The White House and its Senate Republican allies have decided to delay action on another massive round of coronavirus spending until July, hopeful that an improving job market will lessen the need to add more borrowing to what is already the nation’s largest deficit in history.
The jobs report for May, showing that employers added nearly 3 million jobs as coronavirus shutdowns ended, has lowered the urgency for the Senate and White House to hold formal negotiations on a proposal to answer the House relief package, which totals $3.5 trillion.
White House economic adviser Larry Kudlow said Sunday the administration won’t extend $600-a-week federal unemployment benefits, on top of regular unemployment payments, beyond July because they are a disincentive to work. He said the administration is eyeing instead a smaller “bonus” to encourage people to go back to work.
“We are not going to remove unemployment benefits … there will be some return-to-work benefit,” Mr. Kudlow said on CNN’s “State of the Union.” “It won’t be quite as substantial. This is a turning point in the economy.”
Rep. Kevin Brady of Texas, ranking Republican on the House Ways and Means Committee, has proposed a return-to-work bonus that would allow workers to keep up to two weeks of unemployment benefits if they accept a job offer.
Mr. Kudlow said in addition to the encouraging jobs numbers in May, officials are expecting a strong retail sales report Tuesday.
“Already, department and merchandise sales week to week are above year-ago levels,” Mr. Kudlow said.
The president has cautioned aides that the economy “is evolving rapidly,” said White House senior economic adviser Kevin Hassett.
“The economic models are really missing things by a lot,” he said on Fox News. “What we need to do is watch the data come in and then … as we get closer to the end of July, make a judgement of whether the recovery is faster than we thought slower than we thought.”
Most economists had expected employers to shed about 8 million jobs in May, and the surge in hiring caught them by surprise.
“We just had a massive surprise on the upside,” Mr. Hassett said Friday. “If we have another massive surprise on the upside in June, we’re going to have a much different demand for stimulus than if it goes the other way. We’re preparing a plan for upside surprises and downside surprises that we’ll pursue aggressively in July.”
Two other factors are slowing the push for another round of spending. The budget deficit for the first eight months of the fiscal year has hit a record $1.88 trillion, and about half of the roughly $3.3 trillion emergency aid approved so far this year hasn’t been spent, according to the White House’s calculations.
“We want to be careful at this point, seeing how much money is in the economy,” Treasury Secretary Steven T. Mnuchin testified last week to the Senate committee on Small Business. “A lot of the money is still not in it. Before we rush back and spend more money, whether that’s a trillion dollars or whether that’s more, we want to make sure we’re careful in knowing how much more we need to spend.”
Mr. Mnuchin said the president is still considering seriously a second round of the popular direct payments to most Americans, along the lines of what House Democrats approved last month — $1,200 per adult and $1,200 per child, up to three children. That would be more generous than the emergency payments approved in March, which included $500 per child.
The first round of direct payments has totaled about $267 billion.
Largely due to the coronavirus relief spending, the federal deficit is soaring on its record-setting pace for the fiscal year that ends Sept. 30. The eight-month total of $1.88 trillion was more than double the previous year’s deficit $739 billion for the same period, according to the Congressional Budget Office.
CBO is forecasting the deficit this year at $3.7 trillion. The federal deficit for fiscal 2019 was $984 billion.
“We left ourselves with too little fiscal space entering into this crisis, already facing $1 trillion deficits before enacting any fiscal relief measures,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “To fight the pandemic and economic downturn, we may have to borrow even more in the coming months. Now, more than ever, we need to keep close tabs on the nation’s fiscal health to spend wisely and also prepare to get our fiscal house in order, so that we can respond to any future crises from a position of fiscal and economic strength.”
In 2016, the last full year under President Obama’s budget decisions, the deficit was $585 billion. Mr. Trump, who often criticized Mr. Obama’s deficit spending, is now on a pace to add significantly more to the national debt in his first term than Mr. Obama did during his.
From 2010-2013, the first four fiscal years for which Mr. Obama fully responsible, the national debt rose $4.4 trillion. Mr. Trump is projected to add more than $7.6 trillion to the national debt through fiscal 2021, according to CRFB.
A moment of reckoning on the next relief package will be Democrats’ proposal to extend into next year the increased federal unemployment benefits, which are due to expire July 31. The CARES Act added a $600 per week payment to regular state jobless benefits. Republicans and the White House have expressed concern that it’s discouraging workers from returning to their jobs.
“If we continue enhanced unemployment, we’re obviously going to need to fix that,” Mr. Mnuchin said last week, “so that we don’t end up in a situation where workers are paid more on unemployment than they are to go back to work.”
Mr. Hassett said another challenge in crafting a relief bill is the “radical difference right now in the data between red states and blue states.” He said Democratic-run states generally have been slower than Republican-controlled states to reopen from the coronavirus shutdowns.
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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