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Westlake Legal Group > Posts tagged "Federal Budget (US)"

Federal Borrowing Amid Pandemic Puts U.S. Debt on Path to Exceed World War II

Westlake Legal Group merlin_176135361_2fd3d3fe-1e24-42fd-917b-d9b955fa774d-facebookJumbo Federal Borrowing Amid Pandemic Puts U.S. Debt on Path to Exceed World War II United States Politics and Government United States Economy Trump, Donald J Presidential Election of 2020 National Debt (US) Federal Budget (US) Coronavirus Aid, Relief, and Economic Security Act (2020) Congressional Budget Office

WASHINGTON — A surge in government borrowing in the face of the pandemic recession has put the United States in a position it has not seen since World War II: In order to pay off its national debt this year, the country would need to spend an amount nearly as large as its entire annual economy.

And still, economists and many fiscal hawks are urging lawmakers to borrow even more to fuel the nation’s economic recovery.

The amount of U.S. government debt has grown to nearly outpace the size of the nation’s economy in the 2020 fiscal year and is set to exceed it next year, as the virus downturn saps tax revenues, spurs government spending and necessitates record amounts of federal borrowing, the Congressional Budget Office said on Wednesday. Federal debt, as a share of the economy, is now on track to smash America’s World War II-era record by 2023.

The budget office report underscored the scrambled politics of deficits in 2020: It showed debt held by the public climbing to 98 percent of the size of the economy for the fiscal year ending Sept. 30. Forecasters had previously expected the nation to reach those levels at the end of the decade, a time frame that had already alarmed fiscal hawks in Washington, who warned ballooning deficits would consume federal budgets and chill private investment.

But the virus has upended those predictions, prompting even longtime champions of fiscal prudence to urge lawmakers on Wednesday to keep borrowing more for the time being, in order to help people and businesses survive the lingering pain of a sharp recession and now-slowing recovery.

“We should think and worry about the deficit an awful lot, and we should proceed to make it larger,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget in Washington, which has for years pushed lawmakers to take steps to reduce deficits and debt.

The turnabout on deficit fears caps several years of declining concern over Washington spending more than it takes in, particularly among Republicans. Lawmakers voted along party lines in 2017 to pass a $1.5 trillion tax cut that President Trump and Republican leaders insisted would pay for itself but has instead added to the deficit. The budget deficit surpassed $1 trillion in 2019 — before the coronavirus pandemic hit — a jump of 17 percent from 2018 as tax cuts and spending increases continued to force heavy government borrowing.

The pandemic has plunged the economy into its sharpest quarterly contraction in growth in nearly 75 years, ballooning the deficit in the process. With millions out of work and businesses shuttered, tax revenues have fallen for the federal government, along with states and municipalities.

Congress and Mr. Trump moved quickly to approve more than $3 trillion in new federal spending to help businesses and individuals stay afloat through the abrupt slowdown in economic activity. All of those factors necessitated large sums of government borrowing, sending deficits — which had grown steadily even in the middle of a record economic expansion — skyward.

The deficit — the difference between what the United States spends and what it earns through taxes and other revenue — is expected to reach $3.3 trillion for fiscal year 2020, the budget office said on Wednesday. That is more than triple the level it reached in the 2019 fiscal year.

Economic theory has long held that rising debt as a share of the economy would drive up the amount of money governments must pay in interest to borrowers. Like a household with a lot of loans, the theory went, creditors would demand higher interest rates to hand cash to a heavily indebted borrower. With its debt payments more expensive, the household — or government — would have to borrow even more to stay current on its obligations.

That would result in a debt spiral in which the government was not able to do anything but fund its debt, the economists said, though such a spiral did not materialize over the past decade, as debt climbed and interest rates stayed low.

Because the pandemic hit the economy so quickly and painfully this year, lawmakers raced to borrow money much faster than they did during the last recession, when it took two years for the debt ratio to climb by a similar amount, in percentage-point terms: Debt as a percent of gross domestic product grew from 39 percent at the end of the 2008 fiscal year to nearly 61 percent at the end of 2010.

But it has been decades since the amount of federal debt was larger than the sum of the nation’s annual economic output. That came in 1946, shortly after the war ended.

The fiscal woes are not just confined to the United States’ need to borrow. In a separate report released on Wednesday afternoon, the budget office updated its forecasts for the solvency of the Social Security Trust Fund, showing it will run out of money faster than the office previously forecast in June.

The new estimates imply the fund will be exhausted by 2031, a year earlier than previously projected, forcing immediate benefit cuts, unless lawmakers intervene. Medicare’s hospital insurance trust fund is now on track to run out of money in 2024, instead of 2026.

The aggressive federal response to the pandemic in March resulted in trillions of dollars in additional government spending, as Washington looked to provide tax breaks, assistance for small and large businesses, direct checks for low- and middle-income individuals and supplemental benefits for the unemployed.

Those measures were widely supported, as millions of workers were suddenly unemployed and businesses were forced to close their doors. Most economists have continued to call for additional spending, as the pandemic shows no sign of abating.

Loretta Mester, the president of the Federal Reserve Bank of Cleveland, who has warned about previous deficits, told reporters on Wednesday that her own forecasts for the economic recovery hinge in part on continued fiscal support, and that without it, the United States might struggle to make it through shutdowns and onto a sustained growth path.

While Ms. Mester said that she was “not one of those people who think that deficits don’t matter,” the United States cannot worry about loading up on debt in the middle of a nascent recovery.

“This isn’t the right time to have that conversation,” she said.

In a sign of how unconcerned investors are about the deficit, stocks rose on Wednesday, with the S&P 500 rising 1.5 percent to set another record. It was the index’s best day since July 6.

Republican lawmakers who were little troubled by the increase have since cited debt concerns as a reason to move slowly on a new package of economic assistance amid the pandemic. Democratic leaders in the House drafted and passed a $3 trillion opening bid for a new rescue package this week, but they pared it back and dropped some members’ top priorities from the bill out of deficit concerns.

Yet while Mr. Trump, as a candidate in 2016, famously pledged to pay off the entire national debt in eight years, he and his fellow speakers during this year’s Republican National Convention did not raise the deficit issue at all. Mr. Trump’s most recent budget proposal, offered before the pandemic spread rapidly in the United States, did not include a balanced budget even if he were to win re-election.

For decades, analysts argued that an explosion of government borrowing risked devouring a large part of the nation’s savings, leaving less cash available for private businesses to use for investment.

Those companies would then be forced to pay higher interest rates to gain access to that smaller pool of funds. And those higher borrowing costs, it was argued, would curtail investment and hurt economic growth. The process is known as “crowding out,” and there is no sign that it is happening now. Interest rates remain low and inflation is muted.

“We’re in an era where more government debt is not doing so much crowding out,” said Douglas Elmendorf, a former director of the Congressional Budget Office and the current dean of Harvard’s John F. Kennedy School of Government.

“I think the idea that we should not let the debt constrain our response to the pandemic is exactly right,” he said. “But I think the idea that it never matters how much debt you have, because there’s always some way around that, is wrong.”

Even some fiscal hawks, like Ms. MacGuineas and Michael A. Peterson, the chief executive of the debt-focused Peterson Foundation, say lawmakers should continue to spend for now, while targeting their efforts more effectively to help the economy recover. Eventually, they say, that spending will need to yield to debt reduction.

“When this devastating pandemic is behind us,” Mr. Peterson said, “our leaders must come together to address our growing debt so the next generation can have better preparedness and greater prosperity.”

Matt Phillips and Jeanna Smialek contributed reporting.

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State and Local Budget Pain Looms Over Economy’s Future

WASHINGTON — The U.S. economy struggled to shake off the last recession, with historically slow growth and a labor market that took more than six years to recover its earlier employment levels. A big part of the reason: state and local governments, which cut spending and fired workers amid widespread budget shortfalls.

The same dynamic poses one of the biggest threats to America’s recovery from the pandemic downturn. State governments are again experiencing extreme budget problems as they pay out increasing sums to cover unemployment and health costs caused by the coronavirus crisis while revenues from sales taxes and corporate and personal income tax payments plummet. States could face a gap of at least $555 billion through the 2022 fiscal year, according to one estimate.

Economists warn that the long-term risk coming from struggling states could prove even more damaging this time than the recession of 2007-9 unless Congress steps in. Yet providing more aid to state and local governments has become one of the biggest political battles in the fight over another pandemic rescue package.

The Senate formally adjourned on Thursday until early September, all but ending any chance that an agreement could be reached soon. House members had already left Washington.

President Trump and top Republicans, including Senator Mitch McConnell of Kentucky, the majority leader, warn that providing more money to states could simply bail out fiscally irresponsible governments that did not manage their budgets and their public pension plans prudently in good times. Treasury Secretary Steven Mnuchin said Wednesday in a television interview that most states had not exhausted the $150 billion that was allocated in the relief bill passed in March, though analysts say much of that has already been earmarked for certain projects.

Democrats insist that states need more money and have proposed as much as $1 trillion, saying it would support needed services and help the economy recover more quickly.

While many governments entered the downturn with solid tax revenues and billions of dollars in their rainy-day funds, those coffers are quickly dwindling. State revenues “could fall as much as or more than they did in the worst year of the Great Recession and remain depressed in following years,” according to the Center on Budget and Policy Priorities, a progressive think tank.

Nearly all states are required to balance their budgets, meaning officials will need to plug shortfalls by tapping rainy-day funds, raising taxes or cutting costs, including jobs.

That worries economists and Federal Reserve officials. Jerome H. Powell, the Fed chair, regularly warns that state job cuts could weigh on the economy’s ability to recover, and his colleagues warn of public-sector budget pain as one of the primary vulnerabilities ahead.

“It will hold back the economic recovery if they continue to lay people off and if they continue to cut essential services,” Mr. Powell said during congressional testimony in June. “In fact, that’s kind of what happened post the global financial crisis.”

Charles Evans, president of the Federal Reserve Bank of Chicago, echoed that sentiment in a CBS interview on Sunday, saying, “As you look at the economic outlook, there are some negative scenarios, and the ones that are most pessimistic involve not supporting state and local governments.” Absent that help, Mr. Evans said, “there will be employment reductions.”

While it is unclear how persistent job cuts will be — some jobs may still come back as economies reopen — state and local job losses this year have already dwarfed those in and after the entire Great Recession. Back then, state and local governments cut about 750,000 jobs over nearly five years.

Just since February, about 1.2 million local government jobs have been lost. Moody’s Analytics researchers estimate that 2.8 million more could be on the chopping block without more federal help. If that happens, state and local job cuts stand to shave about 2.6 percent from overall pre-crisis employment levels.

While some employers have begun rehiring, nearly 13 million people remain out of work across sectors, and the unemployment rate stood at 10.2 percent in July.

Jobless claims, which are calculated differently, remain elevated. The Labor Department said on Thursday that weekly initial jobless claims fell below one million for the first time since March, with 963,000 new workers filing for unemployment insurance. That is still higher than the peak level in the 2007-9 recession, and economists warn that the recovery is slowing as the virus lingers and businesses struggle to reopen fully.

With unemployment high and many businesses expected to close, states are bracing for more safety net costs on top of the public health expenses they are already incurring. They spend a large chunk of their budgets on Medicaid payments and services for low-income residents.

Yet the Trump administration and many Republican lawmakers have largely brushed off state financial woes, insisting that governors and other local leaders foot part of the pandemic aid bill and refusing to “bail out” Democratic-led states struggling with huge shortfalls in their public pension plans.

ImageWestlake Legal Group merlin_175579149_ca116323-70b3-4de0-bbd1-6855b7de8dd9-articleLarge State and Local Budget Pain Looms Over Economy’s Future United States Economy Unemployment Insurance Taxation States (US) Pensions and Retirement Plans Labor and Jobs Federal Budget (US) Coronavirus Aid, Relief, and Economic Security Act (2020) Budgets and Budgeting
Credit…Doug Mills/The New York Times

Over the weekend, Mr. Trump suggested tapping state coffers as part of his plan to extend pumped-up unemployment insurance benefits, which had been going to millions of workers until the program expired at the end of July.

Governors, including some Republicans, expressed concern about the administration’s attempt to have states shoulder more financial responsibility. Mr. Trump’s proposal that states contribute an extra $100 in weekly unemployment benefits in order to get a $300 supplement from the federal government received a chilly reception from many state officials.

“They just don’t have the money to kick that in,” said Dan White, director of government consulting and fiscal policy research with Moody’s Analytics.

The administration soon shifted the policy to fit that reality. Officials in the office of Gov. Mike DeWine of Ohio, a Republican, said they were told late Sunday by the Labor Department of a new option allowing unemployed workers to claim the additional $300 per week without the state’s kicking in an extra $100.

By midweek, White House aides were making clear in interviews that the state payment was largely optional.

“We are no longer insisting on a cost-sharing deal,” Larry Kudlow, Mr. Trump’s economic adviser, told Fox Business.

Even so, Mr. Kudlow voiced wariness of unfettered additional assistance to states. And while Mr. Mnuchin said the White House was willing to provide an additional $150 billion to states for coronavirus-related costs, that is far less than other policymakers have suggested may be needed. A bipartisan group of lawmakers, including Senator Bill Cassidy of Louisiana, a Republican, are pushing a bill that would give states $500 billion.

“Yes, it is a concern that we’re spending the money now, but the alternative looks far worse,” Mr. Cassidy said this week in an interview, referring to many Republicans’ reluctance to add to the nearly $3 trillion already spent.

Analysts say the actual need probably falls somewhere between the various proposals. Moody’s Analytics, for instance, estimates that states and localities will face a $500 billion budget hole through 2022 if the worst of the pandemic is already past and $750 billion if the United States faces a second pandemic wave this fall.

Mr. Mnuchin has said Democrats want federal money to help support ailing pension funds and to fill budget shortfalls that states were facing before the pandemic — an assertion that Democrats push back on and an outcome that analysts say could be prevented by including restrictions in the legislation.

“What did they say? ‘Let them go bankrupt,’” Speaker Nancy Pelosi of California said of Republican negotiators at her weekly news conference on Thursday. “Economists tell us that our economy depends on the fiscal soundness of state and local government.”

The economic risks are not confined to blue states. Idaho, West Virginia and Alaska, all Republican-dominated states, also face acute budget shortfalls as a percentage of output, based on estimates from Mr. White and his colleagues at Moody’s Analytics.

Credit…Spencer Platt/Getty Images

Hard-hit governments “will start pulling the trigger on cutting services and raising taxes” in the coming years if they do not get help, said Ernie Tedeschi, policy economist for Evercore ISI, a research firm. Such cuts “don’t necessarily plunge you back into recession, but they can slow down the economy.”

Already, many states are dipping into rainy-day funds or using other temporary measures to meet their requirements for balanced budgets, and spending cuts are already underway or proposed in many places. In New York, for instance, lawmakers in April gave Gov. Andrew M. Cuomo a one-year window to cut spending unilaterally as merited as the state faces down a huge shortfall.

The pain extends to local governments. More than 700 cities have scrapped plans to work on roads, buy equipment and upgrade critical infrastructure since the pandemic began, based on a survey by the National League of Cities.

States and localities have already slashed about 6 percent of their combined work forces since the downturn began. And while their hiring showed a rebound last month, that was only because of a quirk in how the data are adjusted for seasonal fluctuations.

Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers, said it would probably take years for state budgets to restore their footing.

“It will be a drag on G.D.P. growth at a time when the nation’s economy is attempting to recover,” Mr. Sigritz said.

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Trump’s Push to Cut Payroll Taxes Opens a Democratic Line of Attack

WASHINGTON — When President Trump announced that he was unilaterally deferring payroll taxes to bring economic relief to struggling Americans, he and his aides thought it would allow them to frame him as pro-worker.

But the move comes with political risks. Eliminating the payroll tax could jeopardize the funding stream for Social Security, which is one of the government’s most popular programs, providing benefits to 64 million people.

The president has given Democrats an opening to raise Social Security cuts as an issue in the final months of an election in which his support among older voters already appears to be shaky.

On Monday, former Vice President Joseph R. Biden Jr. capitalized on the opportunity. “Donald Trump said that if he’s re-elected, he’ll defund Social Security,” he tweeted. “We can’t let that happen.”

The Democratic National Committee amplified the line of attack the next day, blasting out a statement that highlighted “At Least 7 Times Trump Said He Will Permanently Eliminate Funds To Social Security And Medicare.”

Beyond the complicated legal questions about whether Mr. Trump can circumvent Congress by using executive actions to create his own tax-and-spend policies, and the economic debate about whether a payroll tax even helps the right people (it does nothing for the unemployed), the proposal leaves Mr. Trump juggling political priorities.

He is now balancing the potential benefits of giving working people more money in their paychecks — at least temporarily — versus undercutting his own pledge from the 2016 campaign that he would protect entitlement programs.

His economic advisers have insisted that the temporary tax deferral, which Mr. Trump announced on Saturday, will have no effect on Social Security or Medicare. “The president in no way wants to harm those trust funds,” Steven Mnuchin, the Treasury secretary, said on Sunday. “There would be no reduction to those benefits. And the president’s made that very clear.”

But many older Americans — a key base of support for Mr. Trump in the 2016 election — have already grown wary of him because of their anxiety over the coronavirus, and may not be convinced by those promises. Adding to the confusion is that Trump campaign advisers are saying that the president wants to go further and pass a permanent payroll tax cut if he is re-elected. The administration has not explained how Social Security would be funded if a tax dedicated to it evaporates.

ImageWestlake Legal Group 11trump-payrolltax02-articleLarge Trump’s Push to Cut Payroll Taxes Opens a Democratic Line of Attack United States Politics and Government Trump, Donald J Taxation Stimulus (Economic) Presidential Election of 2020 Payroll Tax Federal Budget (US) Coronavirus (2019-nCoV) Biden, Joseph R Jr
Credit…Anna Moneymaker for The New York Times

When it comes to cutting to Social Security, “is that really a debate you want to have?” said David Axelrod, a former top adviser to President Barack Obama.

Trump advisers said they expected Democrats to “demagogue” on Social Security. But they said they expected those attacks would fall flat, partly because the specter of entitlement cuts has been raised so often as to lose meaning, and because he had promised since his 2016 campaign that he would not touch Social Security and Medicare.

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“There are a lot of Americans who have gotten a little bit acclimated to accusations to cuts to Social Security,” said Marc Short, the chief of staff to Vice President Mike Pence. “The president has certainly maintained consistently that that’s not something he wants to do.”

Trump campaign officials also said Democrats would have to defend their own history of supporting payroll tax cuts. “Joe Biden and Nancy Pelosi enthusiastically embraced payroll tax relief under President Obama, proving that their opposition now is strictly political,” said Tim Murtaugh, communications director for the Trump campaign.

And Stephen Moore, a longtime outside economic adviser to the president, said the political calculation was more difficult for Democrats than for the president. “Trump can say to Biden: ‘You’re a blue-collar worker? I just gave them a 7.5 percent pay raise and you’re against it,’” he said. “Once people start getting money in their checks, it’s going to be hard for Democrats to say you shouldn’t have that money.”

Many businesses owners themselves, however, have been cool to Mr. Trump’s action, uncertain about its implementation and concerned that the deferral of taxes simply means a bigger and more complicated tax bill in 2021. Some may decide to continue withholding the taxes anyway on the assumption they will eventually be due.

The deferral announced by Mr. Trump applies to the Social Security portion of the payroll taxes that employees pay, and covers the period from September through December; Medicare payroll taxes are untouched.

It is unclear what ultimate effect Mr. Trump’s action will have, given that the president is only delaying the Social Security payroll taxes — not wiping out what is owed. Eliminating that tax liability would require congressional approval, and lawmakers from both parties have shown little desire to cut payroll taxes.

“In its simplest form, the deferral of employee payroll taxes from September through December is a lot of trouble for negligible benefit,” said Paul N. Van de Water, a senior fellow at the Center on Budget and Policy Priorities, a left-leaning research organization.

He also threw cold water on a Trump-friendly talking point. “It’s not a tax cut,” he said. “That’s just wrong. It could turn into a tax cut if Congress later comes back and decides to do so. But Trump can’t cut taxes on his own.”

That the president’s action merely defers payroll taxes for some employees — workers who make less than $104,000 annually — without eliminating them, also takes some of the potency out of Democrats’ warnings that Mr. Trump is putting the future of Social Security in danger.

In fact, Congress has already taken a similar action in response to the pandemic, with support from both parties. Usually, employees and employers each pay a Social Security payroll tax of 6.2 percent of wages, or 12.4 percent when put together. The $2.2 trillion stimulus law approved in March — with support from Republicans and Democrats alike — allowed employers to delay their portion of the Social Security payroll tax.

Mr. Trump did not help matters with his imprecise explanation of what, exactly, he wanted to do with the payroll tax, which he suggested on Saturday he wanted to “terminate.” Social Security is mostly funded by payroll taxes, and getting rid of them would be a drastic change to the federal government’s revenue streams.

Larry Kudlow, Mr. Trump’s top economic adviser, said on Sunday that the president was referring to forgiving the payroll taxes that are deferred, explaining, “He did not mean that he’s eliminating the Social Security tax.” But on Monday, Mr. Trump used similar language, saying that if he wins re-election, “we will be ending that tax; we’ll be terminating that tax.”

And his campaign advisers have been eager to highlight a sweeping action. “This is actually the biggest news of the day: President Trump said if he is re-elected, he will look into terminating the payroll tax permanently!” tweeted the campaign’s senior legal adviser, Jenna Ellis.

Whatever the president meant, just broaching the subject is giving Democrats additional ammunition in their effort to appeal to older Americans.

The Democratic Congressional Campaign Committee demanded to know if Republicans supported Mr. Trump’s effort to, as the committee put it, “deliver a devastating blow to seniors already reeling from this health and economic crisis.” And the Democratic National Committee is planning efforts in battleground states to draw attention to the matter.

The president’s move also allowed Mr. Biden to go on the offensive on a subject that has been a potential vulnerability for him. In the Democratic primary, Mr. Biden came under criticism over his record on Social Security during his lengthy career in public office, such as his support in the 1980s for a freeze on government spending, including Social Security.

After the president’s action on payroll taxes, the Trump campaign tried to flip the issue on Mr. Biden, reprising the criticism he faced in the primary. The campaign sent out an email calling Mr. Biden “the only candidate in the race who has tried to cut Social Security benefits.”

Before Mr. Trump’s unilateral action, Senator Charles E. Grassley, Republican of Iowa and the chairman of the Senate Finance Committee, which oversees tax policy, said he empathized with Mr. Trump’s efforts to provide tax cuts as administration officials struggled to break through the negotiations impasse with Democrats. But he questioned the merits of cutting the payroll tax.

“I think the best tax policy is the policy that’s long term, and that wouldn’t be long term,” Mr. Grassley said on Thursday.

Mr. Moore, in an interview, conceded that Mr. Grassley’s opposition was problematic for the president. “The only one who really matters a lot in this debate is Grassley,” he said. “It’s hard to get his mind to change.”

Annie Karni reported from Washington, and Thomas Kaplan from Wilmington, Del. Emily Cochrane contributed reporting from Washington.

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Administration Officials Defend Executive Action on Pandemic Relief

WASHINGTON — Facing sharp criticism, administration officials on Sunday struggled to explain the executive actions President Trump used to circumvent Congress in the absence of an agreement on a coronavirus aid package, even as they defended him and insisted that Americans would receive the relief he promised.

The president’s decision on Saturday to sign a series of measures intended to revive unemployment benefits, address an eviction ban, provide relief for student borrowers and suspend collection of payroll taxes came after crucial benefits lapsed and two weeks of talks between congressional Democrats and administration officials failed to produce an agreement on a broader relief package.

But the patchwork of moves was less significant than what Mr. Trump described in his news conference, and the plan appeared unlikely to have immediate, meaningful impact on the sputtering economy, leaving questions about how it would affect the continuing face-off with Democrats, whose votes are needed for a congressional deal.

Democrats swiftly criticized Mr. Trump’s actions as an example of executive overreach, saying the measures offered thin support for struggling Americans and warning that the nation’s social safety net could be jeopardized while the coronavirus pandemic continued to spread. After two weeks of huddling with Mr. Trump’s top advisers on Capitol Hill in an effort to hammer out a deal, Speaker Nancy Pelosi of California and Senator Chuck Schumer of New York, the Democratic leader, called for talks to resume.

“The president’s meager, weak and unconstitutional actions further demand that we have an agreement,” Ms. Pelosi said on “Fox News Sunday.” She rejected the suggestion that she had erred by holding out for Democratic priorities, telling the program’s anchor, Chris Wallace, that “clearly you don’t have an understanding of what is happening here.”

Mr. Schumer, speaking on ABC’s “This Week,” declared that “the president’s executive orders, described in one word, could be paltry, in three words, unworkable, weak and far too narrow.”

Mr. Trump’s top economic advisers were on the defensive on the Sunday talk shows as they tried to justify the president’s authority to bypass Congress, which retains the constitutional power of the purse, to redirect billions of dollars. They argued that Democrats, who first approved a $3.4 trillion stimulus package in May, were unwilling to compromise, particularly on sending additional aid to state and local governments.

Steven Mnuchin, the Treasury secretary, called on Ms. Pelosi and Mr. Schumer to consider a more narrow package that addressed the issues where there was agreement, saying that negotiators had resolved most provisions except for reviving unemployment benefits and distributing money to state and local governments. (Drew Hammill, a spokesman for Ms. Pelosi, disputed that characterization.)

“We don’t have to get everything done at once,” Mr. Mnuchin said on “Fox News Sunday.” “What we should do is get things done for the American public now, come back for another bill afterward.”

He insisted that White House lawyers approved the moves as legal and dared Democrats to take the White House to court to stop money from being released to jobless Americans.

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Updated 2020-08-08T12:04:28.992Z

“If the Democrats want to challenge us in court and hold up unemployment benefits to those hardworking Americans that are out of a job because of Covid, they’re going to have a lot of explaining to do,” Mr. Mnuchin said.

But there was some acknowledgment that the measures could face legal challenges and were not as potent as congressional action.

A number of critical provisions are also left unaddressed without a broader deal, including a lapsed federal program for small businesses, another round of stimulus checks, aid to schools confronting the beginning of the academic year and funds for state and local governments reeling from the toll of the pandemic.

“The downside of executive orders is you can’t address some of the small business incidents that are there,” Mark Meadows, the White House chief of staff, said in a pretaped interview that aired Sunday on Gray Television. “You can’t necessarily get direct payments, because it has to do with appropriations. That’s something that the president doesn’t have the ability to do. So you miss on those two key areas. You miss on money for schools. You miss on any funding for state and local revenue needs that may be out there.”

Among the most complicated measures is the president’s intention to revive lapsed weekly federal unemployment payments of $600 through the repurposing of other federal funds, including from a pot of disaster relief aid, to create a $400-a-week bonus payment. That payment, however, is contingent on states providing $100 per week and establishing an entirely new program — called a “lost wages assistance program” — to distribute the aid.

But states are also facing plunging revenues because of the pandemic. They have already struggled to allocate the original $600 payment because of overwhelmed and often antiquated systems, and some experts warn that the revised benefit could last for only five weeks.

Mr. Trump went golfing on Saturday with Sen. Lindsey Graham, Republican of South Carolina, who had tried to nudge the president toward higher weekly subsidies to supplant lost income. Mr. Trump joked that they would simply have to run the printing presses faster to make up the additional amount it would cost, a person familiar with the discussion said.

Larry Kudlow, the director of the National Economic Council, argued that states would be able to support the demand for $100 a week given that billions of dollars allocated in the $2.2 trillion stimulus law in March had not yet been spent. But when pressed during an interview on CNN, he acknowledged that it remained unclear how much states would be able to provide toward the unemployment benefit and when those benefits would be distributed.

“We’ll probably find that out today and tomorrow,” Mr. Kudlow said, repeatedly offering conflicting amounts about how much relief would be made available to the average American. And while Mr. Mnuchin said on Sunday that states could waive the $100 fee and payments could start “immediately,” Mr. Kudlow said the payments could take a few weeks.

ImageWestlake Legal Group 09dc-virus-cong2-articleLarge-v2 Administration Officials Defend Executive Action on Pandemic Relief United States Politics and Government United States Economy Unemployment Insurance Unemployment Trump, Donald J Treasury Department Stimulus (Economic) Small Business Senate Schumer, Charles E Pelosi, Nancy Payroll Tax Mnuchin, Steven T Labor and Jobs Kudlow, Lawrence A House of Representatives Federal Taxes (US) Federal Budget (US) Federal Aid (US) Executive Orders and Memorandums Democratic Party Coronavirus Aid, Relief, and Economic Security Act (2020) Coronavirus (2019-nCoV)
Credit…Michael Reynolds/EPA, via Shutterstock

On CNN’s “State of the Union,” Gov. Mike DeWine of Ohio, a Republican, said he was studying whether his state government could afford to pay an extra $100 a week for unemployment insurance as required by Mr. Trump’s latest order.

“The answer is, ‘I don’t know,’” Mr. DeWine said.

The governor said he thanked the president for the order, but he urged Congress to reach a deal that would provide a much bolder relief package, saying that “they really need to do it. They need to pull together.”

The effect the moves will have on the economy appears to be meager compared with the broader package that was under discussion, and it comes as job growth is already showing signs of slowing. The need for additional fiscal support from the government is clear, economists say, despite the fact that Democrats and Republicans are divided on how much money is needed and where to deploy it.

Charles Evans, the president of the Federal Reserve Bank of Chicago, said that it was crucial for the government to provide additional support to help workers and businesses make it through the pandemic-spurred economic slump.

“Fiscal policy has been unbelievably important in supporting the economy during the downturn that we’ve been experiencing,” Mr. Evans said on CBS’s “Face the Nation,” noting that the virus was not under control. “Another support package is really incredibly important.”

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He suggested that it could be especially bad for the economy if lawmakers did not help state and local governments, many of which have balanced budget requirements and will otherwise be forced to cut workers.

Mr. Trump’s move to curb evictions also remains murky, given that his directive does not outright ban them but instead would require agency leaders to review the necessity of such a moratorium and examine whether additional federal funds were available to provide rental assistance.

It also remains unclear whether Mr. Trump’s decision to suspend the payroll tax through December, deferring payments, would have any immediate effect. His push to suspend the tax has faced significant objections from both parties, with Senate Republicans ultimately leaving out the proposal altogether in the $1 trillion legislation they unveiled late last month.

Many companies are likely to decline to stop withholding money for payroll taxes since it is uncertain that they will ever be waived. But Mr. Mnuchin rejected suggestions from Democrats that deferring payroll taxes would lead to cuts in Social Security or Medicare benefits. The money that supports those programs would be backstopped by a transfer from the Treasury general fund, he said.

Still, he acknowledged that the payroll taxes would eventually have to be repaid unless Mr. Trump could reach a deal on legislation that would allow them to be waived or forgiven — an unlikely scenario — and that the deficit would continue to swell.

“We’ll deal with the budget deficit when we get the economy back to where it was before,” Mr. Mnuchin said.

Democrats have charged that Mr. Trump’s plans to cut or forgive delayed payments of the payroll tax, which funds Social Security and Medicare, could endanger the long-term health of those programs. By depriving the government of payroll tax funds, the move could mean Mr. Trump’s order contradicts his repeated pledge to leave Social Security untouched — which prompted harsh criticism from former Vice President Joseph R. Biden Jr., the presumptive Democratic nominee.

“Unable to deliver for the American people in a time of crisis, Donald Trump offered a series of half-baked measures today,” Mr. Biden said in a statement on Saturday. “He is putting Social Security at grave risk at a time when seniors are suffering the overwhelming impact of a pandemic he has failed to get under control. And make no mistake: Donald Trump said today that if he is re-elected, he will defund Social Security.”

The Committee for a Responsible Federal Budget, a research organization, estimated that Mr. Trump’s orders would provide about $225 billion of near-term funds with a net cost of $10 billion to $15 billion without additional policy changes.

The president’s top aides also strained to defend his sweeping use of executive authority, which Mr. Trump derided when used by his predecessor, President Barack Obama.

Peter Navarro, Mr. Trump’s trade adviser, said on NBC’s “Meet the Press” that Congress left the president with no choice but to resort to executive orders and memorandum. He assailed Ms. Pelosi for demonizing Republicans during the negotiations and said the president was right to use his executive authority.

“The Lord and the Founding Fathers created executive orders because of partisan bickering and divided government,” Mr. Navarro said.

Maggie Haberman and Jeanna Smialek contributed reporting.

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As Republicans Embrace Cut in Jobless Aid, Divisions Weaken Their Leverage

Westlake Legal Group 27dc-virus-cong-facebookJumbo As Republicans Embrace Cut in Jobless Aid, Divisions Weaken Their Leverage United States Politics and Government United States Economy Unemployment Insurance Trump, Donald J Stimulus (Economic) Senate Republican Party Mnuchin, Steven T McConnell, Mitch Federal Budget (US) Coronavirus Aid, Relief, and Economic Security Act (2020)

WASHINGTON — Senate Republicans and the White House on Monday threw their support behind a substantial cut in jobless aid for tens of millions of Americans laid off amid the pandemic, proposing a weekly reduction of $400 to a benefit that has cushioned the nation’s economy even as coronavirus cases continue to rise across the country.

The proposal was part of a $1 trillion opening bid that would have to be reconciled with Democrats, who are pushing a recovery package that would spend three times as much and extend the $600 per week in extra unemployment aid through the end of the year.

Economists say the money, slated to expire this week, has provided a crucial economic buffer for the unemployed, and that lowering the payments could have a cascade of damaging effects across the economy. But Republicans contend that it is too generous, discouraging Americans from returning to work and hampering a recovery.

The Senate Republicans’ decision to embrace the decrease reflects the predicament in which they find themselves amid a worsening pandemic and continued economic recession, little more than three months before Election Day. With a small but vital bloc of conservative senators opposed to providing any more federal coronavirus aid, the party has struggled to agree on how to stabilize the battered economy, leaving Democrats with crucial leverage for an intense set of negotiations over the relief package.

Even as Republicans rolled out their proposal on Monday evening, Mark Meadows, the White House chief of staff, and Steven Mnuchin, the Treasury secretary, were huddled in Speaker Nancy Pelosi’s Capitol office suite, meeting with top Democratic leaders in a reflection of their influence in the talks.

With the two sides far apart, it appeared unlikely that they could bridge their differences in time to avert the lapse on Friday of the supplemental jobless aid, nor was it guaranteed they would be able to do so at all. That left uncertain the fate of President Trump’s best hope of injecting one last shot of stimulus into the economy before the general election in November.

Complicating the picture, Republicans and the White House continued to bicker over the contents of the package even after it was announced, with Senator Mitch McConnell, Republican of Kentucky and the majority leader, appearing surprised that it included funding for a new F.B.I. building that has long been an obsession of Mr. Trump’s.

“I don’t think there is funding, is there?” Mr. McConnell said to reporters who asked about the money, which is designated as a coronavirus-related emergency in the draft bill. Assured that it was, he said the administration “will have to answer the question on why they insisted on that provision.”

Republicans had hoped to avoid this situation altogether, knowing that many in their ranks had grown exhausted with the torrent of federal spending — nearly $3 trillion — that Congress approved in rapid succession in early spring. They resisted passing another package, gambling that if they waited, the virus would dissipate and the economy would rebound, and that they could push through a bare-bones package.

Instead, they are now staring down the beginning of the school year with skyrocketing cases and record unemployment levels, with many in their ranks unwilling to pour any more money into the economy. Their proposal spends more than many Republicans are likely to support, and it will most likely grow as Democrats place their stamp on it.

“There is significant resistance to yet another trillion dollars,” Senator Ted Cruz, Republican of Texas, told reporters on Monday. “As it stands now, I think it’s likely that you’ll see a number of Republicans in opposition to this bill and expressing serious concerns.”

The policy gulf between the two parties has widened in recent days to the point where top White House officials have begun to float the prospect of a narrow bill to address the unemployment benefits, liability protections and school funding, eschewing Democratic priorities and other objectives in an effort to address what they deem to be more immediate needs. Democrats have rejected such a plan.

“We have produced a tailored and targeted draft that will cut right to the heart of three distinct crises facing our country: getting kids back in school, getting workers back to work and winning the health care fight against the virus,” Mr. McConnell said as he led about a dozen Republican senators in unveiling the legislation on the Senate floor. House Democrats’ proposal, he said, amounted to a “multitrillion dollar socialist manifesto.”

The package of bills rolled out on Monday included a new round of $1,200 direct payments to Americans earning $75,000 or less per year. In line with Mr. Trump’s demands, it would reserve tens of billions of dollars in federal funding for schools that reopen for in-person instruction.

It would limit legal liability for businesses that open amid the pandemic, a top priority of business groups in Washington, for coronavirus-related episodes that take place through October 2024. It establishes a tax credit for companies to reconfigure their workplaces to promote safety from the virus, and it would expand tax credits for employers that hire and retain workers amid the outbreak. The proposal would also offer tax certainty to Americans who work in one state and live in another, and are facing the prospect of paying income taxes in multiple states if they were forced to work from home.

The package would both extend government aid for small businesses through the Paycheck Protection Program, which was established in March, and narrow the set of companies eligible to receive it. It would also create an alternate source of aid for businesses in low-income, high-poverty areas: a 20-year loan, with an interest rate of 1 percent, that would give those businesses enough cash to replace up to two years of lost revenues.

It also includes a bipartisan proposal to force Congress to consider future deficit and debt-reduction measures.

The introduction of the package had been delayed for days as Republicans worked to resolve internal divisions with each other and Mr. Trump and to put forward a united front before negotiations with Democrats. But on Monday, the measure already faced resistance by some rank-and-file Republicans and was scorned by Democrats in both chambers, who said it failed to meet even a fraction of the country’s economic and health needs.

“We have stood ready to negotiate for more than two months,” Ms. Pelosi said in a statement before the meeting in her office. “If Republicans care about working families, this won’t take long. Time is running out. Congress cannot go home without an agreement.”

The disconnect between the two parties has already allowed the additional $600-per-week unemployment benefit to expire for many workers, a move that could prove more harmful if households opt to make precautionary spending cuts without the guarantee of more relief.

Mr. Meadows and Mr. Mnuchin sought to leave an indelible mark on the package on behalf of Mr. Trump, spending a weekend on Capitol Hill meeting with Senate staff — an unusual step for senior cabinet officials — to hammer out the technical details of the unemployment proposal.

While the two men ultimately agreed to drop demands for a payroll tax cut — a presidential priority dismissed by members of both parties — they succeeded in securing $1.75 billion for the design and construction of a new building for the F.B.I. Headquarters across from Mr. Trump’s luxury hotel in downtown Washington, in which he has repeatedly shown a personal interest.

The proposal to cut the jobless aid by two-thirds is likely to be among the most bitterly contested issues in the negotiations to come.

Many Republicans oppose the supplemental jobless aid, arguing that it is a disincentive to returning to work because it exceeds what some workers can earn in regular wages. The Republican plan envisions eventually shifting to a new system of calculating federal aid that would cap benefits at about 70 percent of a worker’s prior income, which would also amount to about $200 per week. Most Democrats say state unemployment systems were already struggling to handle distribution of the $600 lump sum, and would be challenged to adapt to a new system.

The Republican proposal would also establish a liability shield for businesses, schools and hospitals open during the pandemic from facing claims over incidents related to the coronavirus. Mr. McConnell has repeatedly deemed such a provision to be a prerequisite for any further aid bill, while Democrats have instead pushed for federal protections for workers against the coronavirus.

Republicans also set aside $105 billion in aid for schools, with $70 billion going to elementary and secondary schools, two-thirds of it reserved for institutions that have begun reopening and holding some in-person classes. Another $30 billion would go to colleges and universities.

Overcoming opposition from the White House, Republicans also set aside $16 billion in new funding for states to conduct coronavirus testing and contact tracing, as well as additional aid for top health agencies and efforts to support the response to the pandemic and potentially distribute a global vaccine.

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Trump Officials Float Idea of Narrow Bill to Extend Unemployment Benefits

Top Trump administration officials proposed on Sunday potentially short circuiting free-ranging stimulus talks with Democrats to rush through a much narrower bill prioritizing an extension of federal unemployment benefits that are set to expire this week for millions of Americans.

Mark Meadows, the White House chief of staff, said he would now like to see lawmakers act this week to extend and alter the unemployment program, give tax credits to businesses to help ease reopening costs and grant employers new liability protections — while setting aside a long list of other objectives, including Democrats’ priorities.

“Perhaps we put that forward, get that passed, as we can negotiate on the rest of the bill in the weeks to come,” Mr. Meadows said on ABC’s “This Week.”

The proposal, echoed by Treasury Secretary Steven Mnuchin in his own Sunday morning interview, was a last-ditch effort by Republicans to prevent the program from lapsing as signs mounted that the nation’s economy was once again weakening amid a resurgence of coronavirus cases. But as they prepared to roll out their own more expansive relief legislation on Monday, it amounted to a concession that Republicans, slowed by their own internal divisions, were unlikely to reach a deal on a comprehensive relief package with Democrats before millions begin losing a $600-a-week benefit that has helped contain the economic carnage.

With Democrats already on record in opposition to a piecemeal approach, a narrow fix is almost certainly dead on arrival. Republicans know that, suggesting their Sunday proposal may in part be a negotiating tactic laying the groundwork to blame the opposition party when the funds ultimately expire.

Democrats passed their own $3 trillion proposal — which also includes money to bail out states and cities, fully fund the $600 federal jobless benefit and infuse billions more into the nation’s health care system — in May and view the time pinch now as a problem of Republicans’ making that only gives them more leverage in shaping a final bill.

“We’ve been anxious to negotiate for two months and 10 days,” Speaker Nancy Pelosi said on Sunday on the CBS program “Face the Nation.” She said Congress could not leave town for its annual August recess until a deal was struck and noted that she spent the weekend waiting to hear from the other party and begin talks.

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Updated 2020-07-25T09:43:39.358Z

“This is an emergency,” Ms. Pelosi added. “Maybe they don’t understand. I don’t know what they have against working families in America to keep this going so long.”

In addition to a difference in negotiating strategy, the two sides have very different views about how to handle even the narrow set of issues identified by the White House. Republicans are proposing altering the jobless benefit program to replace the $600 flat weekly payments with a plan that would replace about 70 percent of a worker’s lost wages — a change Democrats are unlikely to endorse. And Democrats strongly oppose an effort by Republicans to give many employers new protections from lawsuits from their workers, patients or students.

Even before engaging Democrats, Senate Republicans and the White House have struggled to come to terms on their own $1 trillion proposal. They blew through a series of self-imposed deadlines last week as they fought over how to structure changes to the unemployment benefit system, whether to include a payroll tax cut pushed by President Trump and whether to tie funds for schools to a commitment that they reopen in person this fall.

Mr. Mnuchin and Mr. Meadows now claim to be on the same page as Senate Republicans, and after working through the weekend to iron out details, they now plan to begin unveiling the legislative package Monday afternoon. Formal talks with Democrats could follow, but Senator Mitch McConnell, Republican of Kentucky and the majority leader, predicted on Friday that they could take “weeks.”

ImageWestlake Legal Group merlin_174886104_425d005d-afc6-4cb9-a010-210674e448ec-articleLarge Trump Officials Float Idea of Narrow Bill to Extend Unemployment Benefits Wages and Salaries United States Politics and Government United States Economy Unemployment Insurance Unemployment Tax Credits, Deductions and Exemptions Stimulus (Economic) Senate Republican Party Mnuchin, Steven T Meadows, Mark R (1959- ) Law and Legislation Labor and Jobs House of Representatives Federal Budget (US) Democratic Party Coronavirus Reopenings Coronavirus Aid, Relief, and Economic Security Act (2020) Coronavirus (2019-nCoV)
Credit…Erin Scott/Reuters

Even then, Senator Lindsey Graham, Republican of South Carolina, predicted on Sunday that months after voting unanimously on the first stimulus bill, much of his party would now be unwilling to support any relief bill. Outright opposition to additional stimulus from the Republicans’ right flank may only further empower Democrats when two-party talks begin.

“Half the Republicans are going to vote no to any Phase 4 package,” Mr. Graham said on Fox News. “That’s just a fact.”

In addition to the unemployment benefits change and liability protections, the Republican legislation is expected to include $105 billion for schools and billions of dollars more for testing, contact tracing and vaccine distribution. Some of the education funds would be reserved for elementary and secondary schools that are reopening and bringing students back to a more traditional, in-person setting.

The bill is likely to provide for another round of stimulus checks to American families, though it remains unclear who would be eligible to receive those payments. Larry Kudlow, the director of the National Economic Council, said on Sunday that the checks would be worth $1,200, though he did not detail who precisely would receive them.

The largest sticking point, though, has been the effort to scale back unemployment insurance benefits. The White House and congressional Republicans largely agree that the $600 weekly payment established in the $2.2 trillion stimulus law on top of state unemployment pay is too generous, in some cases providing recipients more money than they received in their job, and discourages people from returning to work.

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“The original unemployment benefits actually paid people to stay home, and actually a lot of people got more money staying at home than they would going back to work,” Mr. Meadows said on Sunday. “So the president has been very clear, our Republican senators have been very clear, we’re not going to extend that provision.”

Democrats, who want to extend the current benefit through the end of the year, say Republicans’ plan would present significant technical hurdles and cut funds to Americans when they need it. When Democrats in March proposed matching 100 percent of a worker’s prior income, Labor Department officials said that antiquated state unemployment systems would make it too complicated to execute.

The National Association of State Workforce Agencies also warned Capitol Hill this week that such a significant change to the current program was likely to take months for states to carry out, according to a memo obtained by The New York Times, meaning that it would take even longer for Americans to start receiving the benefits again.

Even though the benefits program is set to expire at the end of July, workers in most states are already losing access to the expanded unemployment payments. Experts fear further economic turbulence if the program is not quickly reinstated.

After an unusual Saturday meeting with Senate staff on Capitol Hill, Mr. Mnuchin and Mr. Meadows said they also planned to include a number of tax incentives in their bill to help businesses trying to reopen, as well as language providing for what Mr. Meadows described as “manufacturing incentives to make sure we can support American jobs.”

And Mr. Kudlow said on Sunday that the White House was looking to include an extension on a moratorium on evictions that just expired.

“We will lengthen the eviction” moratorium, he said. “We will lengthen it.”

Alan Rappeport and Katie Rogers contributed reporting.

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Republicans, Deeply Divided on Coronavirus Stimulus, Near Agreement on Opening Offer

WASHINGTON — Conservatives are apoplectic about its $1 trillion cost. Embattled mainstream Republicans are desperate to act quickly and aggressively to show voters they are doing something about the pandemic and resulting recession. And President Trump keeps insisting on proposals, like a costly payroll tax cut, that will do nothing to help tens of millions of jobless Americans and even members of his own party do not support.

The debate over the next round of coronavirus relief has exposed deep divisions among Republicans over spending and policy, leaving the fate of a huge economic rescue package in limbo as the virus surges around the country and posing an election-year dilemma for a party already facing a grim political landscape.

After three marathon days of talks, Senate Republican leaders and White House officials expressed confidence on Wednesday evening that they had reached an agreement in principle on a proposal that would dole out more than $100 billion to schools, send additional checks directly to Americans and provide $16 billion for states to conduct testing and contact tracing. But some of the biggest issues, including what to do with enhanced unemployment insurance and Mr. Trump’s payroll tax cut idea, were not finalized.

In a sign of their differences, some Republican senators suggested at one point Wednesday that they might pursue a short-term extension of the enhanced unemployment benefits expiring next week to buy more time to reach a final agreement. Even that idea sparked infighting: Conservatives loathe the extra $600-per-week benefit, regarding it as a disincentive to work, and the White House chief of staff panned it.

And Republicans have not even begun to negotiate with Democrats, who are pushing for a rescue package three times as large.

“Nobody’s stabbed anybody or anything,” said Senator John Kennedy, Republican of Louisiana, describing the dynamic inside of his party as lawmakers bicker over the bill. But, he said, “I don’t think you can say there is a consensus.”

Democrats, who have hammered Republicans for not acting on a $3 trillion recovery measure the House passed in May, have refused to budge from their starting position until Republicans produce an opening bid.

“The Republican Party is so disorganized, chaotic and unprepared that they can barely cobble together a partisan bill in their own conference,” said Senator Chuck Schumer of New York, the minority leader.

Republicans had hoped not to find themselves here at all. After passing the $2.2 trillion stimulus law, they hit pause — as Senator Mitch McConnell of Kentucky, the majority leader, repeatedly said — on another economic rescue package, predicting that the virus would subside and a far less expansive measure would be needed this summer.

Now, with the coronavirus surging, jobless aid set to expire in 10 days, and their re-election races less than four months away, they are stuck assembling a $1 trillion measure that they privately concede will probably grow substantially before their negotiations with Democrats conclude, ideally before both chambers are scheduled to leave Washington in August.

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Updated 2020-07-23T02:12:52.972Z

“Everyone assumed months ago schools would be reopening, the economy would be re-engaging. That is not necessarily true in many places,” Senator James Lankford, Republican of Oklahoma, said Wednesday. “So while I understand ‘hey, you have had months and months of time,’ every week the ground shifts on us and you have to be careful with other people’s money.”

Republicans spent Wednesday trying to finalize their opening bid. In a nod toward fiscal hawks, Senate leaders were discussing the possibility of including deficit-reduction measures in the bill, such as a bipartisan commission championed in a recent op-ed by Senator Mitt Romney, Republican of Utah.

The measure is taking shape as Mr. Trump’s unpopularity drags down Republicans’ electoral fortunes, putting their Senate majority in peril and sharpening a debate over how the party should define itself.

In the House, too, Republicans have been feuding among themselves, embittered by their political situation and competing to shape their party’s message. In a private meeting on Tuesday, a group of Trump loyalists heaped criticism on Representative Liz Cheney of Wyoming, the No. 3 House Republican, for being insufficiently supportive of the president. Ms. Cheney, a staunch conservative, has questioned Mr. Trump’s national security policies and broken with him at times on his approach to the coronavirus.

In the Senate, Republicans were discussing a rescue package that would send additional checks directly to families, provide more assistance for small businesses and allocate $105 billion for schools. Of those funds, $70 billion would go to elementary and secondary schools, with half reserved for schools that are holding in-person classes, and another $30 billion for colleges and universities.

The proposal, which is to be presented as soon as Thursday, is also expected to include $16 billion for states to conduct testing and contact tracing, according to a person familiar with the discussion, as well as $4 billion to assist with the global distribution of a vaccine. Republicans had initially proposed substantially more money for those items, and the administration at first balked at including any.

At lunch on Tuesday with Treasury Secretary Steven Mnuchin and Mark Meadows, the White House chief of staff, Senator Bill Cassidy, Republican of Louisiana and a doctor, said he thought he was on acid when he heard the administration’s view, according to people familiar with his remarks.

But on Wednesday, Mr. Mnuchin said there was broad agreement.

“We’ve now had three days of meetings, and we are now completely on the same page,” he said Wednesday evening as he and senior lawmakers announced the contours of the agreement. “We are all in good shape.”

They would not discuss how they planned to address the looming expiration of the unemployment benefits and the administration’s demand for a payroll tax cut. Many lawmakers oppose including a payroll tax cut because it is costly and would only help employed people at a time when the pandemic has displaced millions of workers.

Mr. McConnell, who not only is battling to maintain his narrow Senate majority but is on the ballot himself this fall in a state badly hit by the virus, will shoulder most of the burden of trying to pull together his fractious conference.

“We’re hopeful we’ll be able to get there,” Mr. McConnell said earlier Wednesday when asked about the political effects of a failure to reach agreement. “This discussion has just really begun in earnest.”

Mr. McConnell, whose meticulous maintenance of his majority has been a hallmark of his time as leader, also has a keen sense of the political stakes. Scott Jennings, a longtime adviser to Mr. McConnell, said polling suggests the position of archconservatives arguing for Congress to do nothing would not fly with voters.

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“This isn’t solved,” Mr. Jennings said. “The pandemic is still here. The carnage is still real, and the voters are still keenly aware of what their incumbents are doing.”

One of those vulnerable senators, Thom Tillis of North Carolina, said Wednesday that he would support delaying the August break until lawmakers pass something “helping people that are hurting.”

Another, John Cornyn of Texas, downplayed concerns about the effect of the package on the nation’s deficit.

“People are concerned about that, but I also tell them in World War II, while we were fighting Hitler, we weren’t thinking about how much it costs,” he said. “We were thinking about survival, and that’s my first priority here.”

ImageWestlake Legal Group merlin_174834762_5dfaa6b7-f6e8-4b14-8427-6027c0e27314-articleLarge Republicans, Deeply Divided on Coronavirus Stimulus, Near Agreement on Opening Offer United States Politics and Government United States Economy Unemployment Insurance Trump, Donald J Stimulus (Economic) Payroll Tax Mnuchin, Steven T McConnell, Mitch Law and Legislation Federal Budget (US) Coronavirus (2019-nCoV)
Credit…Saul Martinez for The New York Times

The risk to the nation’s health and economy is real. Death counts are again on the rise. And the economic rebound has stalled while infections surged across the South and the West. After climbing rapidly in late April and May, small-business openings and revenue plateaued in June and have fallen in recent weeks. Improvements in hotel occupancy, air travel and restaurant diners have also flatlined or turned negative.

Still, conservatives, including the party’s most outspoken firebrands like Senators Ted Cruz of Texas, Rand Paul of Kentucky and Mike Lee of Utah, are threatening to lay themselves down on the tracks to stop any bill they see as fiscally imprudent. They worry that if they get into a spending war with Democrats, voters will give Republicans little credit for supporting the aid while conservative voters will be furious with them.

“I am not going to authorize a dime until I understand what we’ve done,” Senator Ron Johnson, Republican of Wisconsin, told reporters on Wednesday.

Conservative activists, and some conservative economists, are particularly focused on cutting off emergency federal economic assistance like the expanded unemployment benefits. They argue that the additional benefits discourage Americans from returning to work and are sounding the alarms over the trillions of dollars in new federal borrowing that have financed the crisis response.

Mr. Lee invited one such group, the Foundation for Government Accountability, to share polling with Republican senators over lunch on Wednesday.

Republicans have said they want to scale back the unemployment benefits, which amount to more than some workers earn in wages. That would result in a severe cut to the benefit received by millions of jobless Americans.

Many Republicans feel that Mr. Trump has dispatched two flawed negotiators in Mr. Mnuchin, whom they regard as a former Democrat willing to spend vast sums of money, and Mr. Meadows, who spent his years in Congress thwarting large spending deals of the kind now under discussion.

“We’re optimistic that we can continue to find a real solution,” Mr. Meadows told reporters at the Capitol on Wednesday, “and hopefully, reach a compromise with Democrats.”

Luke Broadwater contributed reporting.

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Congress Eyes More Spending as Virus Surges and Economy Struggles

Westlake Legal Group merlin_174090336_2f3c3b33-0d5d-4827-9d8d-6de3e595fab4-facebookJumbo Congress Eyes More Spending as Virus Surges and Economy Struggles United States Politics and Government United States Economy Unemployment Insurance Unemployment Trump, Donald J Small Business Shutdowns (Institutional) Senate Recession and Depression Layoffs and Job Reductions Law and Legislation House of Representatives Federal Budget (US) Coronavirus Aid, Relief, and Economic Security Act (2020) Coronavirus (2019-nCoV)

WASHINGTON — There is a growing recognition across party lines that Congress will need to spend more money, soon, to continue to prop up the American economy during the coronavirus recession.

But there is little consensus on what that next aid package will look like and how quickly it will arrive before the end of summer, and there is a sense among Republicans and Democrats that the next bill will spend far less to help people and businesses than the nearly $3 trillion that Congress approved in March in a series of rapid-fire bills.

Some economists say lawmakers are risking further damage to an already fragile recovery by not moving more quickly. The unemployment rate has dropped from its April peak but was still at 11.1 percent in June. Forecasters at the Congressional Budget Office said on Thursday that they expect the economy to shrink by 5.9 percent this year, a contraction that would be more than twice as large as the one the United States experienced during the Great Recession in 2009.

Federal Reserve officials are worried that a possible “second wave” of the pandemic would further depress economic growth in a way that would be “more severe and protracted” than the current forecast, according to minutes from their most recent meeting published on Wednesday.

Virus cases have begun to surge in across much of the country. Real-time indicators of shopping patterns and business openings suggest that a once-brisk economic rebound stalled in June as the virus began spreading more rapidly in Texas, Florida and other states. Even the most encouraging signs of recovery — such as the report on Thursday that the economy added 4.8 million jobs in June — underscore how far the recovery still has to get back to what was normal before the virus: Nearly 18 million Americans remain unemployed.

Lobbyists and lawmakers say the Trump administration, which has lost several economic advisers in recent weeks, is not deeply engaged in devising another rescue package. Officials have hinted for weeks that they would formally propose tax cuts, infrastructure spending and other initiatives, but they have not followed through. President Trump has asserted that the economy is rebounding but has expressed support for additional tax cuts and government spending.

“Today’s announcement proves our economy is coming roaring back,” he said on Thursday after the jobs report. “It’s coming back extremely strong.”

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Updated 2020-07-02T19:37:14.980Z

Treasury Secretary Steven Mnuchin, appearing with Mr. Trump, said: “Our work is not done. Our work won’t be done until every single American that lost their job due to Covid is back to work.”

Senators are expected to leave Washington on Thursday after making only incremental progress toward an agreement to extend further relief to businesses and laid-off workers who are about to lose or have already exhausted federal assistance. Congress this week unanimously agreed to extend an aid program for small businesses through August, a move that small business groups called a good but insufficient step to help prevent bankruptcies. But the Senate’s Republican majority rejected a Democratic attempt to extend supplemental benefits for the unemployed until the economy has more fully recovered.

“I don’t understand how a senator can go home and not have delivered supercharged unemployment along the lines we’re talking about,” said Senator Ron Wyden, Democrat of Oregon, who introduced legislation on Wednesday that would allow expanded unemployment benefits to continue as long as the economy was weak.

But as is their tendency just before funding and programs are set to expire, several lawmakers expressed optimism that Senate Republicans could rapidly reconcile their divisions and deficit fears with the $3 trillion measure that House Democrats approved in May.

Senator Mitch McConnell of Kentucky, the majority leader, told reporters on Tuesday that the focus of any legislation taken up in the Senate would be “kids, jobs and health care,” as well as liability protections for hospitals, doctors, nurses, businesses, colleges and universities.

Senator Roy Blunt, Republican of Missouri, said he had asked lawmakers and staff on the committee responsible for overseeing health, education and labor spending to begin compiling a package that “will ensure we have more testing, that we continue to work on therapeutics, and we have the money we need to move forward with a vaccine.”

A bipartisan group of lawmakers is also honing in on a deal to revamp the government’s efforts to help small businesses, likely including at least a partial shift from offering what were essentially grants to companies that kept workers on their payrolls to offering low- or no-interest, long-term loans.

A coalition of industry associations, led by the Economic Innovation Group, an entrepreneurship-focused think tank, called on lawmakers this week to give small businesses sufficient aid “to survive a prolonged period of lower consumer demand, ongoing operational disruption, and continued uncertainty until the availability of a vaccine and effective therapeutic treatment eliminate Covid-19 as a severe public health concern” — including simple, zero-interest loans.


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  • Frequently Asked Questions and Advice

    Updated June 30, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.


“As the shutdowns have grown longer, it has become clear that millions of small employers need additional help if they are to keep their heads above water and survive,” said Senator Susan Collins, Republican of Maine and one of the architects of the emerging plan to help businesses. “I believe that we are very close to reaching bipartisan agreement, and I know that for small businesses that are struggling, such an agreement cannot come soon enough.”

Other issues are much further from resolution, including whether to extend, possibly with modifications, the $600-a-week supplemental unemployment benefit that was passed in March and expires at the end of July. Top Republicans are also pushing to grant some form of immunity from lawsuits to companies, schools and businesses that reopen or have remained open while the virus continues to spread. And lawmakers will need to decide how much, if any, money to send to struggling state and local governments that have already begun laying off employees as tax revenue plummets.

Industries that have been particularly hard hit, like entertainment venues, continue to push for more generous and targeted aid to keep them afloat, like tax credits for a portion of refunded tickets.

“There is some growing recognition that there are many industries that are still suffering that might need to be addressed by sector by sector analysis,” said Senator Tim Scott, Republican of South Carolina.

“The president and the Democrats, both have signaled a desire,” he added. “The question is, how do you frame that?”

Some conservatives continue to push congressional leaders and Mr. Trump to resist any additional government spending. Many economists disagree, saying further aid is needed to support the economy through what could be a long and slow recovery.

Federal spending has been “very important” to preventing an even steeper economic nose-dive, said Aneta Markowska, chief economist at the investment bank Jefferies. But it is at risk of running out long before the economy is ready to stand on its own.

“The stimulus was very short-lived,” she said. ‘This problem is going to persist long beyond July.”

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How Washington Learned to Embrace the Budget Deficit

Westlake Legal Group merlin_172205091_d211d5b6-2646-470b-aaef-84a810e6a0be-facebookJumbo How Washington Learned to Embrace the Budget Deficit United States Economy United States Trump, Donald J Recession and Depression National Debt (US) Kelton, Stephanie Interest Rates Federal Budget (US) Economic Conditions and Trends Credit and Debt Coronavirus Aid, Relief, and Economic Security Act (2020)

WASHINGTON — This month, the federal government said it would borrow a record-breaking $3 trillion from April to June to help businesses and workers get through the coronavirus-induced recession. In April alone, the United States recorded a larger budget deficit in a single month than it did for all of the 2017 fiscal year, a total of $738 billion.

Running such a large deficit would have been politically untenable just a year ago; since the end of World War II, economists have often warned that doing so would risk runaway inflation and possibly unsustainable tax hikes on future generations. But now, even some of the country’s most ardent deficit hawks have watched the debt pile up and said: More, please.

The coronavirus pandemic has brought a new sort of deficit scolding to Capitol Hill, with economists and lawmakers warning the United States is not borrowing enough to carry the nation through a debilitating recession that could turn into a second Great Depression.

A legion of economists, Federal Reserve officials and even some of the most outspoken proponents of deficit reduction in recent years are now urging Congress and President Trump to continue spending trillions of dollars to prevent a long-term collapse in business activity and prolonged joblessness.

Behind those calls is a confluence of events that have enhanced the economic case for rising deficits — a combination of rock-bottom interest rates, falling consumer prices and a deep plunge in consumer and business activity.

Many economists said in the past that large public deficits and debt would bog down the economy, by pushing up borrowing costs for businesses and sending consumer prices soaring. Now, the Federal Reserve has made clear that low interest rates, which have been slashed to near zero, are here to stay, making it cheaper for the United States to borrow money. Inflation, which struggled to get out of the gate during an 11-year expansion, seems confined to the woodshed.

In order for America to survive the recession and minimize the damage, many economists are now urging lawmakers to spend more. They want additional aid to small businesses, continued enhanced unemployment benefits for workers and more assistance for state and local governments that have seen a steep falloff in tax revenue and have already laid off 1 million workers. Such spending, economists argue, would hasten a rebound in economic growth and help save businesses that might otherwise fail, generating a return to the economy that exceeds the relatively low future interest costs incurred by prolific borrowing.

“I think we’re still in the early innings of dealing with this crisis, and we’re probably in the early innings of throwing out trillions of dollars to help us get by,” said Kenneth Rogoff, a Harvard University economist whose work on government debt and economic growth was frequently cited by lawmakers pushing rapid deficit reduction under President Barack Obama.

“Any sensible policy is going to have us racking up the deficit for a long time, if you can,” Mr. Rogoff said. “If we go up another $10 trillion, I wouldn’t even blink at that now.”

Deficit critics still exist, at least in sound bites. Republican leaders in the Senate have cited debt concerns as a reason to move slowly on a new package of economic assistance amid the pandemic. Democratic leaders in the House crafted and passed a $3 trillion opening bid for a new rescue package this week, but they pared it back and dropped some members’ top priorities from the bill out of deficit concerns.

Mr. Trump’s advisers and top Republican leaders, citing the enormous sums of money already out the door, have said they would prefer to wait and see whether the existing support provided by Congress will suffice now that states are beginning to lift economic restrictions that were imposed to slow the spread of the virus.

“I don’t believe we can spend ourselves into prosperity,” the head of the National Economic Council, Larry Kudlow, told reporters on Friday.

Even as Republicans point to the deficit in resisting more support for workers and businesses, they continue to push for tax cuts, which would also grow the deficit but represents spending that they argue would be more effective for the economic recovery.

“There’s a huge fiscal problem growing,” said Senator Rob Portman, Republican of Ohio. “We don’t know what the impact of that is economically, but we know that it’s bad for our future economy and for future generations. So we’ve got to take that into account. But we also know that we have to provide a rescue package.”

There is little argument among either conservative or liberal economists that the deficit needs to grow, as tax revenues fall and spending needs rise amid a pandemic that has shuttered business activity and already thrown at least 20 million people out of work.

Federal deficits typically grow during recessions and many economists note that the deficit was going to rise this year whether lawmakers took action or stood pat and allowed the economic damage to mount, forcing more workers to utilize government benefits like food stamps and unemployment.

“The deficit will move on its own,” said Stephanie Kelton, an economist at Stony Brook University who has advised Senator Bernie Sanders of Vermont and is a leading champion of the theory that the federal government’s spending levels should be limited not by tax collections or debt levels, but by how much the economy can actually produce.

“We can move it proactively, and we can direct that deficit spending in ways that are strategic and thoughtful,” Ms. Kelton said, “or we can not do that, and it can move the ugly way.”

Lawmakers’ decision to dive quickly into additional deficit spending has been cheered by those who previously preached fiscal restraint, including the Federal Reserve chair, Jerome H. Powell, who urged Congress and Mr. Trump to “go big” on fiscal support for the economy.

Mr. Powell, who had been a longtime fiscal hawk, repeated his call this week, saying in a speech that “additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.” He and the Fed have lent considerable support to that effort, by promising to keep interest rates near zero for as long as the economy remains in crisis and buying vast sums of the Treasury bonds that support government borrowing.

Polls show Americans worry about the nation’s deficit and debt, but that those worries have declined in recent years. Many economists’ worries have declined, too, in an era of persistently low interest rates and inflation that has remained lower than the Fed’s target rate of 2 percent, and receding fears of the government “crowding out” private borrowers — which is to say, government borrowing pushing up interest rates to such a degree that private companies find it harder to get access to capital.

“Interest rates are lower than they’ve ever been when we’ve done fiscal stimulus,” said Jason Furman, a former top economist under Mr. Obama who is now a professor at Harvard University’s Kennedy School of Government. “Inflation is lower than it’s ever been when we’ve done fiscal stimulus. There’s not a business in the country that is constrained from borrowing by the general level of interest rates.”

Yet some economists caution that, as deficits rise quickly, lawmakers need to make sure they target the dollars effectively.

Michael J. Boskin, a Stanford University economist, warned in a paper posted in February that rising debt as a share of nation’s economy risks higher taxes, lower future incomes and a reduced ability for children to climb past their parents on the economic ladder, because large debt loads reduce savings and crowd out private-sector investment. Mr. Boskin, in an interview, said that he supported many of the government’s deficit-financed efforts in this crisis thus far, but that lawmakers should target future spending on getting people back to work and helping businesses reopen, in order to best help the economy recover.

“We owe that to ourselves,” Mr. Boskin said, “but especially to future generations, who at some point are going to be paying for this.”

Other economists who have long championed deficit reduction have, in this moment of crisis, called for higher and effectively targeted spending. They include R. Glenn Hubbard, a Columbia University economist who was a top adviser to President George W. Bush, and Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, who has spent years advocating deficit reduction.

“There are times you should be borrowing and times you shouldn’t be borrowing,” Ms. MacGuineas said. “This is exactly the moment that we should be borrowing.”

Republicans have grown more tolerant of deficits under Mr. Trump, who famously said as a presidential candidate that he would eliminate the national debt within eight years, but has instead swelled borrowing. Mr. Trump’s sweeping package of tax cuts in 2017 did not pay for itself as promised, and he has signed bipartisan agreements to boost federal spending. That helped to push the deficit above $1 trillion in 2019, well before the current health emergency.

The crisis sharply accelerated the deficit. It will hit $3.7 trillion for the fiscal year, the Congressional Budget Office projects and, by the end of September, the budget office says, the amount of debt held by the public will be larger than a full year of economic output in the United States.

Fiscal hawks had warned that growing deficits under Mr. Trump, which came despite an unemployment rate that fell to 50-year lows, could hamstring the federal response to an economic crisis. Now that such a crisis has arrived, and deficit fears have begun to surface in Congress, many of those hawks say they feel vindicated.

Emily Cochrane, Neil Irwin and Jeanna Smialek contributed reporting.

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More Aid to States? That May Depend on Their Political Hue

WASHINGTON — When Senator Mitt Romney of Utah strode into a luncheon with fellow Republicans last week, he was carrying an oversize poster in his black-gloved hand that bore a blunt message: “Blue states aren’t the only ones who are screwed.”

Two days later, Senator Rick Scott of Florida made the opposite point, arriving at another party gathering with his own placard that showed how rosy his state’s financial picture was compared with those of three Democratic states: New York, Illinois and California. Why should Congress help struggling states and cities, he argued, when the bulk of the aid would go to Democratic strongholds that he said had a history of fiscal mismanagement?

The two Republican senators — both former governors — illustrate the contentious debate within their party that is shaping the next sweeping package of federal coronavirus relief. With many states and cities experiencing devastating fiscal crises amid the pandemic, Democrats in Congress have joined governors and mayors in pressing for a huge infusion of money for troubled states, cities and towns.

On Monday, the Democratic governors of five western states — California, Colorado, Oregon, Nevada and Washington State — said that all 50 states would need $1 trillion in “direct and flexible relief.”

President Trump has not ruled out sending additional money to states. But he has gone after Democratic governors, accusing them of mismanaging their finances, and charged that the party’s members in Congress “want help — bailouts — and, you know, bailouts are very tough. And they happen to be Democrat states.”

“The Republican states are in strong shape,” he said last month. “I don’t know — is that luck or is that talent?”

On Monday, Mr. Trump again accused Democratic states of dragging their feet on reopening their economies. “There just seems to be no effort on certain blue states to get back into gear,” he said.

States are suffering from a collapse in sales and other tax revenue, even as they face enormous new costs for health care, emergency medical services, jobless aid and other safety net programs. Without more support, the Western governors warned, states would have to make “impossible decisions” such as whether to fund public health care programs or lay off teachers, police officers, emergency medical workers and firefighters.

While the federal government can run budget deficits, states do not have that option.

Republicans are divided over whether to help at all and how much aid to provide, as well as what conditions to place on the money. Much of the dispute — unfolding just months before the November elections in which control of the Senate is at stake — is being driven by the political bent of the states that stand to benefit or lose.

Mr. Trump has said that “we’re in no rush” to produce another round of federal pandemic relief, and branded Democrats “stone-cold crazy.”

If such a package materializes, Kevin Hassett, one of Mr. Trump’s senior economic advisers, told CNN on Sunday, “I think President Trump has signaled that while he doesn’t want to bail out the states, he’s willing to help cover some of the unexpected Covid expenses that might come their way.”

Republicans like Mr. Romney are pushing for a substantial infusion with few restrictions, arguing that the money is desperately needed throughout the country, not only in predominantly Democratic places. His poster, which showed an analysis published by Slate using data from Moody’s Analytics, showed that a number of Republican states — including Louisiana, Kansas and Kentucky — are likely to face some of the largest budget shortfalls, in part because of a loss of tax revenue and use of state rainy day funds.

Large state budget shortfalls could prolong a recession, economists have said, by prompting a cascade of layoffs that ripple across the economy. In April, state and local governments laid off one million people, a number that could continue to climb without additional assistance.

“This is not a partisan issue,” said Lee Saunders, the president of the American Federation of State, County and Municipal Employees. “This is not a red or blue issue. This is an issue about providing essential services to the people that rely upon them — and that’s the entire country.”

But Mr. Scott and other Republicans want to place strict limits on any funding to steer it away from heavily Democratic states, such as barring aid from being used to cover pension obligations. That would disadvantage states like California, Illinois and New York, whose huge obligations to public employee pension systems are worsening their financial problems. The Democratic leader of the Illinois Senate, for instance, has asked Congress for a more than $40 billion lifeline, including $10 billion to bolster the state’s pension system.

ImageWestlake Legal Group merlin_172320684_05ee88f9-0038-4b50-884a-c9f8eea55e5f-articleLarge More Aid to States? That May Depend on Their Political Hue United States Politics and Government United States Economy States (US) Senate Governors (US) Federal Budget (US) Federal Aid (US) Coronavirus Aid, Relief, and Economic Security Act (2020)
Credit…Eve Edelheit for The New York Times

Senator Mitch McConnell, Republican of Kentucky and the majority leader, initially indicated he would rather see states go bankrupt than send them additional federal money, but he has since signaled that he would be open to more funding, provided it could not be used to address problems that existed before the pandemic. And while Mr. Trump has indicated that he is willing to consider more state and local aid, he has also made plain that he does not relish the idea of helping states that elect Democrats.

“Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?” Mr. Trump tweeted last month. “I am open to discussing anything, but just asking?”

Congress already allocated $150 billion to states as part of the $2.2 trillion stimulus law enacted in March, although restrictions imposed by the Treasury Department walled it off from being used for anything other than coronavirus-related expenses, which does not account for huge revenue losses resulting from the economic lockdowns.

And there are indications that the money has not been distributed equitably. An Associated Press analysis published last week found that based on the number of positive tests for the coronavirus, states with smaller populations — and not those considered the epicenters of the pandemic — received an outsize portion of aid. Hawaii received $2 million per positive test and Alaska nearly $3.4 million, the analysis found, whereas New York and New Jersey received about $24,000 and $27,000 per positive test, respectively.

Governors of both parties have urged their congressional delegations to approve more funding, arguing for flexibility in how they can use the aid. Alabama’s Legislature wants to spend a portion of its $1.8 billion on building a new Statehouse, according to local news reports. Some are pressing for a special tranche of funding specifically for communities of fewer than 500,000 people.

“The concerns of rural states need to be taken into account,” said Senator Susan Collins, Republican of Maine, in a brief interview. The stimulus law made it difficult for small communities to receive aid directly, she said, because the state is responsible for parceling out the aid.

“I certainly don’t want anything that says you have to be a certain size to get funding,” Ms. Collins added.

According to the United States Conference of Mayors, only 36 cities have qualified for direct federal assistance so far. On Tuesday, on a call arranged by the organization, a bipartisan group of mayors from Michigan, Ohio, Texas, Kentucky and Florida — all states that supported Mr. Trump in 2016 — plan to call for a large new infusion of federal money to cities of all sizes.

Senator John Kennedy, Republican of Louisiana, who compared restrictions on the previously allocated money to “handcuffs,” on Thursday attempted to push through legislation that would eliminate those guardrails, but maintain the prohibition against using the aid for pension programs. Mr. Scott, the Florida Republican, blocked the measure, arguing that Congress had “wisely placed limitations on how this money could be spent.”

House Democrats are preparing to unveil another sweeping coronavirus relief measure that would allow for another round of direct payments, an increase to food assistance programs and support for the Postal Service — proposals that they acknowledge will likely meet conservative resistance and may not survive in negotiations with the Senate. The centerpiece is expected to be aid for state, local and municipal governments, comparable to or eclipsing the nearly $700 billion that has been distributed to small businesses through a loan program created by the stimulus law.

“Republican and Democratic governors and mayors across the country support what we are doing with the state and local, honoring our heroes,” Speaker Nancy Pelosi of California said at a news conference on Thursday. “Viruses know no borders nationally, but they certainly don’t know any state borders.”

Credit…Anna Moneymaker/The New York Times

But Mr. McConnell has urged his colleagues to hit “the pause button,” raising concerns about the ballooning government debt. Although he has acknowledged that another tranche of state and local funding is likely, he has said there will be no such aid without protections against lawsuits for businesses calling workers back, citing it as his red line on future legislation.

Some Republicans, however, are pressing hard for the money. Senator Bill Cassidy, Republican of Louisiana, has introduced legislation with Senator Bob Menendez, Democrat of New Jersey, to distribute $500 billion to states across the country, and other senators have signaled their openness to another round of funds.

And many lawmakers in both parties may be loath to reject such proposals, given the dire straits of their state budgets and the widespread acknowledgment that the government’s response to the pandemic will be top of mind for voters in November.

“I think all of us are going to get our papers graded in November based on how we responded,” Senator John Cornyn, a Texas Republican seeking re-election, told reporters. “This is going to be the dominant issue in every election in the country.”

Nicholas Fandos and Jim Tankersley contributed reporting.

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