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Democrats crafting new $2.4 trillion stimulus bill to spur talks

Billy House and Erik Wasson
Bloomberg

House Democrats have started drafting a stimulus proposal of roughly $2.4 trillion that they can take into possible negotiations with The White House and Senate Republicans, according to multiple House Democratic officials.

The Democratic-only plan, which could get passed by the House next week, also would address demands from swing-state lawmakers for passage of a virus relief plan before they adjourn for the stretch-run of their re-election campaigns, even if it doesn’t result in a deal that gets signed into law.

Rep. Dan Kildee, D-Mich., second from left, accompanied by House Speaker Nancy Pelosi of Calif., left, Rep. Dwight Evans, D-Pa., second from right, and Rep. Richard Neal, D-Mass., right, speaks at a news conference on Capitol Hill in Washington, Friday, July 24, 2020, on the extension of federal unemployment benefits.

While smaller than the $3.4 trillion package the House passed in May, the new proposal remains much larger than what Senate Republicans have said they could accept. President Donald Trump has indicated he’d be willing to go as high as $1.5 trillion.

“When you are talking about $2.2 trillion and $1.5 trillion you are in deal-making territory” Democratic Representative Dan Kildee said.

The plan roughly follows the last offer made by House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer in talks with the White House that broke off in early August. It also would include aid to the U.S. airline industry to avert massive job losses, which could start Oct. 1 when restrictions expire from a prior round of federal assistance, as well as small business aid.

Pelosi and Treasury Secretary Steven Mnuchin both raised the prospect of resuming negotiations on another economic stimulus package earlier Thursday, without giving any indication that they’ve moved closer to a compromise needed for a breakthrough.

Mnuchin said during a Senate Banking Committee hearing on Thursday that a targeted pandemic relief package is “still needed.”

“If the Democrats are willing to sit down, I’m willing to sit down anytime for bipartisan legislation. Let’s pass something quickly,” Mnuchin said.

The House speaker told reporters Wednesday she wasn’t sure when she and Mnuchin would next talk, but said she was willing to resume discussions.

“We are ready for a negotiation,” she said. “I am talking with my caucus and my leadership and we will see what we are going to do,” Pelosi said.

The prospect of talks helped push stocks higher briefly, with the S&P 500 extending gains after the Pelosi and Mnuchin remarks. But that optimism was tempered by reports showing a resurgence in coronavirus cases in Europe and investors pulled stocks back off session highs.

The risk of a slowdown in the recovery is rising with the lack of movement on fiscal stimulus. Initial claims for unemployment insurance remained at a level above the peak during the Great Recession of 2007-09, the latest weekly data showed on Thursday.

Fed Chair Jerome Powell reiterated his conclusion that “it’s likely that additional fiscal support will be needed,” speaking at the same Senate panel where Mnuchin was testifying.

The recovery has been faster than anticipated so far, Powell said, thanks to income support to those affected by the pandemic.

“The risk is that they’ll go through that money, ultimately, and have to cut back on spending and maybe lose their home,” the Fed chief said. “That’s the downside risk of no further action.”