The Trump administration and congressional leaders struggled to reach a deal on fiscal stimulus measures worth nearly $2tn to help the US weather the coronavirus pandemic as jittery markets opened around the world.
The negotiations hit an impasse on Sunday after Democrats on Capitol Hill said that the proposed deal offered big business an overly generous bailout with limited conditions and scant oversight. They also argued it would not release enough new funds to hospitals.
But officials involved in the talks, primarily Steven Mnuchin, the US Treasury secretary, and Chuck Schumer, the top Senate Democrat, signalled there was still room for a compromise. Staff were working through the night to try to resolve the impasse.
“This bill is going to affect this country and the lives of Americans, not just for the next few days, but in the next few months and years — so we have to make sure it is good,” Mr Schumer said. “We’re getting closer and closer. And I’m very hopeful, is how I’d put it, that we can get a bill in the morning.”
The day had started with Mr Mnuchin telling Fox News that he had reached a “fundamental understanding” with Democrats on the terms of the stimulus. But by the afternoon, congressional Democrats were balking at the text and blocked a procedural motion in the upper chamber to advance the legislation.
The main features of the stimulus would be loans to small businesses, so they could retain their workers, and direct payments to US households worth $3,000 for a family of four.
The most contentious element of the package — to which Democrats objected — provided for up to $500bn to rescue large companies stricken by the coronavirus outbreak, in addition to $50bn set aside to help the airline industry.
Democrats want assurances that the companies receiving government help would not be able to buy back stock and would restrict executive compensation. They also objected to a provision that would delay disclosure of the companies receiving state aid, saying it amounted to “secret bailout authority”.
“The overall view is that they want to create a slush fund for giant corporations. No help for employees and no help for the hospitals, and that cannot be where we are,” said Elizabeth Warren, the former Democratic presidential contender.
Democrats were also unhappy that certain non-profit organisations, such as mental health providers, rape crisis centres and family planning facilities, would not be eligible for loans directed to small businesses.
But Mitch McConnell, the Republican Senate majority leader, said it was time to make deal, with a new procedural vote to advance the bill expected around lunchtime on Monday. “This national crisis is not going to wait around if Congress slips back into conventional politics or haggles endlessly over the finer points,” he said.
Donald Trump said he remained optimistic. “I don’t think anybody actually has any choice,” the president said. “Our goal is to get relief to Americans as quickly as possible.”
Mr Mnuchin said the deal would ensure “broad-based” lending to the US economy through the Federal Reserve, which has revived tools used during the 2008 financial crisis to boost credit. The legislation is expected to provide funds through the US Treasury department’s Exchange Stabilization Fund to help backstop the Fed’s facilities.
“We’ll have up to $4tn of liquidity that we can use to support the economy,” he said.
Economists have predicted a dramatic slowdown in economic activity in the coming weeks. Goldman Sachs has forecast a 24 per cent drop in US gross domestic product in the second quarter and Morgan Stanley has predicted a 30 per cent contraction. This has pushed the White House and Congress to consider a larger stimulus package.
US lawmakers and administration officials were eyeing legislation worth about $800bn less than a week ago, but the pricetag has grown to nearly $2tn. Mr Mnuchin said he expected the measures to work over the next 10 to 12 weeks, but more fiscal support might be needed if the coronavirus crisis persisted.
“If, for whatever reason, you know, 10 weeks from now, this virus, we haven’t won this, we’ll go back to Congress again,” he said.
Even as they have pushed for more aggressive stimulus, Mr Trump and senior officials have insisted that the US economy would rebound quickly once the coronavirus threat has been overcome.
“When we get through this virus as I’ve said, I think you’re going to see the US economy come back to strength,” Mr Mnuchin told Fox. “We have great companies. We have great workers. What we need to do is have a bridge to get through this, and this isn’t the financial crisis that’s going to go on for years.”