President Donald Trump and Republican congressional leaders are counting on state lockdowns lifting to propel an economic rebound that will ease pressure for another round of stimulus.
“There is only one way out of this dilemma: America has to grow again, to open up again and I am pleased that is beginning to happen in my state and other states,” Majority Leader Mitch McConnell of Kentucky said at the Capitol after Trump had a lunch meeting with GOP senators.
Trump, who has been urging governors to lift restrictions on businesses, said he expects “a really great third quarter” for the U.S. economy, even though Federal Reserve Chairman Jerome Powell reiterated Tuesday that a full recovery might take until the end of 2021.
Republicans are putting up a unified front on holding off on another round of stimulus even as every economic indicator is showing historic declines. That’s put them in an election-year stalemate with Democrats, who last week pushed through the House a $3 trillion virus relief package that the GOP has rejected.
The lunch session with Trump followed a morning meeting in McConnell’s office at the Capitol with Vice President Mike Pence, Treasury Secretary Steven Mnuchin and House GOP leader Kevin McCarthy.
After he left that meeting, Mnuchin joined Powell before the Senate Banking Committee, testifying about the response to the pandemic. Mnuchin warned of significant harm to the economy if shutdowns are prolonged.
“There is the risk of permanent damage,” Mnuchin told lawmakers. “And as I’ve said before, we’re conscious of the health issues and we want to do this in a balanced and safe way.”
The Congressional Budget Office on Tuesday forecast that the U.S. economy will expand more in 2021 than it previously projected -- 4.2% on a fourth quarter-to-fourth quarter basis from an April 24 estimate for a 2.8% increase. But it also said the economic fallout from the pandemic will linger, with the unemployment averaging 11.5% this year and only improving marginally in 2021 to 9.3%, just under the high reached in the 2007-2009 recession.
Since agreeing to a massive stimulus package in March, Republican leaders in both chambers have been united in their call for a delay in providing more assistance, arguing that careful consideration is needed amid an explosion in spending to address the pandemic and bolster the sinking economy.
McConnell said congressional Republicans and Mnuchin, who negotiated previous rounds of stimulus with Democrats, are all in agreement that a pause is needed. With the Senate leaving later this week for a nearly two-week recess, he said discussions on next steps would happen in couple of weeks.
A House GOP aide, who spoke on condition of anonymity to discuss party strategy, said that in addition to wanting to wait for a better measure of how the economy is faring, Republicans are concerned that providing more assistance to states and individuals would slow movement by governors to lift business restrictions.
Republicans haven’t ruled out additional legislative responses to the pandemic. McConnell is pushing giving businesses a shield against liability for employees or customers. Other GOP proposals include giving states more flexibility to spend the aid already allocated and extending the popular Paycheck Protection Program for small businesses. Three Republicans have signed on to legislation to provide more aid to state and local governments.
Senate Democratic leader Chuck Schumer blasted the Republican resistance to another round of economic relief. “How much will the Republican pause cost the American economy?” he said to reporters.
Despite the pressure from Democrats, Republicans are working hard to stick together. In a highly unusual move, McConnell on Wednesday is scheduled to join a conference call of all House Republicans.
McCarthy said that Congress needs to look at the state of the economy before acting again and assess whether the existing aid is working.
“I would make sure that the $3 trillion we have already passed is implemented correctly,” he said, adding he wants to see more flexibility for small businesses getting loans through the Paycheck Protection Program and to make sure unemployment insurance benefits are not so generous they prompt people to stay home.
McCarthy said Republicans are looking at “fixes” to the earlier stimulus bills. He indicated that more money may not be necessary, at least not right away, because states are reopening.
“I would note today we have almost every state doing some form of opening back up,” McCarthy said. “We see promise every single day, we watched just yesterday the promise of antibody test coming forward and how much advancement we have had on a vaccine and others.”
Schumer argues that public pressure is building on Republicans to sign onto a bigger package similar to what the House approved.
In remarks on the Senate floor Tuesday, he said Powell’s repeated calls for some action to aid the cratering economy should “jolt” Republicans to action. He assailed the fact that it hasn’t, and that McConnell instead has the chamber focused on confirming Trump nominees.
“When will our Republican Senate colleagues start to get the message?” Schumer said. “Because looking at the floor of the Unite States Senate, you would never guess that we are in the middle of a national economic crisis.”
But while a few Republican senators -- including Bill Cassidy of Louisiana -- are supporting efforts with Democrats to get more state aid, McConnell is facing little pressure from his rank and file.
“I’m not optimistic” about getting more funding any time soon, Senator John Kennedy, also a Louisiana Republican, told reporters Tuesday as he entered the GOP luncheon meeting. He added the lawmakers are increasingly wary of letting leaders in both parties negotiate the bills with Mnuchin and then simply signing on.
“They make a deal and they bring it back to the rest of us,” who then “moo and follow them into the chute like cattle.” He added, “I’m not sure it’s going to work this time.”
At the same time, some outside conservative groups are pushing congressional Republicans to reject more aid for states and local governments. On Wednesday, Americans for Prosperity, the main political arm of the Koch network, will release a report opposing “another massive bailout bill.”
The report is to argue that instead of pushing for more funding, state and local policy makers should first show how they are using currently available federal funds to give priority to necessary services. Those local officials should also enact reforms and spending reductions to address state budget challenges, many of which are the result of fiscal mismanagement before the Covid-19 crisis, the AFP report asserts.
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