The Washington PostDemocracy Dies in Darkness

The Finance 202: Fiscal cliffs approach as Republicans clash on relief package

with Brent D. Griffiths

The 30 million Americans set to lose federal unemployment benefits in days unless Congress acts aren’t the only ones who should be worried about the chaos consuming early negotiations toward another economic relief package. 

As the Trump administration and Senate Republicans clash on the composition, price tag and timing of their plan, deadlines are fast approaching for several other programs that need funding to help prop up the pandemic-ravaged economy.

A federal moratorium on evictions protecting about 12 million renters expires Friday. A program to help state and local governments is dwindling, leaving them to face laying off employees and contractors. And small businesses struggling to stay afloat have only until Aug. 8 to apply for forgivable loans through the Paycheck Protection Program.

Like most of the rest of the emergency spending package, there is little easy agreement emerging on these items among Republicans, much less between the GOP and Democrats. And the prospect of reaching consensus fast enough to pass a bill by the end of next week was remote enough Tuesday that Senate Majority Leader Mitch McConnell (R-Ky.) laughed as he dismissed it to reporters, according to Erica Werner, Jeff Stein and Seung Min Kim. 

The approaching fiscal cliffs “are all so significant,” S&P Global chief U.S. economist Beth Ann Bovino tells me. Among other concerns, amid a sputtering economic rebound, another downturn could force more businesses to shut their doors, and “the impact on the on the economy is not necessarily going to be ‘one and one equals two.’ There could very well be a nonlinear impact this time around.”

Leading economists say after extending unemployment benefits, funding for state and local governments presents the most urgent need.

In a survey of 33 top economists by FiveThirtyEight and the Initiative on Global Markets at the University of Chicago Booth School of Business, 85 percent said the aid should be a top-three priority for policymakers crafting the relief package. And 36 percent said it should be the top priority. Via FiveThirtyEight: 

Yet the proposal Senate Republicans are forging isn’t set to include new relief for state and local governments. Instead, the lawmakers appear likely to give governors and local officials more flexibility in directing the $150 billion that has already been allocated.

State and local leaders say it's not nearly enough and are pushing Congress for $500 to $1 trillion in new help. House Democrats included $1 trillion for them in the relief package they passed in May. And Sen. Bill Cassidy (R-La.) has coauthored a bipartisan proposal to send $500 billion in new support to state and local governments. But many of his colleagues object, in part over concerns about the price tag.

Governments beyond the Beltway are getting squeezed from two directions: The economic freeze has choked off tax revenue, just as they face higher costs to support those dislocated by the downturn and respond to the public health crisis itself. Unlike the federal government, nearly all are required to balance their budgets, meaning funding shortfalls will force spending cuts. And those could have a macroeconomic effect, considering the contribution local governments make to overall economic activity.

“Collectively, state and local governments outspend Washington on direct goods and services, employ more workers than the domestic manufacturing sector, and are responsible for about 11 percent of national GDP,” Anshu Siripurapu and Jonathan Masters of the Council on Foreign Relations recently wrote.

Housing advocates are raising alarms about the sunset of an eviction ban.

“The moratorium covers renters who live in homes with federally backed mortgages, which the Urban Institute estimates to be 12.3 million households, or about 30 percent of all renters nationwide,” Renae Merle reports. “Once the moratorium lapses, landlords can give their delinquent tenants 30 days’ notice and then begin filing eviction paperwork in late August.”

Some 96 percent of renters made their June payments, roughly matching the same month last year, according to the National Multifamily House Council.

But housing advocates worry that number could plummet if the weekly $600 payments in federal unemployment benefits dry up, delivering a gut-punch to millions of lower-income people who have lost their jobs. “We are looking at an eviction cliff, and once we fall over it, it will be hard to climb back,” National Housing Conference president David Dworkin tells Renae.

Providing more funding for the PPP presents a rare point of agreement.

McConnell and Treasury Secretary Steven Mnuchin both support extending the lending program for small businesses. McConnell wants to tweak its terms to “more closely target troubled businesses,” the Wall Street Journal’s Andrew Duehren reports. “Sen. Marco Rubio (R., Fla.), who leads the Senate Small Business Committee, said that effort will involve both repurposing leftover PPP funds and likely appropriating additional ones.”

But little is fixed as Republicans spent Tuesday sparring over the proposal’s basics. “The Republican and White House positions changed multiple times as the day went on,” Erica, Jeff and Seung Min report.

“Complicating matters, other Republican lawmakers appeared mortified about the growing size of the spending bill, leading to bickering over which policies to remove and warning that miscalculations could allow Democrats to seize control of the White House and the Senate in November,” they write. 

“The whole process now appears likely to spill into August, something the White House and congressional Democrats had hoped to avoid, because it would mean more than 20 million Americans would lose emergency unemployment benefits when they expire at the end of this month. They have not mapped out a plan for what would happen to these people as the pandemic’s turmoil continues to weigh on the U.S. economy.”

Market movers

Dow pulls out 150-point gain.

But tech stocks drag down Nasdaq: “The Dow Jones Industrial Average and S&P 500 closed higher on Tuesday as traders booked profits from the major tech names and added to positions in the more beaten-down value stocks,” CNBC's Fred Imbert and Yun Li report.

“The 30-stock Dow gained 159.53 points, or 0.6 percent, to close at 26,840.40. The S&P 500 climbed 0.2% to 3,257.30. Both the Dow and S&P 500 cut their gains in the final 30 minutes of trading. The Nasdaq Composite, meanwhile, dropped 0.8 percent to 10,680.36 after hitting an intraday record earlier in the day.”

Tesla's drive to the S&P 500 isn't automatic: “Tesla plans to report its second quarter results on [today] after the market closes, and all eyes are on the company’s bottom line this period,” CNBC's Pippa Stevens reports.

“That’s because a fourth consecutive quarter of reported profitability on a GAAP basis would make Elon Musk’s electric car company eligible to join the S&P 500 index … But it’s not a done deal. Even if the company does report a fourth consecutive quarter of GAAP profits, there’s no guarantee that it will be added to the [index]. The make-up of the S&P 500 is determined by what’s known as the “'Index Committee' at S&P Dow Jones Indices. Inclusion in the index is based on quantitative as well as qualitative factors.”

Coronavirus fallout

Executives of drug companies behind leading coronavirus vaccine candidates forecast an aggressive timeline on Tuesday for when a vaccine might be available for emergency use. (Video: Reuters)
From the U.S.:
  • At least 3,874,000 cases have been reported; at least 139,000 have died.
  • Deaths on Tuesday topped 1,000 at the nation recorded its highest one-day toll since June 2. It was still below the peak of the outbreak in April. 
  • Trump warns pandemic likely to ‘get worse before it gets better': “Three months after he abandoned the daily virus briefings and attempted to turn the country’s attention to what he described as the ‘great American comeback,’ Trump’s low-key reappearance before reporters seemed to be a tacit admission that his previous strategy had not worked,” Toluse Olorunnipa reports of the president's return to covid news briefings.
  • Most Americans are still highly vulnerable to the virus. “Only a small proportion of people in many parts of the United States had antibodies to the novel coronavirus as of this spring, indicating most of the population remains highly susceptible to the pathogen, according to new data from the Centers for Disease Control and Prevention," Laurie McGinley reports
  • Former CDC chief says states aren't reporting enough data: “The analysis is the first comprehensive review of covid-19 data that all 50 states and Washington, D.C., are using to make decisions about policies on mask-wearing and opening schools and businesses,” Lena H. Sun reports.
  • Court rulings create uncertainty over strip clubs receiving PPP funds: The Trump administration has barred companies that ‘present live performances of a prurient sexual nature’ from participating. Clubs sued, and two federal judges rebuked the SBA for excluding the establishments from receiving the forgivable loans meant to protect jobs amid the health crisis,” Reuters's M.B. Pell and Chris Prentice report. What remains unclear is whether only clubs that sued can receive funds or if the SBA will now make it available to everyone.
From the corporate front:
  • Airlines want E.U., White House to adopt testing for passengers: “In a letter to Vice President Mike Pence and Ylva Johansson, the European Commissioner for Home Affairs, the chief executives of American Airlines, United Airlines, Lufthansa and International Airlines Group requested ‘the safe and swift restoration of air travel between the United States and Europe,’” Reuters's David Shepardson reports.
  • Airplane suppliers are hurting, too: “Already weakened by a decade of pressure from Boeing and Airbus to cut prices and invest in new technology, U.S. aerospace firms now face a wave of bankruptcies, restructurings, takeovers and mergers, industry sources and bankers say,” Reuters's Eric M. Johnson and Rebecca Spalding report.
  • United Airlines lost $1.6 billion in the second quarter: “Revenue plunged to $1.48 billion in the three months ended June 30, an 87 percent drop from $11.4 billion during the same time last year. The sharp decline in sales wasn’t as bad as feared, beating analysts’ estimates of $1.32 billion,” CNBC's Leslie Josephs report.
  • Best Buy says its sales are rebounding: The electronics retailer said its second-quarter sales "are up about 2.5 percent through July 18, compared with the same period a year prior,” CNBC's Melissa Repko reports. “Online sales have jumped by 255 percent so far in the second quarter, compared with a year ago.”
  • Coke sales fall 28 percent, but the company says the worst is over: About half of the company's business comes from non-home sales, including restaurants and event venues, that remain set down, the WSJ's Jennifer Maloney reports. “But China, Southeast Asia and Western Europe have done a ‘pretty good job in managing the worst stages of the pandemic’ and sales there should continue to improve, Coke’s finance chief, John Murphy said.
  • Walmart to spend $428 million on worker bonuses: The nation's largest grocer also announced that it will close on Thanksgiving, CNBC's Melissa Repko reports.
Around the world:
  • EU relief deal overcome came north-south divide: European Union leaders provided a vital lifeline for the Mediterranean countries that have sometimes felt abandoned by Brussels amid the pandemic, reaching a deal to pump money into their hard-hit economies,” Chico Harlan reports from Rome. “Under the deal struck Tuesday, Italy will receive the largest share of the stimulus money, with Spain receiving the second-largest.”
  • 1 in 5 people in New Delhi may have been infected: The findings also imply that a large number of infected persons remain asymptomatic and go undetected. Majority of the population in Delhi remains vulnerable to the virus and the federal government said that strict containment measures need to continue,” Niha Masih reports from India's capital.

When superpowers collide

China vows to retaliate after U.S. orders closure of its Houston consulate.

Washington has yet to announce such an order: “The United States has ordered China to close its consulate general in Houston 'in order to protect American intellectual property and American's private information,' State Department spokeswoman Morgan Ortagus said Wednesday," Anna Fifield reports.

"Beijing vowed to retaliate, calling the order "an unprecedented escalation" in a broader conflict between the world's two biggest economies, which now encompasses trade and technology, freedom of the press and religion, and the coronavirus and the race for a vaccine… The State Department did not elaborate on the alleged violations, but Ortagus suggested that China had violated the Vienna Convention, which says diplomats must ‘respect the laws and regulations of the receiving State’ and ‘have a duty not to interfere in the internal affairs of that State.’"

U.S. accuses Beijing of sponsoring hacking into covid-19 vaccine research: “U.S. officials accused China of sponsoring criminal hackers who are targeting biotech firms around the world working on coronavirus vaccines and treatments, as the FBI said the Chinese government was acting like ‘an organized criminal syndicate,’” Ellen Nakashima and Devlin Barrett report.

“The defendants hacked for their own profit but also for the Chinese Ministry of State Security (MSS), a civilian spy agency responsible for counterintelligence, foreign intelligence and domestic political security, the indictment says. They were aided in that effort by an MSS officer, authorities charge … It marks the first time the United States has charged suspected Chinese hackers with working not only to enrich themselves but also on behalf of the government — what prosecutors characterized as a ‘blended threat.’”

TikTok wants to hire 10,000 staff in the U.S. even though it's at risk of being banned (CNBC)

Trump tracker

Trump blasts China in public, but in private his company imports lots of goods.

These goods have contributed to U.S. trade deficit, something Trump abhors: “Since September of last year, Trump properties in the US have imported more than eight tons of goods from China, CNN has learned by reviewing US customs data compiled by ImportGenius, which tracks information companies are legally bound to provide to US customs when they import goods to the US. The imports have arrived to decorate his properties while the president has sought to dress down China,” CNN's Kylie Atwood reports.

“More than six tons of tables were delivered to Trump International Hotel in New York last fall. On the same day, Trump tweeted, ‘We are doing very well in our negotiations with China.’ A shipment of two tons of wooden and glass showcase cabinets arrived at the Trump National Golf Club Los Angeles from Shanghai just two months ago. Meanwhile Trump has increasingly gone after China for the country's handling of the pandemic.”

Trump’s Request of an Ambassador: Get the British Open for Me (NYT)

Money on the Hill

Shelton's Fed board nomination clears Senate Banking. 

The 13-12 margin represented a rare partisan vote for a Fed nominee. “Shelton, who advised Donald Trump’s 2016 presidential bid, has drawn scrutiny for her views related to the long-abandoned gold standard, along with her calls for closer ties between the White House and the Fed,” Rachel Siegel reports. And Democrats and others have said the stakes are especially high because Trump could seek to promote her to Fed chair when Jerome Powell's term expires in 2022. 

Her nomination now moves to the full Senate. Analysts are split on her chances. Here's what some told me: 

  • Jaret Seiberg, Cowen Washington Research Group: “They wouldn’t have scheduled the vote in Senate Banking if they didn’t think she could pass the full Senate, so our assumption is she’s going to be a Federal Reserve governor… I think it’s going to be difficult to find significant additional dissent on the floor when the nomination comes up.”
  • Ian Katz, Capital Alpha: “There's the uncertainty of not knowing what you don't know about the views of the few dozen Republicans she needs to vote for her in addition to the ones on Senate Banking. She could lose a couple of Republicans and still win, but that's probably all she can afford to lose because you can't assume she'll get any Democratic votes. But she doesn't just need almost all the Republicans in the Senate to support her; she needs them to actually vote. In theory, she should get through, but the margin for error is very small.”
  • Isaac Boltansky, CompassPoint:I’m just operating under the framework that when the clock starts running down for this Congress, McConnell’s office is going to prioritize other nominations that either have full-throated support or longer terms. These nominations clearing committee gives [McConnell] the option to fill the Fed Board if Trump loses this fall, but I still think that Shelton’s nomination faces an uphill climb.”

Pocket change

Apple pledges to be carbon neutral by 2030.

The tech giant also promised to step up its investment in solar power: “The company, which is already carbon neutral for its corporate operations, said the move means that by 2030, every iPhone, MacBook and iPad sold will have no climate impact,” Hamza Shaban reports.

“The initiative follows major climate action from other trillion-dollar technology companies. In January, Microsoft announced plans to remove more carbon than it produces by 2030. Last month, Amazon — which has set its own carbon-neutral goal for 2040 — publicized the creation of a $2 billion venture capital fund to back ambitious efforts to develop decarbonizing technologies. (Amazon chief executive Jeff Bezos owns The Washington Post.)”

Wells appoints new CFO amid leadership shake-up:Wells Fargo & Co said Mike Santomassimo would replace John Shrewsberry as chief financial officer when he retires in the fall after more than two decades at the firm,” Reuters's Imani Moise and Noor Zainab Hussain report.

“Since taking over as chief executive in October, Charles Scharf has shaken up leadership at the bank and installed a slew of former colleagues and confidants in top positions. Santomassimo most recently served as Scharf’s CFO at Bank of New York Mellon (BK. N) and previously led the finance teams for various business lines at JPMorgan Chase & Co … When Santomassimo joins the company in the fall, the top three executives will be based in New York, away from the bank’s official San Francisco headquarters.” 

Ex-Morgan Stanley staffers want out of NDAs to discuss racism: “At least six former staffers say they can’t share their experiences because of the strict conditions in their exit pacts with the firm, according to lawyer Jeanne Christensen. She’s also representing Morgan Stanley’s former diversity chief, Marilyn Booker, who is suing the bank, claiming systemic bias faced by women of color,” Bloomberg News's Sridhar Natarajan, Max Abelson and Michelle F Davis report.

Christensen said she’s asking the bank’s board to allow the ex-employees to ‘tell their stories about the racial discrimination they experienced at Morgan Stanley’ without fearing retribution because of the secrecy pacts they signed. Non-disclosure agreements typically signed in exchange for severance or access to deferred compensation and mandatory arbitration have been standard for years across Wall Street. ”

Tapestry board had opened probe into CEO before he resigned: “The parent company of Coach and Kate Spade said [Jide] Zeitlin had resigned … for personal reasons. The 56-year-old executive later disclosed he had quit to avoid causing the luxury-goods company a distraction over allegations about a romantic relationship predating his becoming CEO,” the WSJ's Suzanne Kapner and Telis Demos report.

“The board hired the law firm Fried, Frank, Harris, Shriver & Jacobson LLP to investigate allegations by a woman who accused Zeitlin of posing as a photographer under an alias to lure her into a romantic relationship more than a decade ago …”

Billionaires in New York could pay $5.5 billion a year under new tax: “The tax, part of a new ‘Make Billionaires Pay’ campaign by progressive lawmakers and activists, would impose a new form of capital gains tax on New Yorkers with $1 billion or more in assets. Sponsors of the plan say it would raise $5.5 billion a year, which would be used for a new unemployment insurance fund for those impacted by the covid-19 pandemic,” CNBC's Robert Frank reports.

“With New York state staring at a $13 billion deficit, and looming cost cuts, many lawmakers are pushing to raise revenue from the rich rather than cut government services.”

Chart topper

Via Eurasia Group president Ian Bremmer: 



  • European Central Bank President Christine Lagarde speaks about the global economy with The Post's David Ignatius
  • The Senate Foreign Relations Committee holds a hearing on competition with China
  • The House Small Business Committee Subcommittee on Investigations holds a hearing on the Small Business Administration's technology
  • Biogen, Discover Financial Services, Las Vegas Sands, Whirlpool, Chipotle Mexican Grill and Spirit Airlines are among the notable companies reporting their earnings


  • The Labor Department releases the latest numbers on weekly jobless claims
  • The House Financial Services Committee holds a hearing on the Heroes Act, Democrats' sweeping proposal for the next phase of coronavirus relief
  • The Senate Small Business Committee holds a hearing on minority small businesses' access to capital during covid
  • Financial Services Chairwoman Maxine Waters (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) deliver introductory remarks during the Center for Responsible Lending's virtual event honoring Dodd-Frank.
  • Amazon, AT&T, Southwest Airlines, Hershey, Intel, Alaska Air Group, Union Pacific, Tractor Supply Co., Aaron's and Scholastic are among the notable companies reporting their earnings. (Amazon CEO Jeff Bezos owns The Washington Post)


  • The National Association of Realtors releases new-home sales data for June
  • Verizon, American Express, Bloomin' Brands, Goodyear Tire & Rubber, Honeywell International and Lear Corp. are among the notable companies reporting their earnings

The funnies

Bull session