Mitch McConnell is leaving negotiations over a new stimulus package until mid-July. With the critical $600 unemployment benefit expiring July 31. Those unemployment benefits are our most important economic prop. Leaving the discussion to a last minute scramble up to the deadline seems insane. So why delay?
I don’t think he has the votes.
McConnell wants to pass a “Republican” bill. He can’t do that without a rough Republican consensus on policy. That consensus doesn’t exist. There are too many Senators given to grandstanding about debt (Ron Paul). Even more whose paymasters are presumably moving heaven and earth to kill that $600 benefit and keep wages down (Tom, Cotton ARK, aka “the Senator from Wal Mart and Tyson Foods”). And the party as a whole lives in an alternative reality where the Fed is all-powerful and benefits for “those people” are always bad.
Here’s where the fantasy centrists swing into action. Cue Friedman and Brooks et al. We’ll just pass a bill with a mix of Republican ad Democratic votes. Sensible people reaching across the aisle. Blah Blah Blah.
What incentive do Chuck Schumer, much less Nancy Pelosi have to help Mitch McConnell? In an election year? When he is fighting for re-election himself? Zero.
Think about what McConnell would do if the tables were turned. He’d choose to obstruct any stimulus, tank the economy, and win the election (his post-2008 playbook exactly). Pelosi and Schumer aren’t quite so evil, but they aren’t stupid either. Mitch needs a win more than they do.
If Mitch reaches a hand across the aisle, they will ask for the whole arm. Schumer and Pelosi will offer a reasonable-sounding “compromise” that can pass with all the Democratic votes and a handful of Republican ones. Take it or leave it.
Lets say McConnell fights to a compromise. That will still look like a defeat. Because any compromise is a defeat in the all-or-nothing mindset that grips the modern Republican party.
But he can’t walk away. No deal = no stimulus. That would (or should) tank the markets. even these wildly optimistic ones. Also those payouts are supporting a lot of Real Estate that a lot of other rich people own.
Given the two unpalatable choices above, he’s taking the third option. Delay. Wait until after the July 4 recess. Hope the exploding COVID numbers bring enough Republican Senators to their senses.
We’ll see. But a lot of people seem to share a cozy assumption that further stimulus is assured. Intermixed with a folk-remedy faith in the Fed* and corresponding lack of appreciation for the stimulus doing the actual heavy lifting (that $600 a week).
The sentence above that worries me most is “But he can’t walk away.” What if he does? Does McConnell prioritize his personal political survival over the country? Does he decide to keep his Senate seat even if it plunges the country into a depression? Which do you think is more important to him?
* The Fed’s own numbers show the money hasn’t gone anywhere (see this piece here for the numbers). Money has so far gone to foreign central banks (stabilizing exchange rates), the Treasury, and into the banks. The banks have NOT lent that money on. They’ve but just parked it as “Excess Reserves” back at…. the Fed. All those trillions have led to a (placebo effect) drop in market rates and a (placebo effect) investor faith in “liquidity.” Placebo effects are real. But they are faith-based. That is a pretty thin reed to hold up the economy. Especially if that $600 a week prop gets kicked away.
PS: Why is McConnell talking so little about the unemployment benefit and so much about “liability protections for hospitals, businesses, etc…” Because there is a Republican consensus on liability. Which is irrelevant to keeping the economy afloat right here and right now. His silence [on unemployment benefits] points to where consensus is lacking.
