An agreement on the economic stimulus package is a lot closer this morning. Senator Schumer and Treasury Secretary Mnuchin resolved most of the large issues last night. A deal did not materialize yesterday, but negotiators knew the clock was ticking and worked late into the night to get the details in order for a potential deal announcement today.
Last night, Mnuchin agreed to more oversight of the corporate loan facility and Schumer won more money for hospitals and $25bn of direct aid for the airlines to avoid layoffs. This has paved the way for the deal to be closed out.
Yesterday was as ugly a day to watch the legislative process as I have ever seen. I often stress that the legislative process is not elegant, but the process needs to play out to move legislation forward. Failed votes can, at times, help to move negotiations forward. The process works.
But we are on the cusp of an explosion in reported COVID-19 cases, and just days away from what is likely to be the largest increase in initial unemployment claims in the country’s history. Our clients’ frustration was palpable.
Continued delays over the Senate vote or the House process will not be viewed kindly by investors, given the postponements in getting this packaged passed already.
- Senate Votes Could Start As Early As Today: The process can move really fast if an agreement is reached this morning. We can see Senate votes a few hours after the text is ready. The procedural vote to start consideration of the legislation will likely come this afternoon.
- The Senate Needs To Deliver A Large Bipartisan Majority To Pressure The House: With the House on recess and unlikely to reconvene back in Washington due to coronavirus fears, a strong Senate vote is needed to ensure the House has no other choice but to approve the Senate bill.
- Trump’s Support Is Critical To Deliver A Large Vote In The Senate: Assuming a deal is reached among negotiators, Mnuchin will need to get Trump to sign off on the deal. Trump’s support is critical because it will give cover to Republican Senators. The inclusion of $25bn in direct aid for the airlines and air cargo companies will give some Republicans pause in voting for the bill.
Press reports claim the president was briefed last night and seemed pleased with the negotiations, but a more thorough review is needed once the deal is finalized.
- Speaker Pelosi’s View Will Be Critical Since the House Will Also Need to Pass Legislation: Yesterday, Speaker Pelosi released a $2.5 trillion stimulus package spread out over 1,400 pages. The last-minute move created confusion around the process and a number of the provisions were completely unrelated to the current economic recovery efforts. But Pelosi was laying down her marker for her caucus that these were her priorities before cutting a deal. It also made Schumer’s demands look moderate (bad cop/good cop) in the negotiations. Successful inclusion of several items allows Pelosi to sell the deal to her caucus. Speaker Pelosi will be making the rounds on TV this morning.
- Procedural Hurdle: The House is Unlikely to Return to Washington: Assuming the Senate successfully passes this stimulus package, the House will need to follow with its passage of the legislation. This poses a procedural challenge since the House is not likely to reconvene in Washington due to the risks of COVID-19.
- House Leadership is Recommending Unanimous Consent or Voice Voting to Pass Legislation Related to COVID-19: Last night, we received a report from the House Rules Committee recommending that the House follow the example of the 1918 Influenza Pandemic and vote by Unanimous Consent (UC) or by voice voting. UC Agreements or voice voting are really the only two ways that the House can pass the Senate bill without coming back to Washington. Under a UC agreement, all members of Congress agree to move forward without holding a formal vote. In most cases, UC agreements are for noncontroversial business and are used to speed up the process. But if one member objects, the legislation cannot move forward.
- By Moving the House Bill under UC or Voice Voting, the House is Signaling That It Will Accept the Senate Plan or Nothing Will Pass: There is a risk that if UC or voice voting does not work, no stimulus package will pass. This is because the Senate bill is the only possible option. Given this potential binary outcome, Speaker Pelosi and the House Democrats would likely share in the blame of bad economic data in the coming weeks. Pelosi is smart enough to prevent this from happening. There is also a risk that some conservative Republicans, appalled at the $1.4 trillion package, also raise objections. This is not our base case, but the unique nature of the House procedure is where we expect the discussion to be headed as legislation moves through the Senate and towards the House.