By Timothy L. O’Brien and Nir Kaissar / Bloomberg Opinion
We aren’t statisticians, oddsmakers, pollsters or fortune tellers, so we can’t predict with certainty whether Congress and the White House will pull together a covid-19 relief package before Election Day; or even shortly afterward.
But we’re going to hazard a guess that they won’t.
As of Friday, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin hadn’t narrowed the gap between their plans, one of which calls for $2.4 trillion in aid and the other, $1.9 trillion. Mnuchin and Pelosi blamed each other for the standoff (and, by the way, the Democrats had a plan in place months ago). But even if the two of them could find common ground, Senate Majority Leader Mitch McConnell has counteroffered an anemic $500 billion, which a significant portion of his own caucus is unlikely to back.
Of course, if the House of Representatives and the White House wind up with an agreement without the Senate, then they don’t have a bill. It’s been apparent since May that the Republicans who run the show in the Senate aren’t serious about enacting a robust federal aid package as a successor to last spring’s CARES Act.
That’s unfortunate. It’s also tragic. While dealmaking and legislative gamesmanship are obviously at work here, lives hang in the balance. There are 12.6 million Americans without jobs, and the supplemental benefits they received under the CARES Act _ benefits that put food on their families’ tables and paid the rent _ expired in July. Almost four months have passed since then, and an unknown number more will now go by without further aid.
In recent months, the economy has been humming along, buoyed by the trillions in federal aid that the CARES Act steered to corporations and financial markets. Remove that support and what happens? One economist cited by Bloomberg News estimates that a failure to deliver more relief will mean $1.2 trillion less in economic output by the end of 2023 and a job market that doesn’t return to its pre-Covid level until 2024. Misery is written in those figures.
A huge number of Americans are already struggling. The Census Bureau, which has been surveying Americans on economic and other impacts of the pandemic, has found that 32% of respondents are having some or a lot of difficulty paying for usual household expenses. If you include those reporting modest difficulty, the number jumps to 56%. Not surprisingly, the most vulnerable Americans are struggling at far higher rates. Roughly 64% of respondents with kids at home, and an alarming 83% of those who report being in poor health, say they are having difficulty. With no new federal aid, those numbers stand to get worse.
We have argued repeatedly that the federal government needs to enact a much more ambitious and sweeping relief package than even Pelosi has offered. But putting the size of the effort aside for the moment, what else has to be considered?
Pelosi, Mnuchin and McConnell have been assessing their options against a landscape of ever-changing scenarios that are useful to ponder. Potential changes in the presidency and the Senate after Nov. 3 are the big wild cards. We don’t expect to see the House, which Democrats control, changing hands.
Consider these possible outcomes and the impact each one would have on passage of a relief bill:
Outcome: President Trump keeps the White House and Republicans hold the Senate.
Impact: A watered-down relief bill passes before the end of the year.
Outcome: Trump keeps the White House but Democrats take the Senate.
Impact: A more robust relief bill passes after a new Senate is seated.
Outcome: Joe Biden takes the White House but Republicans hold the Senate.
Impact: Divided government means there is little chance that a relief bill passes soon.
Outcome: Biden takes the White House and Democrats take the Senate.
Impact: A very robust relief package, possibly a modern version of the New Deal, passes after a new Senate is seated and Biden is inaugurated.
If you’re Pelosi, scenario 4 is the most desirable. If you’re Mnuchin or McConnell, scenario 1 is best. But we see scenarios 3 and 4 as the most likely outcomes.
Where does that leave American workers? The best case for them, unfortunately, is that they wait until early February or March for aid; and suffer longer. The worst case is that no aid ever arrives.
Where does that leave the American economy? Under scenario 4, it will get a major shot in the arm and a chance to right itself. Under scenario 3, it’s left to its own devices, and a return to the pre-covid economy is unlikely anytime soon.
Public policy matters. History teaches us that government intervention during downturns is a salve that helps everyone, regardless of their station in life. Voters should bear all of this in mind as they keep marching to the polls.
Timothy L. O’Brien is a senior columnist for Bloomberg Opinion. Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.