Senators return to Washington, D.C., today from their annual summer recess, no closer than when they left three weeks ago to resolving sharp divisions over another coronavirus aid package and now facing a potential government shutdown that could deepen the economic pain, the New York Times reported. The impasse amounts to a fraught political situation for both parties less than two months before the November election, with millions still unemployed and cities and states beginning to enact significant budget cuts with no promise of relief from Congress. Senate Republican leaders are hoping to corral their caucus around a scaled-back stimulus plan that would reinstate lapsed federal unemployment benefits at $300 per week — half their previous level — and allocate $105 billion for schools and funds for testing and the Postal Service, according to Republican aides familiar with the discussions. The plan represents an effort to intensify pressure on Democratic leaders, who want to restore the $600 unemployment benefits and have refused to consider any measure below $2.2 trillion. The Republicans’ bill would carry a likely price tag of $500 billion to $700 billion, far less than the $3 trillion measure Democrats passed in the House and smaller than the $1 trillion measure Senate Republicans introduced in July. A procedural vote advancing the legislation could come as early as this week, according to Republican aides, but it remains unclear whether Republicans can coalesce around it. Even if they do, Democrats are expected to block it. In a letter to his caucus, Senator Chuck Schumer of New York, the minority leader, called the bill “emaciated” and urged Democrats to push for “another comprehensive, bipartisan bill that meets the moment facing our nation.” Lawmakers are more optimistic about the chances for a stopgap budget bill to avert a shutdown at the end of the month; Speaker Nancy Pelosi and Steven Mnuchin, the Treasury secretary, have reached an informal agreement on the bill. It is unclear how long the measure would provide funding after the new fiscal year begins on Oct. 1, but it would be all but guaranteed to last beyond the Nov. 3 election. Read more.
https://www.nytimes.com/2020/09/08/world/covid-19-coronavirus.html?acti…
In related news, states and cities across the nation have made an array of fiscal maneuvers to stay solvent and are planning more in case Congress can’t agree on a fiscal relief package after the August recess, the New York Times reported. House Democrats included nearly $1 trillion in state and local aid in the relief bill they passed in May, but the Senate majority leader, Mitch McConnell of Kentucky, has said that he doesn’t want to hand out a “blank check” to pay for what he considers fiscal mismanagement, including the enormous public-pension obligations some states have accrued. There has been little movement in that stalemate lately. Economists warn that further state spending reductions could prolong the downturn by shaking the confidence of residents, whose day-to-day lives depend heavily on state and local services. “People look to government as their backstop when things are completely falling apart,” said Mark Zandi, chief economist at Moody’s Analytics. “If they feel like there’s no support there, they lose faith and they run for the bunker and pull back on everything.” Collectively, state governments will have budget shortfalls of $312 billion through the summer of 2022, according to a review by Moody’s Analytics. When local governments are factored in, the shortfall rises to $500 billion. That estimate assumes the pandemic doesn’t get worse. Read more.
https://www.nytimes.com/2020/09/07/business/state-budgets-coronavirus-a…
