Senate Defeats Must-Have Aid Package When Country Needs It

Posted on 03/22/2020 7:30 PM

Texas producer gives granddad's advice on 'uncharted waters'



Note: The coronavirus rescue bill failed in a key procedural vote in the Senate, sending lawmakers back to the drawing board. Senators voted 47-47 on advancing a “shell” bill, a placeholder that the text of the stimulus legislation would have been swapped into, falling short of the two-thirds threshold needed to advance the proposal.

     Democratic lawmakers said “the GOP” bill includes several “non-starters” and that it walks back areas of prior agreement, such as expanding unemployment insurance, they thought they had reached with Republicans. Sen. Ed Markey (D-Mass.) said the proposal put forward by Republicans was “totally inadequate.”

     It did not take long for Senate Minority Leader Chuck Schumer (D-N.Y.) to say the “GOP bill” includes “problematic” provisions and that Senate Majority Leader Mitch McConnell (R-Ky.) should have made the negotiations include both chambers and the White House from the beginning.

     McConnell said: “The American people are watching this spectacle. I’m told the futures market is down 5%. I’m also told that’s when trading stops. So the notion that we have time to play games here with the American economy and the American people is utterly absurd,” McConnell said.

     Point, counter-point. “We’re back to square one,” McConnell said, noting he would try again at a time of his choosing. Schumer said the package up for consideration was a Republican bid to direct aid to corporations.

     As for the Democratic-controlled House, House Speaker Nancy Pelosi (D-Calif.) said, “From my standpoint, we’re apart.” Pelosi said House Democrats would go ahead with their own legislation. This would later be reconciled with the Republican proposals, which would likely delay the arrival of the stimulus and unnerving markets, just as Congress did during the last financial crisis.

     A major Democratic sticking point is a $500 billion pool of money for loans and loan guarantees that Republicans want to create, which some Democrats are labeling a “slush fund” because the Treasury Department would have broad discretion over who receives the money.


In Tonight’s Updates



* Trader: You can always count on Congress to fail to deliver on time
* Words of wisdom from a Texas farmer
* Global cases of infection more than doubled in a week to top 330,000 Sunday
* Cases in the U.S. crossed 32,000 mark, 10-fold from a week earlier
* N.Y. state: 15,168 cases reported Sunday, about 4,000 more than a day earlier
* New York has roughly 5% of coronavirus cases worldwide
* New York city has close to a third of all cases in the country
* U.S. Covid-19 testing ramps up
* Vice President Mike Pence said he and his wife tested negative for Covid-19
* Sen. Rand Paul tested positive for coronavirus, under quarantine, 'feeling fine'
* German Chancellor Angela Merkel is self-isolating
* One in four Americans being asked to stay home to curb coronavirus pandemic
* Chinese gov't data: one-third of coronavirus cases asymptomatic 'silent carriers'
* Trump: Companies stepping up as states raise concerns over supplies
* Hawaii orders a 14-day quarantine for all arrivals
* Warmer weather may slow the coronavirus*
* Aim for Virus Aid Plan 3: Include appropriations designed to keep gov't running
* Barron's article mentions possible 'depression'...
* … But American consumers are still optimistic about the economy
* ObamaCare and Medicaid will see a surge in enrollments
* Some ask: Why not do huge infrastructure/transportation reform now?
* Poll show rise in Trump's management of crisis
* WSJ: The South is Trump's to lose
* Congress is considering funding for more rest spots for long-haul truckers
* Fewer refineries able to get biofuel waivers.


MARKET FOCUS



Markets: U.S. equity futures tumbled at the start of trading Monday after a surge in the global death toll from the coronavirus and a failure as yet by Congress to agree on an aid plan. Crude oil slumped. S&P 500 futures dropped 5% and hit limit down after the index lost more than 4% on Friday. Australian equities tumbled more than 8% and Asian contracts pointed lower. The dollar climbed against major peers.

Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the virus.

Treasury Secretary Steven Mnuchin dismissed a question on whether the U.S. was already in a recession as a “technical” one that was “not terribly relevant,” but he acknowledged economic activity will be reduced this quarter and possibly also in the subsequent three months depending on the trajectory of the virus.

U.S. Covid-19 testing ramps up. Higher numbers may not reflect massive growth in infections but really just more testing. There's also some new data showing a significant number of people may be asymptomatic, infected and untested, which supports the idea of a mortality rate somewhere perhaps in the 0.5-1% range.

     Testing

 Barron's cover story (link) says Washington needs to act big if a deep recession or depression is to be avoided. "If otherwise healthy companies and industries collapse, there could be nothing left for workers to return to when the coronavirus subsides. If people aren’t given the financial support they need to quarantine or practice social-distancing for what could be an extended period, the virus might not abate quickly enough for the economy to bounce back," reads the push for huge intervention.

     While there’s no clear definition of a depression, the Barron's article notes that, “The San Francisco Fed has tried to put things in perspective by comparing the downturn that occurred from 1973 to 1975 to the first downward leg of the Great Depression, from 1929 to 1933. During the 1973 recession, GDP fell 3.4%, while joblessness rose from 4% to 9%. In the first leg of the Great Depression, real output slid almost 30%, while unemployment jumped from 3% to nearly 25%. During a later leg of that awful downturn, many businesses and individuals went bankrupt. Banks failed, and the economy took more than a decade — and a world war — to recover. It took 25 years — until 1954 — for stocks to return to the peak they hit in 1929.”

     More to come

ObamaCare and Medicaid will see a surge in enrollments as workers lose their jobs and their health coverage, a stress test for the federal health programs.

Some upbeat news... American consumers are still optimistic about the economy, but they’re already reporting changes in their income, spending, and behavior. As governments and organizations continue to work toward containing Covid-19, caused by the novel coronavirus (SARS-CoV-2), and stem the growing humanitarian toll it is exacting, the economic effects — at the macro and sector levels, as well as on employment — are also beginning to be felt. McKinsey & Company is tracking consumer sentiment to gauge how people’s expectations, incomes, spending, and behaviors change throughout the crisis. The graphic below is based on U.S. survey data collected March 16-17, 2020. Link for details and more graphs.

     McKinsey one

Fearless girl

     "Fearless Girl" statue outside the New York Stock Exchange (Photo: Kevin Hagen/AP)


POLICY FOCUS



Words of wisdom from a Texas farmer via an email:

I feel like as a producer we have to hang in there; if we don’t produce, the world can’t begin to climb out of this. I farm with my granddad. This will be his 61st crop this year. We were discussing plans leading up to planting the other day and he told me, 'I wish I had words of wisdom, or something witty to say about how things are going to be ok, but this is just getting outta hand. We just have to work smart.' That’s when it hit me that we are in uncharted waters. When a producer has seen what he’s seen, and lived through the ag economy ups and downs in the last 60 years is speechless on a topic, it’s something to be cautious with.”

     Another reader: “I hope to hell we can look back at this and say we probably overreacted! Then we know we did enough. It would be catastrophic if we failed to overreact.”

     Advice from another reader: “One of the psychologists in nearby MD is doing a series of whiteboard therapy posts on facebook — https://www.facebook.com/whiteboardpsych (link). I think both posts on depression and anxiety might be helpful for some folks.”

Whenever Congress can get its act together on Virus Aid Plan 3, the aim is to include several months of appropriations designed to keep the government running, according to one administration official — a move that would allow Congress to adjourn for the coming weeks.

     Appropriators are still working on a supplemental spending measure that would help government agencies continue to operate, a measure that could be tacked on to the broader stimulus. Senate Appropriations Chairman Richard Shelby (R-Ala.) said he expects that funding bill to be included.

     White House request significantly revised higher. The administration requested $45.8 billion in fiscal 2020 funds last week but has ballooned to $242 billion in the Senate. A summary of the supplemental spending legislation provided to stakeholders by the Senate Appropriations Committee says it would provide $75 billion for hospitals, $20 billion for veterans’ health care, $11 billion for vaccines, therapies and diagnostics and $4.5 billion for the Centers for Disease Control and Prevention. More than 75% of the $242 package — approximately $186 billion — will go to state and local governments, fulfilling a central Democratic demand to help cash-strapped states such as New York. The supplemental would also provide $20 billion for public transportation emergency relief, $10 billion for airports and $5 billion for the Federal Emergency Management Agency (FEMA) disaster relief fund, according to the summary document.

     Other items include $12 billion to the Pentagon, $10 billion in block grants to states, $12 billion for K-12 education and $6 billion for higher education.

Some ask: Why not do huge infrastructure/transportation reform now? With the Federal Reserve setting interest rates at zero, it’s a good time for the government to borrow and this should include a big funding program on infrastructure reform that could bolster the U.S. economy post-Covid-19.

     Lawmakers from both political parties have argued for years on how to fund the reform, but with the current congressional spending blitz ahead, observers say a transportation package should be part of the longer-term mix of items to get the U.S. on the path back to sustained growth.

Coronavirus update:

  • Summary: The global cases of infection more than doubled in a week to top 330,000 Sunday. Cases in the U.S. alone crossed 32,000. The U.S. has seen a surge in new cases, growing 10-fold from a week earlier. The death toll across the U.S. now stands at 347. New York state has15,168 confirmed cases, up 4,812 since Saturday, and 114 deaths. The number of deaths world-wide from Covid-19, the disease caused by the virus, surpassed 13,000 as of Sunday, according to the data compiled by Johns Hopkins University.

    Virus surge

     
  • New York cases surge. Figures presented by New York state governor Andrew Cuomo showed the number of confirmed U.S. cases had increased by about 8,000 from Saturday, to more than 29,000. New York has the biggest number of cases in the United States. Data showed one in 20 people in the world who have the virus live in the state, with the number of cases surging from 10,000 to 15,000 as of Sunday. Those in New York City itself rose from about 6,000 to 9,000. Cuomo said he expected between 40% and 80% of the state’s population to ultimately contract the virus. New York has about 15 times more confirmed cases than any other state — although this was in part, Cuomo said, because it was conducting more tests than elsewhere.
     
  • Italy on Saturday again recorded the highest one-day death toll for any country, with 793 fatalities, prompting the government to tighten a nationwide lockdown.
     
  • The number of deaths reported in Iran rose 129 over the previous 24 hours to a total of 1,685, the highest in the world after Italy and China.
     
  • Vice President Mike Pence said he and his wife had tested negative for the coronavirus, a spokesman said. They were tested after an official in Pence’s office was confirmed to be infected.
     
  • Kentucky GOP Sen. Rand Paul tested positive for coronavirus and is under quarantine, but is “feeling fine,” his office announced on Twitter Sunday. “He is asymptomatic and was tested out of an abundance of caution due to his extensive travel and events. He was not aware of any direct contact with any infected person.”
     
  • German Chancellor Angela Merkel is self-isolating after a doctor she saw last week was infected.
     
  • One in four Americans is being asked to stay home in an effort to curb the coronavirus pandemic. The governors of California, New York, New Jersey, Connecticut and Illinois told their residents to stay indoors as much as possible, issuing far-reaching demands that all nonessential workers must remain at home. “These provisions will be enforced,” Gov. Andrew M. Cuomo of New York said. “These are not helpful hints.”
     
  • Classified Chinese government data suggests one-third of coronavirus cases there were asymptomatic "silent carriers,” according to an article (link) in the South China Morning Post, the English-language paper in Hong Kong. “More than 43,000 people in China had tested positive without immediate symptoms by the end of February and were quarantined."
     
  • Trump says companies are stepping up as states raise concerns over supplies. Vice President Mike Pence said at a news conference at the White House on Saturday that the federal government had ordered hundreds of millions of N-95 masks for health care facilities, but he did not say when they would be delivered. A Hanes spokesman said the company had agreed to make up to six million masks a week along with a group of other yarn and clothing companies after Trump administration officials reached out about a week ago. The masks will not be the highly sought-after N-95 masks. Tim Cook, Apple’s chief executive, said on Saturday that the company would donate millions of masks to health professionals in the U.S. and Europe.

    Before the coronavirus emerged, China produced about half of the world’s masks. During the outbreak, it expanded its mask production by nearly 12-fold but continues to hold onto its supply, but the country has given some countries some masks.

     
  • Hawaii orders a 14-day quarantine for all arrivals. Gov. David Ige of Hawaii has ordered a mandatory 14-day quarantine for everyone arriving in Hawaii, including tourists and returning residents. Returning residents are to quarantine in their homes, and visitors are to stay in their hotel rooms or rented lodgings. They are to leave only to seek medical care. The Hawaii Department of Health on Saturday reported 48 cases of coronavirus in the state, an increase of 11 from the day before. The governor said the delay in putting the order in place was to give tourists time to cancel or postpone their trips, which he said he hoped they would do.
     
  • Warmer weather may slow the coronavirus. Communities living in warmer places appear to have a comparative advantage to slow the transmission of the coronavirus, according to an early analysis by scientists at the Massachusetts Institute of Technology. The researchers found that most cases occurred in regions with low temperatures, between 37.4- and 62.6-degrees Fahrenheit. “Wherever the temperatures were colder, the number of the cases started increasing quickly,” said Qasim Bukhari, a computational scientist at MIT who is a co-author of the study. “You see this in Europe, even though the health care there is among the world’s best.” The temperature dependency is also clear within the United States, Dr. Bukhari said. Arizona, Florida and Texas have seen slower outbreak growth compared with Washington, New York and Colorado. Coronavirus cases in California have grown at a rate that falls somewhere in between. The combination of heat and high humidity that appears to reduce transmission comes mainly in July and August for much of the Northern Hemisphere, Dr. Bukhari cautioned. “This suggests that even if the spread of the coronavirus decreases at higher humidity, its effect would be limited for regions above 40 degrees North, which includes most of the Europe and North America,” he said.

Other items of note:

  • Poll shows rise in Trump's management of crisis. An ABC News/IPSOS poll released on Friday indicated that 55% of Americans approved of Trump’s management of the crisis, versus 43% who disapproved. Those numbers were roughly inverted since a poll a week before from the same organizations.
     
  • The South is Trump's to lose. The president is expected to do well in rural America this fall, but the margin of turnout could shape whether Democrats have a chance to win in the Deep South. Link to Wall Street Journal article.
     
  • Congress is considering funding for more rest spots where long-haul truckers can safely take a break. Truckers often have to park on highway shoulders or other unsafe areas because of a lack of parking. A bill in the House would give up to $755 million to states to build new parking spots and rest facilities, but it may be pushed to still another Covid-19 aid package or even into 2021.
     
  • Fewer refineries able to get biofuel waivers. The Trump administration doesn’t plan to challenge a federal court ruling that significantly curbs its ability to exempt oil refineries from biofuel-blending requirements via the Renewable Fuel Standard (RFS) program, Bloomberg News reported. Link to details.


 

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