Nancy Pelosi Plays Hardball on Stimulus Talks: Could Her Plan Backfire?

Nancy Pelosi Plays Hardball on Stimulus Talks: Could Her Plan Backfire?

Will Congress finally pass a much-needed deal?

House Speaker Nancy Pelosi (D-Calif.) posed a forty-eight-hour deadline on Sunday for top White House aides to strike a deal with Democrats if they want to pass the next coronavirus relief package before November 3, as negotiations over legislative language have hit a brick wall for months.

“The 48 only relates to if we want to get it done before the election—which we do,” Pelosi told ABC’s “This Week.” “But we’re saying to them we have to freeze the design on some of these things, are we going with it or not, and what is the language.”

When asked about the possibility of Americans receiving federal relief before Election Day, Pelosi added that it, “depends on the [Trump] administration.”

Back-and-forth talks between Pelosi and Treasury Secretary Steven Mnuchin have loomed for months, as there are significant partisan differences on the measures of the package, rather than the dollar amount. The two spoke for over an hour on Saturday and agreed to convene again on Monday in hopes of cutting a deal before Pelosi’s tight deadline.

Pelosi’s office told CNN that the speaker gave President Donald Trump’s administration until the end of Tuesday to reach an agreement, which offers Congress just two weeks before the election for the legislation to roll through the House and Senate, as it won’t be feasible to push a bill through both chambers if negotiations surpass Tuesday evening.

Pelosi and Mnuchin disagree on much of the bill’s substance, including funding for cities and states, child care, tax credits for lower-income families, as well as liability protections that Democrats avidly disapprove of. The two also remain divided on specific language within the package, particularly relating to the national strategic testing plan, as the GOP-language provides too much flexibility in changing the initial bipartisan agreements.

“The White House does not appreciate the need to direct resources to culturally competent contact tracing,” Pelosi wrote in a letter to Democratic House colleagues on Sunday. “Instead of recognizing the need for a strategic plan, they have changed words including ‘shall’ to ‘may,’ ‘requirement’ to ‘recommendation,’ and ‘strategic plan’ to ‘strategy.’”

“When you say ‘may,’ you’re giving the president a slush fund. He may do this, he may grant, he may withhold,” Pelosi said. “When you say ‘shall,’ according to … what the science tells must happen. … We can open our schools, we can open our businesses.”

The two do agree, however, that certain sectors, including the airline industry, should receive relief and that Americans should expect another round of $1,200 stimulus checks.

But the longer talks on Capitol Hill stay inconclusive, the stronger the economy is strained as more small businesses permanently shutter, millions of Americans file for unemployment and families enter the poverty line.

Economists, members of the Federal Reserve and bipartisan lawmakers have called for a new stimulus package to aid the path to economic recovery.

Dr. Desmond Lachman, economist and resident fellow at the American Enterprise Institute, said that “another round of stimulus is urgently needed if the economy is not to experience a double dip recession,” as the unemployment rate remains high and second wave of coronavirus nears, “further casting a dark cloud over the U.S. economic recovery.”

“Absent another stimulus package one must expect that the economic recovery will stall and that unemployment will start increasing again.,” Lachman warned. “One would also expect a surge in corporate and household bankruptcies as well as real hardship for those out of work.”

Scott B. MacDonald, contributor to TNI and chief economist at Smith’s Research & Gradings, echoed Lachman’s concerns and said, “If there is no new stimulus package the US recovery will slow, with a potential spike in unemployment, corporate bankruptcies and homelessness. There will be longer lines at the food banks. And there could be a spiral (if the lack of stimulus is extended into 2021) into the financial sector, which thus far has ridden through the worst of the economic situation.”

Pelosi’s comments come after Mnuchin hinted Wednesday that another stimulus legislation “would be difficult” to pass before Election Day, suggesting that Pelosi’s reluctance to strike a deal has been a major issue. The Democratic House passed two multi-trillion-dollar proposals, but both were rejected by top White House aides and Senate Republicans. Mnuchin shot back with a GOP counter-offer of a $1.8 trillion package that embraced some Democratic provisions but that also got blocked.

Senate Majority Leader Mitch McConnell (R-Ky.) announced Saturday that the Senate will vote on certain stimulus measures this week, specifically on a slimmed-down $500 billion bill that he recently attempted to push through the Senate. Democrats rejected the proposal, as it didn’t include another round of stimulus checks and lowered the weekly unemployment benefits that were originally priced at $600 in the Cares Act.

McConnell’s legislation tries to appeal to Senate Republicans who have balked at supporting another massive spending measure, as it would widen the nation’s deficit. Trump, however, has made it clear that he’s willing to surpass the original Democratic price tag of $2.2 trillion, providing Pelosi incentive to pressure Mnuchin to agree to a big spending bill.

Lachman noted that it is “questionable” that the next stimulus package needs to be more than $2 trillion and said the deal “must be very much better targeted,” so that it doesn’t increase the “country’s already large debt burden.”

But the US “deficit was already on track to go above $1 trillion for the first time in eight years before the pandemic hit,” according to MacDonald. If Congress passes another large stimulus bill, MacDonald agreed that it would just boost the federal debt.

“A $2.2 trillion stimulus package would only add to the mushrooming of our budget deficit following the first stimulus package and would push our debt to well over 100 percent of GDP or to a higher level than it reached after the Second World War,” Lachman said. “Such a high debt level would all too likely seriously dim the country’s longer-term growth prospects as more of the budget would need to be devoted to servicing the national debt.”

Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.

Image: Reuters.

Editor's Note: This piece has been updated with new information since publication.​