Clash Over New Stimulus Trump Calls Dead on Arrival

Mish

The House passes a $3.5 Trillion stimulus bill that Trump labeled DOA. What's next?

A Democrat-Republican feud is underway over what the next round of stimulus should look like.

The Trump administration wants to encourage Americans to go to restaurants and take vacations, but Democrats have other ideas as the White House Weighs Options.

“We’ve been through the rescue phase and we’re now in the transitional reopening phase and I think generally speaking we’d like to move into a growth- incentive phase for the future economy,” the senior administration official said.

The size and scope of the final package, which White House aides predicted won’t be completed until July, will depend in part on the success of state-level reopening efforts and whether the economic downturn begins to reverse.

White House officials are continuing to bet on a V-shaped recovery in which the economy rebounds this summer and continues growing briskly into next year, officials said. 

The House already passed a monstrous bill but Senate leader Mitch McConnell does not want to exceed $1.0 trillion.

Administration Options Discussed

  1. Reducing the payments to $250 to $300 a week during the second half of the year.
  2. Set the payments as a share of workers’ salaries, ensuring they earn more than the 30% to 40% most would ordinarily receive in weekly jobless benefits. 
  3. Tourism tax deduction
  4. Tax credit for families or individuals who take a vacation somewhere in the U.S. in the next three to six months, one of the officials said.
  5. Making permanent provisions set to phase out in 2022 that allow companies to deduct the cost of capital spending, including relocating from China and other countries.

Options 3 and 4, encouraging people to take vacations, primarily benefit the wealthy. Some people never have the luxury of traveling. Others would prefer a new washing machine or fix their car. 

Those options are especially weak but that is the direction the administration seems headed. 

I prefer something along the lines of option number number 2 because I strongly dislike this problem: At Least for a While, It Pays Better to Be Unemployed. 

States claim option 2 it is hard to implement.. Perhpas so, but they have a month to prepare if Trump would get behind the idea and make it clear that was a priority.

Number 5 is way too slow to be meaningful now. 

V-Shaped Recovery?

The administration may be betting on that, but forget about it.

Grim Economic Data

  1. May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
  2. May 15: Retail Sales Plunge Way More Than Expected
  3. May 15: Industrial Production Declines Most in 101 Years
  4. May 30: GDPNow Forecast is Negative 51.2 Percent

Ripple Impacts May Last Years

The economic data has been grim and the ripple impacts will last for years.

Global COVID-19 Risk Ranges Up to $82 Trillion

To understand the total global risk, please see Global COVID-19 Risk Ranges Up to $82 Trillion

Ripple Impacts

For a detailed synopsis of the state of the economy and the ripple impacts, please see The Economy Will Not Soon Return to Normal: Here's Why.

CBO Estimates it will Take 10 Years Just to Get Back to Even

The nonpartisan Congressional Budget Office disagrees as do blue-chip economic forecasters.

For discussion, please see CBO Estimates it will Take 10 Years Just to Get Back to Even.

Mish

Comments (23)
No. 1-14
Zardoz
Zardoz

Looks like he wants to use vacation incentives to save airbnb (and trump resort properties, but that's none of my business) to stave off the house price disaster that's happening, and keep rents up, while cutting the amount of money going out to people that rent.

What could possibly go wrong?

Tony Bennett
Tony Bennett

"What's next?"

...

Just looked at the House of Representative's calendar. House in session thru end of July. August recess (vacation). September in session. October in district (campaigning ... it's an election year.)

Obviously, calendar is fluid, but sounds like sooner rather later, if something passes ... since it won't be an "emergency" this go round ... with actual "debate" (time consuming) ... the horror.

Tony Bennett
Tony Bennett

Much of the stimulus to be spent (forbearance still in effect?) ... true nature of economy might not reveal itself till later. August? (when House off).

Jdog1
Jdog1

The economy was tanking before the virus started because you can only prop up a failing economy on future spending for so long. Nothing they do now will prevent the coming depression. People and companies have already spent their future earnings by taking on mountains of debt. When you pre-spend future earnings, those earning cannot be spent in the future when they are actually earned. This truth eventually catches up with every "boom cycle". The house of cards is crumbling, and now it must just play out. We will have years of depression and deflation, which will be followed by a period of recovery. The coming depression will be brutal, because the amount of credit induced inflation was allowed to continue way too long.

hhabana
hhabana

Gold, silver, bitcoin and hard assets. If you have a safe place outside the country, and skills to continue to make money then you are golden.

Anda
Anda

In Spain they are saying in three weeks the "new normal" will start, though I can't figure how something new can be called normal...maybe they will normalise virus fatalities to 0 like is being done now in spite of hospitals still reporting many...or maybe it will be higher unemployment during tourist season and lower unemployment in winter, must know ways to do that also (this image does not count those temporarily laid off)

but I think it might be to do with UBI, or maybe it is going to be about a future background of unrest, or about shadow banning commentators or sacking anyone in the civil service who questions authority as has occurred.

Anyway, everyone in Spain is supposed to expect something new after restrictions are relaxed, but I guess a lot of people are just wondering what the government there thinks it is on about.

Jdog1
Jdog1

Mish, how about doing an article where you discuss how the relationship between the Fed and Federal Government actually works. Explain how the Fed loans money to the Federal Government at interest, and how that interest has to be serviced. Explain also how when the governments budget does not have enough money to pay the interest how they are faced with the options of cutting services or raising taxes, and how at some point in the not too distant future, the bill for all of this new government borrowing is going to come due, and how it is the future taxpayers who will pay for all the free money being given away today.......

jeffpogo
jeffpogo

I remember after the 2008 crash ... the same talk about no V shaped recovery and negative return's for years. How did that prediction work out? How are things different this time? The reality of the situation is the government does not care about debt and will stimulate with free money to make stocks go up again.

Stuki
Stuki

Five year planning other people's vacations, are a highly critical government function in dystopias.

thimk
thimk

ya lets give more money to incentivize non work . idle hands are the devils workshop.
Instead of throwing bricks learn how to build with them.

stillCJ
stillCJ

Editor

Re: the "experts" opinions: "It's hard to make predictions, especially when they're about the future".

stillCJ
stillCJ

Editor

Mish, I thought maybe I might see some support from you for downsizing the next free money giveaway, but I failed to detect it. Just lots of Debbie Downer stuff.

amigator
amigator

PAYROLL TAX HOLIDAY!

That becomes permanent!

That moves the plug over to start Draining the Swamp!

jazzmonger
jazzmonger

And just when has the CBO EVER been right in anything they predict? oops...nNever...


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