with Brent D. Griffiths

House Democrats are poised to plow forward today with the biggest economic relief package in history, over the objections Republicans and moderates in their own ranks balking at the measure’s more than $3 trillion price tag.

But with 36.5 million Americans joining the jobless rolls in just the past eight weeks, some macroeconomists sizing up a free-falling U.S. economy say if anything, the package actually could prove too small to stave off a severe and scarring collapse.

Their assessment that Congress needs to go big and fast is colliding with growing deficit fatigue in Washington. 

“We know from past recessions if you wait and see, and it ends up being really bad, you will have lost a window of opportunity to make it less bad,” says Claudia Sahm, a former Federal Reserve economist and expert on recessions. In the wake of the financial crisis, she notes, “people didn’t want to believe it was as bad as it was… We’re set up on the same trajectory.” Sahm now serves as director of macroeconomic policy at the Washington Center for Equitable Growth, a liberal think tank. 

Sahm and other economists say those setting the country’s fiscal policy should plan to worry about chipping away at the federal debt once the economy is back on solid ground — a point Federal Reserve Chair Jerome Powell made earlier this week.

Powell and a host of conservative economists have taken the unusual step of urging Congress to do more now to help stabilize the economy, as some lawmakers are wary of doubling down after authorizing nearly $3 trillion in emergency funding. 

The size of the package House Democrats aim to pass today is somewhat arbitrary.

The bill, assembled from submissions by committee chairs, originally clocked in at a significantly higher cost. Aides to House Speaker Nancy Pelosi (D-Calif.) trimmed it to $3 trillion to avoid sticker shock among the rank and file, two top Democratic aides tell me, though another Democratic leadership aide said the decisions were “committee driven.”

The work of paring the measure continued Thursday, as Democrats narrowed a provision that would have benefited all of the nation’s 45 million student loan holders to those who were financially distressed when the pandemic hit, Politico reports.

Sahm, who has been advising the Joint Economic Committee on the congressional relief efforts, said there is necessarily guesswork involved, “and it goes to the massive amount of uncertainty and the severity of this crisis… As an economist, you never have a perfect crystal ball, but the crystal ball is shattered right now and nobody has a glimpse of it.”

Indeed, the nature of the economywide shock wrought by the pandemic shutdowns is something none have encountered. So economists’ projections about the timing and slope of a recovery lean on what could prove faulty estimates of when the public health crisis will recede and how fully hiring and spending return in its wake.

Whether the House bill, officially the HEROES Act, is large enough to meet the need is “to be determined.” 

That's according to Joe Brusuelas, chief economist at accounting firm RSM. He views the bill in part as a political marker, aimed at splitting the deficit-wary congressional Republicans from the White House. The Trump administration has signaled openness to providing support to state and local governments, per Bob Costa, Jeff Stein, and Seung Min Kim, as well as another round of direct payments to individuals, according to CNBC. Both are key elements of the Democratic bill.

Brusuelas said he expects the scale of the disaster to be clearer when congressional negotiations get serious next month. More bad news seems to arrive by the day. On top of the headlining-grabbing jobless claims Thursday, new federal data showed households and small businesses are rapidly exhausting their financial cushions, with about half of small firms due to run out of cash within a month, Andrew Van Dam and Heather Long report. Retail sales figures for April set for release this morning are expected to show a record drop.

“Policymakers in Washington are still having a hard time getting their heads around the true order of magnitude of shocks cascading through the economy,” he says. “They want to believe this will go away, people will get hired back, and we will revert to the status quo ante. That’s just not going to happen.”

Economists say the foundation of the House bill, roughly $1 trillion for state and local governments, is a good start.

Ryan Sweet, a senior economist at Moody's Analytics, points to a Brookings Institution rule-of-thumb that every one-percent increase in the unemployment rate translates into $45 billion in lost revenue for states every year. His firm’s model shows unemployment averaging 5 percent higher than its pre-pandemic baseline for the next fiscal year, meaning states would gobble up nearly half of the $500 billion the House bill earmarks for them to make up lost tax collections.

Brusuelas sees a more dire situation unfolding for governments beyond Washington. California alone now has to close a $54.3 billion deficit. The state was running a budget surplus before the pandemic hit, so at this rate, a shutdown that lasts four more months would put it in the red by more than $160 billion. Repeat the exercise for other similarly large states, “and any way you slice it, you’re talking about three-quarters to $1 trillion,” he said. 

Either way, Sweet says, “if we’re wrong and assume they have enough, and they don’t, we’ll see a significant number of furloughs from state and local governments — teachers, police, first responders, people you want working in a crisis — and a significant cut in services.”

Plus, because state and local governments are typically required to run balanced budgets, the drop in their tax collections not only means layoffs but canceled spending plans, deepening the injury to an already-wounded economy. “One of the great mistakes in the Great Recession was the Obama administration shifted to austerity too soon, which slowed the recovery,” he says. “The last thing you want to do right now is get too worried about deficits and debts. If this turns out to be a worse recession than we’re penciling in, the debt is going to go up anyway.”

The bill includes a lot of other funding, but nothing to extend the Paycheck Protection Program.

The package serves up big chunks for other Democratic priorities. Beyond a second round of direct checks to lower and middle income Americans, it provides an extension through January of $600 extra in weekly unemployment insurance; $200 billion in hazard pay for essential workers; $175 billion in rent, mortgage and utility assistance; and a bump in food stamp benefits.

But Brusuelas says beyond aid to state and local governments and extended unemployment benefits, the measure doesn’t address the third most pressing economic need: Continuing to shore up small businesses. A proposal spearheaded by Rep. Pramila Jayapal (D-Wash.) to replace and expand on the PPP with a federal paycheck guarantee and help on other expenses, estimated to cost $654 billion, didn’t make it into the bill.

The House bill’s price tag “is not low,” Sahm notes. “It would mean within a couple months, they’ve allocated $6 trillion to fight this thing,” more than Congress authorized during the Great Depression, adjusted for inflation. 

But the appropriate scale of the response turns on expectations for economic conditions months from now that are already diverging. Trump and his team are presenting a rosy forecast for a rebound that begins in the second half of the year and continues into 2021. By that time, Sahm says, “I think we’re going to be firmly in a depression. If I didn’t know macro-forecasting as well as I do, I would want to believe the president, because the other version is so horrible.”

Market movers

Stocks stage turnaround to end broadly higher. 

The S&P 500 still ended the week down. AP's Stan Choe, Damian Troise, and Alex Veiga: “Wall Street rallied back from a sharp morning drop on Thursday, led by a resurgence for some of the year’s most beaten-down stocks. The S&P 500 climbed 1.2% in another scattershot day of trading, with many stocks flipping from the bottom of the leaderboard to the top following a few sharp reversals in momentum. The zig-zag trading followed up on earlier losses for Asian and European stocks, while Treasury yields sank in a sign of increased pessimism.

“It’s the latest wobble for Wall Street, which has been wavering for weeks as it digests gargantuan moves the market made earlier this year, first down more than 30% on worries about the coming recession and then up more than 30% on hopes for a relatively quick rebound.”

The New York Stock Exchange will reopen its trading floor this month. NYSE president Stacey Cunningham writes in a WSJ op-ed the floor will reopen “thoughtfully, carefully," on May 26. Among other precautions, she writes, “Our floor brokers will return, though in smaller numbers at first, and will wear protective masks as they work. They will also follow strict social-distancing requirements, enforced by a new choreography that defines the space where each person may work on the floor.”

The ETF purchases, which began on Tuesday, are part of the latest emergency lending program the Fed has rolled out to help cushion the impact of the coronavirus pandemic on the U.S. economy and financial markets.
The head of America’s seventh-largest commercial bank said the sale would give him a “bulletproof” balance sheet to deal with an extreme crisis or a war chest to buy distressed assets in a more moderate recession. 
Financial Times

The reopening debate

CDC offers few guidelines for reopening safely.

The agency's recommendations appeared to be significantly watered down: “The Centers for Disease Control and Prevention issued a scant six pages of recommendations,” Lenny Bernstein, William Wan, Josh Dawsey and Holly Bailey report

“The six checklists — which also address restaurants, mass transit and camps — come days, and in some cases weeks, after many states have begun to lift restrictions on their own. The advice is less detailed than draft recommendations the agency sent to the White House for review last month. The nation is still awaiting that detailed technical guidance, which the White House has held up and not shared publicly. The delay has left the responsibility for decision-making about reopening to states and localities. It has also left many health experts clamoring for greater transparency.”

  • CDC says more could come: “The White House at first shelved the CDC guidelines. When asked about them, the White House said they were ‘overly specific’ and in the process of being revised. A CDC spokesman said additional recommendations may still come from the agency. The six decision trees were ready for release, so the administration decided to put them out while other guidelines make their way through the review process.”
  • What changed: “The CDC removed from an earlier draft a recommendation that no facility open in an area where spread of the virus requires ‘significant mitigation.’ But it left a warning against reopening against local or state orders. That puts the responsibility squarely on state and local governments to impose those rules.”

Coronavirus fallout

Three million Americans filed jobless claims last week.

That pushes the total in the last eight weeks to 36.5 million: “Once again, the federal unemployment data illustrates the wide-ranging economic consequences of the coronavirus pandemic, which has spared no state or industry,” Tony Romm reports.

“The Labor Department data said Connecticut witnessed a more than 700 percent increase in applications for jobless aid, after nearly 300,000 filed for benefits in the week ending May 9, the data shows. But Connecticut officials later said that figure was a mistake, and that the real figure was 29,846. Even some of the states that have raced to reopen have been inundated with new claims. More than 241,000 people filed anew for unemployment in Georgia, for example, and more than 221,000 did so in Florida, both marking increases from the prior week, according to federal data."

More from the U.S.:
  • At least 1,411,000 cases have been reported; at least 85,000 people have died
  • Ousted official warns the U.S. is not ready for another wave: Rick Bright, a former top U.S. vaccine official, "said there is still ‘no master plan’ for assessing the need for and distribution of masks, testing swabs and other medical equipment," Aaron C. Davis, Yasmeen Abutaleb, Felicia Sonmez and John Wagner report. “The United States faces the ‘darkest winter in modern history’ if it does not develop a more coordinated national response, he said.”
  • Trump administration plans to expand national stockpile: “The president said his administration is launching what he termed a ‘groundbreaking initiative’ to ‘replenish and modernize’ the government’s stores of masks, ventilators and other essential pandemic-fighting medical equipment to create a 90-day reserve,” Amy Goldstein reports.
  • Colleges push to reopen: “Many colleges and universities are pushing to bring students back to campus in the fall, pledging an all-out effort to overcome the extraordinary challenges of housing and teaching them during a public health crisis. But the movement to resume higher education in person … is colliding with concerns that schools could deepen the health crisis if they act too quickly,” Nick Anderson and Susan Svrluga report.
The corporate front: 
  • Boeing CEO David Calhoun irked airlines after predicting a major one's demise: “American Airlines Group Inc. CEO Doug Parker called the Boeing chief this week to express surprise and disappointment after Calhoun told a television interviewer that a major U.S. airline would most likely go out of business by this fall … Calhoun’s comments weren’t well-received at United Airlines Holdings Inc. either,” the WSJ's Andrew Tangel and Alison Sider report.
  • Airlines struggle to shrink as demand plummets: “After announcing that it would no longer fly its 18 wide-body 777s, Delta told its 14,500 pilots that it expects to have 7,000 more than it needs in the fall, according to a memo to flight operations employees first reported by Reuters,” Tracy Rucinski and David Shepardson report. “U.S. airlines are collectively burning more than $10 billion in cash per month and averaging fewer than two dozen passengers per domestic flight.”
  • OpenTable says one-quarter of restaurants won't reopen: “Total reservations and walk-in customers from OpenTable’s network were down 95% on May 13 from the same day a year ago, according to data from the service,” Bloomberg News's Edward Ludlow reports. “Restaurants lost more than $30 billion in sales during March and $50 billion in April, according to National Restaurant Association estimates.”
  • Starbucks asks for break on rent for the next year: “The restaurant company, one of the largest in the country by number of stores, told landlords that starting June 1, for at least the next 12 months, it will need changes to lease terms and base rent,” CNBC's Amelia Lucas reports.
  • McDonald's sets conditions for reopening: The world’s largest fast-food company “is asking restaurant owners in the U.S. to make dozens of changes to ease … concerns before reopening their dining rooms, including commitments to clean bathrooms every half-hour and digital kiosks after each order,” the WSJ's Heather Haddon reports.
Around the world:
  • The developing world could be devastated by covid's consequences: “International agencies have released stark figures in recent weeks highlighting the risk that poverty and hunger could end up killing even more people worldwide than the 40 million victims that researchers had projected would die from the virus if no control measures were taken,” Liz Sly reports from Beirut.
  • Conditions are beyond desperate in Brazil: “Brazil’s failure to provide enough hospital beds for the surging number of critical coronavirus patients is yielding increasingly grim results across the country, but particularly in Manaus, a city of 2 million people on the Amazon River deep in the rainforest,” Terrence McCoy and Heloísa Traiano report.
  • Taiwan beat covid and won more friends: “With just 440 covid-19 cases and seven deaths, Taiwan looks to have conquered the coronavirus. The island has won praise for its effective response and donations of medical equipment, including millions of face masks — the fruits of a campaign to combine health diplomacy and relief with an effort to bolster Taiwan’s international image,” Nick Aspinwall and Emily Rauhala report from Taipei.

Trade fly-around

Trump continues to signal that U.S.-China relations are deteriorating.

He said he has no interest in talking to Chinese President Xi Jinping right now: “In an interview with Fox Business Network … Trump said he was very disappointed with China’s failure to contain the disease and that the pandemic had cast a pall over his January trade deal with Beijing, which he has previously hailed as a major achievement,” Reuters's Doina Chiacu and David Brunnstrom report.

“Trump was asked about [Arkansas Republican Sen. Tom Cotton's] suggestion that U.S. visas be denied to Chinese students applying to study in fields related to national security, such as quantum computing and artificial intelligence. ‘There are many things we could do. We could do things. We could cut off the whole relationship,’ he replied. ‘Now, if you did, what would happen? You’d save $500 billion,’ Trump said.”

Taiwan company to build semiconductors in Arizona: Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of silicon chips, “is expected to announce the plans as soon as [today] after making the decision at a board meeting on Tuesday in Taiwan, according to people familiar with the matter. The factory could be producing chips by the end of 2023 at the earliest, they said, adding that both the State and Commerce Departments are involved in the plans,” WSJ's Bob Davis, Kate O’Keeffe and Asa Fitch report.

“Politically, the announcement could be a win for [Trump], who has been campaigning to get companies to build in the U.S. He has also been looking to make sure that Republicans retain their majority in the U.S. Senate. Arizona Sen. Martha McSally is among the Republicans facing a tough challenge in this November’s election."

Pocket change

Money on the Hill

Burr steps aside as Intel chair as probe into his stock trades intensifies.

Sen. Richard Burr (R-N.C.) isn't the only senator being looked at: “Senate Majority Leader Mitch McConnell (R-Ky.) said in a statement that Burr informed him of his decision to step aside as committee chairman ‘during the pendency of the investigation.’ The two agreed, McConnell added, ‘that this decision would be in the best interests of the committee’ and was to take effect [today]," Devlin Barrett, Seung Min Kim, Spencer S. Hsu and Katie Shepherd report.

Also Thursday, aides to Sens. Dianne Feinstein (D-Calif.) and Kelly Loeffler (R-Ga.) acknowledged that the senators had been in contact with federal law enforcement. Feinstein had been questioned by FBI agents about stock sales, which she has said were done by her husband and without her knowledge, a spokesperson said. Loeffler’s office acknowledged she had turned over documents related to stock sales she says she did not actively participate in.”

More on the investigation: “A person familiar with the investigation of Burr and other senators said investigators are examining the timing of his trades and any communications concerning stock sales that he may have had with his brother and others. This person cautioned, however, that there are significant legal hurdles to bringing charges in such cases, particularly the Constitution’s ‘speech or debate’ clause, which covers many of the activities of members of Congress."

Chart topper

Fewer than 1 in 5 businesses could hold out for even three months:


  • 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

The funnies

From The Post's Tom Toles:

Bull session