trump said last week might be an inevitable cost of reopening, Fauci warned that the virus could again spread largely unimpeded.”
More from in the U.S.:
- At least 1,363,000 cases have been reported; 81,663 people have died.
- California state universities will be mostly closed this fall: “California State University, the largest four-year public university system in the country, announced Tuesday it intends to go without in-person instruction for most classes in the fall term, a major signal that the pandemic will keep some college campuses largely empty for months to come,” Nick Anderson and Susan Svrluga report.
- Armed militia helped a Michigan barbershop reopen: “Armed members of the Michigan Home Guard stood outside Karl Manke's barber shop, ready to blockade the door if police arrived … The protest and others like it — including two last month that included demonstrators with swastikas, Confederate flags and some with long guns inside the capitol — have alarmed lawmakers on both sides of the aisle.,” Moriah Balingit reports from Owosso, Mich.
Trump backs Musk in reopening of Tesla factory.
Tesla's CEO has tangled with local health officials in California: “Tesla’s Elon Musk is in a showdown with California officials over the reopening of a major factory here, one of the most prominent examples of a powerful business defying health orders that require all but essential activities to cease,” Faiz Siddiqui and Josh Dawsey report.
“Musk continued to ramp up production Tuesday at the company’s Fremont facilities, where Tesla produces its electric vehicles. Workers’ cars filled up the company’s parking lot, with no signs of any enforcement actions by Alameda County officials, who sent a letter Monday telling the company to cease production. Musk drew public support from the president on Tuesday. ‘California should let Tesla & @elonmusk open the plant, NOW,’ [Trump] tweeted. ‘It can be done Fast & Safely!’ Musk tweeted back, ‘Thank you!’”
More from the corporate front:
- Amazon and Google help states as unemployment claims surge: “States including Rhode Island, Kansas and New York are turning to tech companies including Amazon Web Services and Google to handle an unprecedented rise in unemployment claims,” WSJ's Sarah Chaney reports. (Amazon CEO Jeff Bezos owns The Washington Post.)
- States attorneys general ask Amazon for data on worker infections: “ A group of 13 U.S. attorneys general on Tuesday asked Amazon.com Inc to provide data on coronavirus-related deaths and infections among its workforce, along with evidence of the company’s compliance with paid sick leave laws,” Reuters's Krystal Hu and Nandita Bose report.
- Boeing 737 Max cancellations mount: Boeing said “that customers canceled 108 more orders for 737 Max jetliners in April, further whittling down the company’s backlog of planes,” CNBC's Leslie Josephs reports.
- Big food brands are back: “Packaged grocery brands that had run up against Americans’ growing preference for fresh and private-label foods are seeing a resurgence as iconic brands like Goldfish, Oreos, Campbell Soup and Doritos fill the pantries of homebound consumers in search of small pleasures,” Thomas Heath reports.
Around the world:
- Some countries are reimposing lockdowns after reopening: “Such a resurgence of cases had been widely predicted by experts, but these increasing numbers come as a sobering reminder of the challenges ahead …,” Liz Sly and Loveday Morris report from Beirut. “Lebanon on Tuesday became the latest country to reimpose restrictions after experiencing a surge of infections, almost exactly two weeks after it appeared to have contained the spread of the virus and began easing up.”
- Europe encounters trouble amid trying to reopen borders: “Some European countries want to move faster than their neighbors do, many want to welcome tourists this summer and most need workers who commute to jobs across borders. How Europe handles the challenge could offer a model for other continents and set the pace for its own economic recovery,” WSJ's Bojan Pancevski and Daniel Michaels report.
- China stalls search into virus' origins: “The lack of transparency and international involvement in the search has left room for speculation and blame. It also troubles health experts and officials who say finding the source is key to preventing the same virus from jumping again from animal to human—potentially unleashing another wave of disease,” WSJ's Jeremy Page and Natasha Khan report.
Supreme Court looks headed toward a mixed outcome over Trump's tax returns and financial records.
The court heard oral arguments in three cases: “Several justices suggested there might be more work for lower courts to do, which could delay any turnover of the documents being sought by congressional Democrats and Manhattan’s district attorney until after November’s election,” Robert Barnes and Ann E. Marimow report.
“In general, the justices seemed more troubled by subpoenas issued by three House committees than with the ones coming from New York County District Attorney Cyrus R. Vance Jr. None indicated they agreed with the assertion from Trump’s private lawyer Jay A. Sekulow that the president enjoyed immunity from investigation while in office. There was no discussion of whether the court lacked authority to decide the merits of the dispute, even though the justices themselves had requested briefing on the subject.”
- It's unlikely there will be a unanimous ruling: “The court’s previous major decisions involving presidential authority were unanimous: Richard M. Nixon was ordered to turn over White House tape recordings, and Bill Clinton was required to respond to a sexual harassment suit filed by Paula Jones. A 9-to-0 ruling did not seem a possibility after Tuesday’s proceedings. But some, led by Chief Justice John G. Roberts Jr., seemed to be looking for middle ground that would avoid a deeply split decision in a highly charged political atmosphere.”
Money on the Hill
Lawmakers press bank regulators on oversight.
Quarles defended the central bank's actions: “Randal Quarles, the Fed’s top regulatory official, told lawmakers during a Senate Banking Committee hearing that this summer’s stress tests, which have been changed to reflect the ongoing global pandemic, will dictate what the Fed does on bank dividends,” Reuters's Michelle Price and Pete Schroeder report.
“Quarles added that he expects the results of the 2020 bank tests, typically released near the end of June, to be published earlier this year to be more responsive to the pandemic … Quarles, Federal Deposit Insurance Corporation Chair Jelena McWilliams, Comptroller of the Currency Joseph Otting and Rodney Hood, chairman of the National Credit Union Administration, appeared remotely before the panel to defend their efforts … But the regulators, all chosen by [Trump], were pressured by Democrats who were skeptical that their efforts were effectively delivering relief to all Americans without creating undue risk in the financial system.”
Congress begins probe into Blue Flame: “The House Energy and Commerce Committee said it has launched an investigation into Blue Flame Medical LLC after several states canceled contracts with the company,” WSJ's Brody Mullins and Susan Pulliam report.
“'We are deeply concerned by the numerous reports regarding Blue Flame Medical LLC’s failure to deliver on contracts with state and local governments to provide critical medical supplies,' the chairman of the committee, Rep. Frank Pallone (D., N.J.) said in a press release announcing the probe … The firm also faces investigations by the Justice Department and Maryland’s attorney general. The company previously has said it has done nothing wrong and would cooperate with any investigations.”
Trump continues his attacks on China.
The latest target is federal retirement plans: “The Trump administration has asked the board that runs the retirement savings program for federal employees and military personnel to not allow funds to be invested in Chinese businesses, ratcheting up a dispute into a potential showdown over who ultimately runs the program,” Eric Yoder reports.
“Labor Secretary Eugene Scalia on Monday sent a letter to the Thrift Savings Plan’s governing board saying that ‘at the direction of [Trump], the Board is to immediately halt all steps’ toward switching to a broader international stock market index, one that includes China, in one of its investment funds. Scalia’s letter followed a letter to him earlier in the day from Larry Kudlow, the director of the White House’s National Economic Council, and national security adviser Robert C. O’Brien in which they said ‘we believe the Board should cease implementation immediately.’ The letters, which were first reported by Fox Business, state in the most explicit terms to date that the Trump administration’s opposition to the planned change is at least in part motivated by China’s role in the coronavirus pandemic.”
China is reportedly working to fulfill its Phase 1 promises: Beijing “is working towards meeting its promise to boost U.S. purchases, even though the pace of buying has been restrained by [the outbreak],” Reuters's Jing Xu and Ryan Woo report.
“Under the Phase 1 deal signed in January, Beijing pledged to buy at least $200 billion in additional U.S. goods and services over two years and Washington agreed to roll back tariffs in stages on Chinese goods … China’s April imports of U.S. goods slumped 11.1 percent in dollar terms from a year earlier …"
Wuhan lab suspicion ensnares New York nonprofit group: “An American nonprofit received millions of dollars from the U.S. government during the Obama and Trump administrations to identify unknown viruses in bats that could infect humans and cause a global pandemic,” Paul Sonne and Shane Harris report.
“Now, as the world faces one such pandemic, the New York City-based EcoHealth Alliance has found itself at the center of a political maelstrom, with one of its major federal grants suddenly axed.”
Trump again leans on the Fed to adopt negative rates.
Powell and other central bank officials have consistently pushed back on the idea. But Trump re-upped his call on Twitter:
As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT”. Big numbers!— Donald J. Trump (@realDonaldTrump) May 12, 2020
Stocks slump, with the S&P 500 shedding 2.1 percent. “Stocks tumbled after a U.S. health official warned against a premature reopening of the economy and as traders assessed a dire outlook from Federal Reserve regional chiefs. Treasuries and the dollar climbed,” Bloomberg's Rita Nazareth reports.
Consumer prices hit largest decline since 2008: Prices are “weighed down by a plunge in demand for gasoline and services including airline travel as Americans stayed home …,” Reuters's Lucia Mutikani reports.
“The report from the Labor Department … also showed a record decrease in underlying prices last month, raising the specter of a bout of deflation as the economy sinks deeper into a recession triggered by lockdowns …”
Investor and consumer confidence diverge. Morning Consult economist John Leer spotted the split, and tweets that the “gap between Main Street and Wall Street is real. COVID-19 hurt consumer sentiment three times more than investor confidence. This divergence is not sustainable.”
- Cisco Systems and Jack in the Box are among the notable companies reporting their earnings
- The Labor Department releases the weekly jobless claim numbers
- Denny’s is among the notable companies reporting its earnings
- The Census Bureau releases its monthly retail sales numbers for March and advance numbers for April
- DraftKings is among the notable companies reporting its earnings