After saying a stimulus bill would be the focus when the Senate returns, Senate Majority Leader Mitch McConnell (R-KY) is now suggesting that a small package may be enough given the pace of the economic recovery.
“Our economy is really moving to get back on its feet. That I think clearly ought to affect what size of any rescue package we additionally do,” McConnell told reporters in Kentucky on Friday. “Something smaller, rather than throwing another $3 trillion at this issue, is more appropriate.”
After the October jobs report beat estimates, with the addition of 638,000 jobs and an unemployment rate down to 6.9%, McConnell said this “is a stunning indication of a dramatic comeback of the economy,” paired with the surge in GDP in the third quarter.
Still, the economic recovery is slowing down. More than 10 million jobs have yet to be recovered and 21 million Americans still rely on some type of unemployment benefits, some of which expire at the end of the year.
‘It doesn’t appeal to me at all’
House Speaker Nancy Pelosi’s (D-CA) latest stimulus offer came down to $2.2 trillion, which opens a big gap between the Democratic proposal and the proposals McConnell has brought to the floor, the latest of which was $500 billion.
“No, it doesn’t appeal to me at all because they still have not agreed to crush the virus,” Pelosi told reporters on Friday when asked about a smaller bill. “That isn’t anything that we should even be looking at.”
If he losses the election, President Donald Trump may also be less likely to push for a high price tag on a stimulus deal like he did before the election and will have no “political capital” to do so, according to Mark Harkins, a former congressional staffer and senior fellow at Georgetown’s Government Affairs Institute.
“It truly is up to the Senate leadership to determine whether they want to work a deal or not and whether the Democratic leadership wants to capitulate to a smaller number,” Harkins told Yahoo Money. “At the moment, it seems like neither sides are willing to give up.”
‘They become fiscal conservatives again’
While the White House’s counterproposal was worth “almost $1.9 trillion” in the week before the election, the Republican proposal may have a much lower price tag.
“We’re not interested in, you know, two or three trillion,” Larry Kudlow, director of the U.S. National Economic Council told reporters on Friday. “We would like to negotiate a package.”
But different analyses find that larger stimulus packages would lead to a faster economic recovery. A $2 stimulus package could bring the economy back on track to its pre-pandemic levels by mid-2021, an analysis by Brookings found.
Another analysis by Evercore ISI found that a package like the one Treasury Secretary Steven Mnuchin and Pelosi were negotiating — worth around $1.9 trillion — would have increased GDP by 3.5% in 2021 and returned the economy to its pre-pandemic path in the fourth quarter of next year.
“Republicans have supported additional funding in the past,” Harkins said. “But especially with a President Biden, they're going to find that they become fiscal conservatives again after four years of not caring quite as much.”