The Finance 202: Republican infighting over emergency relief erupts at a perilous time for the party
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The Finance 202
Your economic policy briefing
Tory Newmyer By Tory Newmyer
with Brent D. Griffiths
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Republican infighting over emergency relief erupts at a perilous time for the party
A payroll tax cut, one of President Trump’s top priorities for the coronavirus relief package, officially went belly-up Thursday. Trump just days ago suggested he might veto a package that didn’t include it.
The president blamed Democrats for its failure to move forward, but objections from Republicans sunk it on Capitol Hill. Its fate is just one example of the broader mess consuming Republican negotiations on the next round of emergency relief for an increasingly shaky economy – and the political risks.
Republican infighting is hobbling progress at a moment the party can least afford it.
With Trump down in the polls against former vice president Joe Biden and Senate Republicans at risk of losing their majority, the pressure's on for the GOP to unite swiftly around a plan to keep the economic crisis from growing worse. Instead, with critical lifelines to strapped Americans set to expire in days, party leaders are presiding over a needlessly late and haphazard process before even presenting their plan to Democrats.
White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin address reporters in the Capitol about the emergency relief package. (Jim Lo Scalzo/ EPA-EFE)
White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin address reporters in the Capitol about the emergency relief package. (Jim Lo Scalzo/ EPA-EFE)
Republicans are still divided on multiple key issues.
Senate Majority Leader Mitch McConnell (R-Ky.) was expected on Thursday morning to roll out the Republican answer to the $3 trillion relief package House Democrats approved in May. Instead, ongoing rifts between Senate Republican leaders and the Trump administration — and among factions of the Senate GOP — forced McConnell to delay its debut.
The major points of disagreement:
- The overall cost. “They had said they wanted the package to be roughly $1 trillion, but the GOP plan has fueled fierce internal divisions about the size and scope of the government response as lawmakers have digested grim polling news about the party’s standing ahead of the November elections,” Erica Werner, Seung Min Kim, and Jeff Stein report.
- The process for approving the relief. Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows on Thursday endorsed breaking up the package to immediately move a stand-alone measure extending enhanced unemployment benefits. “Democrats and Republicans immediately shot down the idea,” per my colleagues.
- What to do about the expiring unemployment benefits. Senate Republican opinion has run the gamut, from stopping the $600 weekly payments cold to extending them at their current rate. Top Republicans have settled on a plan that could cut the average payment to $200 a week, the New York Times’s Jim Tankersley and Ben Casselman report. But it faces logistical hurdles.
- Trump's push on the FBI building. The White House is pushing for language addressing the location of the FBI headquarters in downtown Washington, a longtime hobbyhorse of the president’s with no apparent relevance to the pandemic response, per Post reporting.
- A Lindsey Graham special. The South Carolina Republican is demanding the inclusion of a provision related to manufacturing and China that is drawing pushback from colleagues.
Senate Majority Leader Mitch McConnell (R-Ky.). (Erin Scott/ Reuters)
Senate Majority Leader Mitch McConnell (R-Ky.). (Erin Scott/ Reuters)
Where Republicans agree, at least in broad strokes:
McConnell, in a Senate floor speech, said the Republican proposal would include a new round of $1,200 stimulus checks, more funds for coronavirus testing, and “liability reform setting up legal protections to make it hard for employees to sue their employers if they become sick at work,” Erica, Seung Min and Jeff report.
More from the Post team: “The emerging GOP bill also was expected to include $70 billion for elementary and secondary schools, with half of that money connected to schools physically reopening their classrooms. No new money for state and local governments was expected, but instead the legislation would allow local leaders more flexibility in spending $150 billion allocated in the Cares Act in March. Tax credits were expected to encourage businesses to retain workers and help them enact safety protections in workplaces. Another round of funding for the small-business Paycheck Protection Program was also expected.”
Republicans are scrambling now because they waited weeks to start crafting their proposal.
As we wrote here back on June 30, “Evidence keeps mounting that a wobbly economic recovery is poised to lose its footing as states and businesses ratchet back reopening plans in the face of spiking case counts. But the party remains divided, both on Capitol Hill and within the White House, about the necessity of pumping out more federal money to shore it up. And GOP leaders are evincing little urgency about acting in the immediate term.”
The public health and economic crises have both degraded significantly since. “There have been 4 million confirmed U.S. cases of the virus, far more than any other country,” my colleagues note. “More than 140,000 people have died, including 3,000 since Tuesday. In addition, 1.4 million people filed for unemployment benefits last week, up from 1.3 million the week before, the first time there was a week-over-week increase in several months.”
Coronavirus fallout
PPP couldn't outlast the pandemic.
There's no official count, but some recipients are starting layoffs: Some 22 percent of PPP recipients have laid off or expect to lay off workers after exhausting their loan, up from 14 percent in June, per a survey by the National Federation of Independent Business. 'A recent report from Goldman Sachs found that only about one in six businesses that received loans said they were confident they could pay their employees without further assistance,' Eli Rosenberg reports.
“In recent weeks, layoffs have been reported at the Buffalo-based New Era Cap Co., which received $5 million to $10 million; Peoria Charter Coach, a bus travel company that laid of 132 workers — 95 percent of its workforce — after using up the $1 million to $2 million PPP loan; at least a dozen museums including National September 11 Memorial and Museum and the Philadelphia Museum of Art; and Rosen Hotels & Resorts, a Florida-based hotel company that received a loan of between $2 million and $5 million.”
Special events workers who lost work because of the pandemic marched on Tuesday in Salt Lake City. (Rick Bowmer/AP)
Special events workers who lost work because of the pandemic marched on Tuesday in Salt Lake City. (Rick Bowmer/AP)
The relief is running out as the jobs crisis grows more dire.
New unemployment insurance claims rise for the first time since March: “For the week ending July 18, about 109,000 more jobless claims were filed compared to the week prior, according to the Department of Labor,” Eli Rosenberg reports.
“The number of workers continually claiming unemployment insurance went down, however, a statistic that lags by a week, to 16.1 million workers for the week ending July 11, from 17.4 million for the week ending July 4. In addition to the 1.4 million seeking unemployment nationwide last week, another 980,000 new Pandemic Unemployment Assistance claims were filed, the benefits offered to self-employed and gig workers.”
July jobs report could show backsliding: “Economists are expecting to see a decline in second-quarter growth of about 35%, when the GDP data is released next week. The size of the bounce back in the third quarter is dependent on the health of the labor market. July’s employment report is scheduled to be released Aug. 7,” CNBC's Patti Domm reports.
More from the U.S.:
- 'The rapid spread of the virus this summer is striking, taking just 15 days to go from 3 million confirmed cases to 4 million. By comparison, the increase from 1 million cases to 2 million spanned 45 days from April 28 to June 11, and the leap to 3 million then took 27 days,' Anne Gearan, Marisa Iati and Jacqueline Dupree report.
- Trump cancels Republican national convention: “Trump abruptly canceled the Republican National Convention celebrations scheduled for next month in Jacksonville, Fla., making the latest in a series of head-snapping reversals in the face of a nationwide pandemic that continues to spread out of control,” Michael Scherer, Josh Dawsey and Colby Itkowitz report.
- Oregon governor faces lawsuit over mask mandate: “The legal challenges against mask mandates reached Oregon when a conservative nonprofit group sued Gov. Kate Brown (D) over her rules that require people to wear masks in public while indoors or in outdoor spaces where it is difficult to stay at least six feet away from others,” Katie Shepherd reports.
From the corporate front:
- Southwest and American cut more flights: “American Airlines Group Inc. and Southwest Airlines Co. said they were tempering expectations for an air-travel recovery, as mounting cases have driven down bookings by as much as 80 percent in some parts of the U.S,” the WSJ's Alison Sider and Doug Cameron report.
- Ann Taylor parent company files for bankruptcy: “Ascena Retail Group, the conglomerate behind women’s apparel brands Ann Taylor, Lane Bryant and Catherines, filed for bankruptcy and said it will close at least 877, or nearly a third, of its 2,800 stores after years of declining sales and ballooning debt,” Abha Bhattarai reports.
- AMC postpones reopening until August: “The nation’s largest theater chain previously said it would reopen theaters at the end of July. AMC, which owns about 1,000 theaters world-wide, said about one-third of its cinemas in Europe and the Middle East have reopened. In China, where Covid-19 cases were first reported, theaters began reopening this week,' the WSJ's Dave Sebastian reports.
- Ad market faces long road back: 'Just last month, analysts were expecting third-quarter U.S. ad sales to decline by 4.8 percent versus the year-ago quarter, which would have been an improvement over the 16.8 percent decline in the hard-hit second quarter. But now it appears the third quarter could be ‘significantly worse'… said Vincent Letang, executive vice president of global market intelligence at research firm MAGNA,' Reuters's Sheila Dang reports.
- Cannabis demand at all-time high: “There’s been a wave of increased cannabis sales since the pandemic began, industry data show. Sales so far this year are approaching $4 billion according to BDS Analytics. While sales declined slightly in April after a March bump related to stockpiling in quarantine, they trended upwards again in May, surpassing March’s numbers,” Bloomberg News's Tiffany Kary reports.
When superpowers collide
The U.S. Consulate in Chengdu, China, on Thursday. (Bloomberg)
The U.S. Consulate in Chengdu, China, on Thursday. (Bloomberg)
China strikes back, orders U.S. to close Chengdu consulate.
The move comes in retaliation for U.S. directive for the country to shutter its Houston consulate. “While analysts here called the retaliation measured, they said there was no end in sight to a conflict that spans trade and technology, freedom of the press and religion, students and scientists, human rights and the race for a coronavirus vaccine,” Anna Fifield reports.
“'Even though the relationship is worsening, we have not yet reached the worst point,' said Cheng Xiaohe, a professor of international relations at Renmin University in Beijing. The bottom, he said, would be measured by two things: The closure of embassies in each country, or military confrontation, whether intentional or accidental… Analysts on both sides say bilateral relations are at their worst since 1972, when President Nixon began overtures to the People’s Republic of China, leading to the start of formal diplomatic relations in 1979.'
Secretary of State Mike Pompeo is ratcheting up his rhetoric. Key quote: 'The old paradigm of blind engagement with China simply won’t get it done. We must not continue it. We must not return to it,” Pompeo said Thursday. “Today, China is increasingly authoritarian at home, and more aggressive in its hostility to freedom everywhere else. . . . If the free world doesn’t change Communist China, Communist China will change us.'
Money on the Hill
Sen. Mitt Romney (R-Utah). (Olivier Douliery/AFP/Getty Images)
Sen. Mitt Romney (R-Utah). (Olivier Douliery/AFP/Getty Images)
Judy Shelton's confirmation may not be sealed yet.
Sen. Mitt Romney's opposition means the vote could be very close: “[Romney] (R-Utah) said he will vote against [Trump’s] controversial nomination of Judy Shelton to the Federal Reserve Board, impeding her path to confirmation,” Sylvan Lane and Jordain Carney report.
“[He] is the first Republican senator to announce his opposition to Shelton, who will also likely be opposed by all 47 members of the Senate Democratic Caucus, so the opposition of three more Republicans would effectively doom her nomination. Romney, like several GOP senators, had previously expressed concerns about Shelton’s past support for linking the value of the dollar to gold, along with her inconsistent stances on the Fed interest rates.'
Former New York Fed president says Shelton wouldn't be that big of deal: “Having people who are ‘outside the mainstream’ on the Federal Reserve’s Board of Governors won’t create ‘huge amounts of problems’ because they won’t set the path for monetary policy alone, former New York Federal Reserve President William Dudley said,” Bloomberg News's Ana Monteiro and Christopher Condon report. “They ‘will have a voice, but they will not actually set the path for monetary policy or regulatory policy -- that will be set by Jay Powell and Randy Quarles,’ Dudley said.”
Pocket change
Monday's major tech hearing is in limbo.
Efforts to honor civil rights icon John Lewis might delay the proceeding: “Monday's first-of-its-kind congressional hearing with the CEOs of Amazon, Apple, Google and Facebook is likely to be postponed because of the announcement that the late Rep. John Lewis will lie in state at the U.S. Capitol next week,” Politico's Cristiano Lima reports.
“Lewis (D-Ga.), a civil rights icon who died last week after a battle with pancreatic cancer, is set to be honored in a private ceremony in the Rotunda on Monday, congressional leaders announced Thursday evening …Those plans conflict with the House Judiciary antitrust subcommittee's planned hearing with Amazon's Jeff Bezos, Facebook's Mark Zuckerberg, Apple's Tim Cook and Google's Sundar Pichai, scheduled to begin at noon on Monday.” (Amazon CEO Jeff Bezos owns The Washington Post.)
Lawmakers have a lot of grist for grilling big tech chiefs. In the headlines yesterday alone:
- Amazon met with some companies before they launched competing products. WSJ's Dana Mattioli and Cara Lombardo interviewed more than two dozen entrepreneurs, investors and deal advisors 'who said Amazon appeared to use the investment and deal-making process to help develop competing products,” they report. “In some cases, Amazon’s decision to launch a competing product devastated the business in which it invested. In other cases, it met with startups about potential takeovers, sought to understand how their technology works, then declined to invest and later introduced similar Amazon-branded products, according to some of the entrepreneurs and investors.”
- Apple faces deceptive trade practice probe by multiple states: “The Texas attorney general may sue Apple for violating the state’s deceptive trade practices law in connection with the multi-state investigation, according to the document, which was obtained by the Tech Transparency Project,” Reuters's Stephen Nellis and Neha Malara report.
- Twitter CEO apologizes for hack. “Twitter CEO Jack Dorsey said the company ‘fell behind’ in some of its security restrictions that led to the hack of prominent users including former president Barack Obama and Tesla chief executive Elon Musk on the social media site last week,” Rachel Lerman reports. “Dorsey apologized while announcing the company’s second-quarter earnings, which showed Twitter users have increased during the pandemic, but advertising revenue has fallen.”
Market movers
People walk along Wall Street near the New York Stock Exchange. (Michael M. Santiago/Getty Images)
People walk along Wall Street near the New York Stock Exchange. (Michael M. Santiago/Getty Images)
Dow drops 350 points as tech shares slide.
S&P 500 snapped four-day winning streak: “The Dow Jones Industrial Average dropped 353.51 points, or 1.3 percent, to 26,652.33. The S&P 500 slid 1.2 percent, or 40.36 points, to 3,235.66, snapping a four-day winning streak. The Nasdaq Composite fell 2.2 percent, or 244.71 points, to 10,461.42 as the sell-off in major technology companies deepened,” CNBC's Fred Imbert, Thomas Franck and Sam Meredith report.
The details: “Microsoft shares slipped 4.3 percent despite reporting better-than-expected earnings for the previous quarter … Apple traded 4.5 percent lower, while Amazon and Netflix dropped 3.6 percent and 2.5 percent, respectively. Tesla, meanwhile, gave back its earlier gains and fell nearly 5 percent despite reporting earnings that blew past analyst expectations.”
The regulators
The New York Stock Exchange. (Michael M. Santiago/Getty Images)
The New York Stock Exchange. (Michael M. Santiago/Getty Images)
Hedge fund bailout highlights holes in Dodd-Frank.
The economic crisis has shown how non-bank corners of the industry remain beyond the reach of regulators. The New York Times's Jeanna Smialek and Deborah Solomon examine hedge funds making so-called basis trades, “involved exploiting a price difference in the Treasury market” and funded b “a form of short-term borrowing, called repo.”
“The problems started as markets became very volatile in mid-March. The repo funding essential to the trades was suddenly hard to come by as financial institutions that provide the loans backed away. Historical pricing patterns broke down, and many trades were no longer profitable. Some hedge funds were forced to dump government debt,” they write.
“The market for U.S. government debt, the very core of the global financial system, was grinding to a standstill… The Fed stepped in to avert catastrophe, pledging during an emergency Sunday afternoon meeting to buy huge sums of government-backed bonds.”
CFTC scales back derivatives oversight.
The move represents a win for JPMorgan Chase and Citigroup. “The U.S. derivatives regulator on Thursday voted to abandon its effort to regulate trading that happens overseas, where it had worried that interconnections between big banks in the global market could transmit risk to the U.S. economy,” WSJ's Dave Michael's reports.
“The Commodity Futures Trading Commission’s plan will effectively cede oversight of that activity to overseas regulators whose rules are deemed sufficient. The plan, which passed along party lines on a 3-2 vote, represents a win for banks such as JPMorgan Chase & Co. and Citigroup Inc. that dominate the $558 trillion global swaps market and have structured their trading in places like London to minimize U.S. oversight.”
Daybook
Today:
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
From The Post's Tom Toles:
Bull session
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