(Bloomberg) — House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin resume plodding negotiations Tuesday on another stimulus with a fresh warning from Federal Reserve Chair Jerome Powell that the U.S. economy will suffer if policy makers fail to step up.
Pelosi called on Republicans to get on board with a version of the stimulus bill the House passed last week with only Democratic votes. But significant gaps remain between the Democrats’ $2.2 trillion proposal and a $1.6 trillion offer backed by the White House.
“Chairman Powell’s warning could not be more clear: robust action is immediately needed to avert economic catastrophe from the devastation of the coronavirus pandemic,” Pelosi said in a statement Tuesday. “It is long overdue for Republicans to join us in passing a bill that meets the needs of the American people.”
Speaking in a virtual conference hosted by the National Association for Business Economics Tuesday, Powell said that the nation faces a weak recovery without sufficient government aid.
“Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” Powell said.
Yet there are few signs that negotiators can reach an agreement before Election Day, even with President Donald Trump telling lawmakers to “get it done.” Congress would have just four weeks to finalize and pass any legislation before the Nov. 3 vote.
Pelosi and Mnuchin spoke by phone for one hour on Monday to discuss spending amounts and exchange written proposals, according to Drew Hammill, a Pelosi spokesman. Hamill said they will continue the conversation on Tuesday.
Pelosi, speaking to reporters on Monday, put the onus on Republicans.
“It depends on if they really want to crush the virus, honor our heroes and put money in the pockets of the American people,” she said.
If the two sides could agree on an outline in the coming days, it would likely take Congress two weeks to write the bill, return from recess, overcome Senate delays and pass the legislation. That would mean weeks more until benefits like the $1,200 direct payments both sides agree on for most Americans hit individuals’ bank accounts.
The S&P 500 swung between gains and losses Tuesday as Powell was speaking at the virtual conference.
“I think the two important messages we’ve been getting from Fed speakers are — we are not out of ammunition, but it’s more important now for fiscal authorities to step up,” said Liz Ann Sonders, chief investment strategist at Charles Schwab (NYSE:) & Co.
White House Chief of Staff Mark Meadows — referred to even in the administration as the “bad cop” operative in the stimulus talks — on Monday indicated the administration may still resist a further move toward Pelosi’s bigger proposal.
“There are a lot of people that continue to hurt, are waiting on stimulus, and the president’s committed to getting a deal done,” Meadows said. “He wants to make sure we move expeditiously — but also in a fiscally responsible manner.”
Pelosi has outlined five areas of “significant disagreement.” They are mostly the same issues that have stood in the way of a deal for weeks: funding for unemployment insurance; money for schools and state and local governments; amounts for the Child Tax Credit and Earned Income Tax Credit; restrictions on the use of money for testing; and a $44 billion gap on appropriated discretionary funding.
“None of those issues seem intractable,” Representative Ted Lieu of California, who is part of Pelosi’s House leadership, said. Democrats would consider a deal “somewhat less” than $2.2 trillion, but not “dramatically less,” he said.
(Updates with Pelosi statement beginning in second paragraph)
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