Friction among Senate Republicans on the next round of coronavirus relief legislation and a suddenly shaky stock market has eroded President Trump’s leverage in the ongoing standoff with Democrats.
Senate Majority Leader Mitch McConnell (R-Ky.) was still searching Tuesday afternoon for 51 Republican votes for a half-trillion-dollar economic relief package that he hopes will put pressure on Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) to soften their demands.
Meanwhile, the stock markets in the past week have suffered their worst one-day drops since the coronavirus first froze the U.S. economy in March. On Tuesday, the Dow Jones Industrial Average and the S&P 500 dropped 632 points and 95 points, respectively — more than 2 percent each — while the tech-heavy Nasdaq composite dropped 465 points, or 4.11 percent.
While the stock markets surged upward through July and August, the start of September has brought a stark shift in sentiment. Coronavirus infections are expected to spike when the fall temperatures drop and there doesn’t appear to be a clear path to getting another federal relief package.
“Trump needs a package just because the stock market has been declining. There is a possibility that COVID infections will increase in the fall and we know the economy is a big variable in how people vote,” said Darrell West, director of governance studies at the Brookings Institution.
“Republicans want to protect the Senate and protect the presidency and they’re going to need a deal,” he said.
Federal Reserve Chairman Jerome Powell warned Congress during testimony in June that “significant uncertainty” remained in the economy and that “support would be well-placed at this time.”
The recent big drop in the stock indices is a significant political development because Trump often cites Wall Street to argue that the economy is making a strong recovery.
“The Dow Jones Industrial just closed above 29,000! You are so lucky to have me as your President. With Joe Hiden’ it would crash,” Trump tweeted exuberantly on Sept. 2, just before the markets started tumbling.
Another relief package passed by Congress, especially one as large as what Pelosi and Schumer want, is expected to give another boost to the markets.
“You live by the sword and you die by the sword. If you’re claiming credit when the market is high, you have a problem when the market drops,” West said.
One Republican senator who wants a larger relief bill said the market turmoil “ought to” put pressure on the White House and colleagues to agree to more federal aid.
But the lawmaker, who requested anonymity to discuss Trump’s motives, conceded “I’m having trouble mapping out a scenario one way or another.”
Pelosi on Tuesday seized on calls by Fed officials for more fiscal stimulus from Congress as well as divisions among Republicans to press her growing leverage.
“The chairman of the Fed and other Fed leaders around the country have said clearly that we need a stimulus, that we need a boost,” she noted in an interview with Bloomberg’s “Balance of Power.”
At the same time she slammed McConnell’s revised relief bill, which is estimated to cost around a half-trillion dollars, as “pathetic.” She pointed out it is roughly “half of what [Treasury] Secretary [Steven] Mnuchin has proposed.”
“They are not even in agreement. They are in disarray,” she said of Republicans.
The Senate Republican bill needs 60 votes to overcome an anticipated Democratic filibuster and pass.
It will fall well short of that threshold, but McConnell is hoping to get at least a simple majority in favor of it so he can argue that Democrats are acting as obstructionists.
He said on the Senate floor Tuesday that he will schedule a vote this week and indicated to reporters in the hallway that it would happen Thursday.
“Republicans are making yet another overture,” McConnell said.
Conservatives such as Sens. Josh Hawley (R-Mo.), Rand Paul (R-Ky.), Mike Lee (R-Utah) and Ron Johnson (R-Wis.) are skeptical about spending hundreds of billions of dollars in more federal aid and are pushing for concessions from the GOP leadership. With all Democrats likely to oppose the Republican bill, McConnell can only afford three defections.
Paul on Tuesday said he would oppose the measure.
“We don’t have any money up here. I’m not for borrowing any more money,” he said.
Johnson on Tuesday afternoon said he would support the bill after McConnell and Mnuchin agreed to repurpose about $350 billion in funding from the $2.2 trillion CARES Act passed in March to new relief measures.
He said the revised bill would add only $150 billion to $300 billion to the deficit, though he cautioned the numbers aren’t final yet.
Johnson said he worked closely with the GOP leadership and Mnuchin to make changes to the measure to make it more appealing to conservatives but didn’t know if it would get 51 votes.
“We’ll see what all ends up happening. We’ll probably have a discussion. There might be some further arm twisting,” he said.
Hawley, a rising conservative star, is pressing for a fully refundable tax credit for homeschooling expenses such as books, technology and laboratory equipment. His proposal was not in the bill as of Tuesday afternoon and he remains undecided.
Sen. Ted Cruz (R-Texas) used his leverage with Republican leaders to gain two years of tax credits for individuals and businesses that donate to nonprofit scholarship funds, a proposal designed to help subsidize private school tuition.
There are also questions as to whether more-moderate Republicans in tough reelection races such as Sens. Susan Collins (Maine) and Cory Gardner (Colo.) will be satisfied with the smaller price tag for the revised package, and the lack of additional federal aid for state and local governments, other than money set aside for schools.
Without the repurposed federal funding offsetting some of its cost, the package would be in the range of $500 billion to $700 billion, according to Senate GOP aides.
The Republican bill, which McConnell unveiled Tuesday, would provide $300 a week in federal unemployment assistance, a second round of Paycheck Protection Program loans, $105 billion to help reopen classrooms and $16 billion in more money for COVID-19 testing.
Failure to win a simple majority vote for a largely symbolic bill would be another setback for the White House and Senate Republicans, who declined to put the $1.1 trillion coronavirus relief proposal they drafted in July on the Senate floor because of divisions within their conference. Plans to vote during the first week of August on proposals to extend federal unemployment assistance and to fund a second round of small-business loans were scrapped after disagreements again broke out among Republican senators.
Democrats, however, have stayed unified behind their own proposal, the $3.4 trillion HEROES Act, which the House passed in May, as well as a trimmed-down $2.2 trillion proposal that Pelosi and Schumer offered to White House negotiators in late August.
Pelosi and Schumer on Monday said McConnell’s bill was “headed nowhere” and dismissed it as a “political” gesture.