WaPo: Trump bending on aid to states despite Senate GOP opposition

Senate Republicans might want to hold the line on bailouts of the states, but they haven’t reckoned with Donald Trump’s dealmaking instincts. The first aid packages have now had a few weeks to roll out, but they aren’t making enough of a dent to keep jobs from melting away. The White House will clearly need to get more of their own priorities through Congress, which means Nancy Pelosi has enough leverage to dictate some terms.

In other words, it’s time to play Let’s Make a Deal, and the Washington Post reports that Trump wants to play Monty Hall. To get a little, he knows he’ll have to give a little, but the trick is to give as little as necessary:

White House officials have privately signaled that they are willing to provide tens of billions of dollars in relief to states as part of a bipartisan deal with Democrats in the coming weeks, despite President Trump’s reluctance and strong opposition from conservative groups, according to seven people familiar with the internal deliberations who spoke on the condition of anonymity to discuss the matter.

Although that position is likely to anger some Republicans who have warned that Democrats want “blue state bailouts,” many White House officials now believe that providing new funding to states to deal with challenges related to the novel coronavirus will be necessary if they want to secure their own priorities, such as tax breaks and liability protections for businesses, the people said.

“The White House is moving to set up where a deal could be,” a veteran Republican close to Trump said. “The first thing is getting Republicans in Congress to come around on some money for states and that’s happening. It’s progress, for sure, but it’s only the first part of bringing it all together in a deal.”

First off, note the scope in Trump’s concession. “Tens of billions” is far short of Pelosi’s three trillion dollar package coming up for a vote tomorrow, which is so full of pork and hobby-horse agenda spending that few people are even bothering to defend it. The scope suggested in this report would likely be limited to reimbursing for COVID-19 related spending rather than bloc-granting rescues for budget shortfalls. That gives the White House some negotiating room to get Pelosi on board a tighter, more focused rescue package for states and local government in the next phase of the emergency response.

Just to put the cherry on top, as Mitch McConnell said, he once again declared Pelosi’s $3T bill dead on arrival at the Senate. The “totally unserious effort” included every Democratic hobby horse imaginable, including marijuana promotion:

Two days after House Speaker Nancy Pelosi unveiled what would be Congress’ fifth and largest package for nursing the dormant economy through the emergency, McConnell, R-Ky., said Democrats had produced a “seasonal catalog of left-wing oddities and called it a coronavirus relief bill.”

Provisions he singled out for criticism included a rollback of GOP-passed tax increases on residents of states with high taxes, language making it easier for people to vote by mail and what he called “the cherry on top” — provisions helping legal marijuana businesses.

“This is a totally unserious effort,” he said.

So Senate Republicans still need to get sold on the need for such spending, especially in light of how Democrats are approaching aid. They point out — correctly — that the federal government is spending trillions of dollars it doesn’t have at the moment, and that the debt and deficit of all this helicopter money will do long-term damage of its own. The White House may have been convinced by Fed chair Jerome Powell that standing pat will be worse:

Federal Reserve Chair Jerome H. Powell gave a dire warning Wednesday that the U.S. economy could become stuck in a painful multiyear recession if Congress and the White House do not authorize more aid to address the coronavirus pandemic’s economic fallout.

“Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said in a videoconference with the Peterson Institute for International Economics. …

Asked about the need for more economic stimulus, Trump told reporters on Wednesday, “I don’t know, it depends.” But Powell sounded a much more urgent tone, describing the United States as in the midst of the “biggest shock our economy has felt in modern times” and potentially facing an “extended period” of weakness.

“The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” Powell said. “Avoidable household and business insolvencies can weigh on growth for years to come.”

That means more aid aimed at the private sector, which means that Pelosi suddenly matters again. There’s no way around the House of Representatives when it comes to appropriating money, and this time around Pelosi has enough time to demand some concessions in return for states..

Not all Senate Republicans are averse to more spending efforts, either. Cory Gardner and Josh Hawley have combined on an effort to direct federal funding toward private-sector payrolls with a more fine-tuned approach to aid.  The two Republicans cast this as an answer to Pelosi’s bloated Phase IV (V? VI?) bill, especially in targeting the job losses that have threatened to turn this into another Great Depression:

“We should put forward a proposal that is focused on jobs in contrast to what House Democrats are doing. They could have done something like this. They had an opportunity to put forward a jobs proposal and they didn’t,” Hawley said of Democrats’ bill, which will receive a vote on Friday. “It is unbelievable that you would propose $3 trillion in federal spending and you wouldn’t have a focus on workers.”

Senate Majority Leader Mitch McConnell (R-Ky.) and other senior Republicans have suggested they are content to see how the nearly $3 trillion they have pumped into the economy so far works out before moving onto a fifth relief bill. But Gardner says “without additional support, it’s possible that many jobs will never come back and many businesses will never reopen.” …

The two Republican senators’ proposal would provide payroll assistance at up to 120 percent of a rehired worker’s pay, with a $50,000 cap. The bonus pay is aimed at providing incentives for companies to bring back workers and make up for some of the employees’ pay losses while they are unemployed. It would also apply to new hires for businesses staffing up for post-lockdown commerce.

Similarly, the legislation would pay up to 80 percent of workers’ wages for employees that businesses have kept on their payrolls. The benefits for companies to both rehire workers and keep existing idled workers on their payroll would last through the end of the year.

That would not likely be a replacement for Pelosi’s bill, but instead another element to blend into the final version of a more targeted aid package. This is already getting some criticism as a corporate welfare program, but either we rescue jobs through their employers or we pay lots of money for unemployment benefits. The former would at least preserve some economic power for a reopening of the public square, which will be necessary to reinvigorate the tax base for the same state and local economies that Pelosi wants to bail out now.

With both parties moving a little closer together, expect an agreement of some sort within the next few days. Best guesstimate on overall cost would be around $2 trillion, but preferably lower.

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