(Bloomberg) -- Less than a week after Senate Republicans united behind a slimmed-down fiscal stimulus package, President Donald Trump renewed divisions in the party over how much Covid-19 relief the U.S. economy needs.
Trump urged the GOP in a tweet Wednesday to “Go for the much higher numbers” in new coronavirus stimulus. He followed up at a White House news conference by saying he liked “the larger numbers” in a compromise $1.5 trillion stimulus plan from a bipartisan group of House lawmakers.
“I agree with a lot of it,” Trump said of that proposal.
It’s well above the $1.1 trillion the White House previously backed and much higher than the $650 billion Senate Republicans more recently proposed. White House Chief of Staff Mark Meadows said the $1.5 trillion figure wasn’t a “show-stopper,” but it appeared that way to some Republicans.
Senator John Thune of South Dakota, the party’s No. 2 in the chamber, said that $1.5 trillion would cause “a lot of heartburn” for GOP members. His colleague Ron Johnson of Wisconsin underlined that last Thursday’s $650 billion bill, was the right size. That legislation was blocked by Democrats who called it insufficient.
The Republican rifts drew focus away from infighting on the Democratic side, with Speaker Nancy Pelosi rejecting moves within her caucus to vote on something smaller than the $3.4 trillion initiative the House backed in May. She and Senate Democratic leader Chuck Schumer, who now favor $2.2 trillion in relief, quickly applauded Trump’s new flexibility on the top-line number, issuing a joint statement expressing encouragement.
While the parties struggle to keep a united front, the impasse between the main negotiators remains. While Pelosi and Treasury Secretary Steven Mnuchin conferred on Wednesday on a vital stopgap spending bill to keep the government open past the Oct. 1 start of a new fiscal year, they didn’t discuss stimulus.
Powell’s View
At the same time, evidence is emerging about the danger of fiscal-stimulus withdrawal. U.S. retail sales growth slowed much more than expected in August, after supplementary unemployment benefits enacted in March ran out.
“My sense is that more fiscal support is likely to be needed,” Federal Reserve Chair Jerome Powell said in a Wednesday briefing after the central bank reinforced expectations to keep interest rates near zero for years to come. He cited the 11 million Americans still out of work because of the coronavirus, struggling small businesses and declining revenue among state and local authorities.
With the short timeline for action before the Nov. 3 election, the coming days will prove critical in determining whether the White House’s fresh call for a bigger package breaks the deadlock.
Republicans are split between fiscal hawks reluctant to provide the economy with much more relief and swing-district moderates whose constituents are demanding Covid-19 aid. Trump, whose flagging re-election campaign against Joe Biden needs a jolt of good news, has fewer qualms about the $3.3 trillion budget deficit.
Meadows signaled newfound flexibility on what’s been a key sticking point in his and Mnuchin’s talks with Pelosi and Schumer: Aid to state and local governments. The administration had painted the Democrats’ demand for $915 billion as a sop to poorly run blue states, and had put forward a much smaller $150 billion.
The bipartisan 50-member House group, known as the Problem Solvers, included about $500 billion in their compromise proposal. Meadows said that while that’s more than the White House estimates states have lost in revenue because of the pandemic, the administration could accept a figure in the $250 billion-$300 billion range.
How many congressional Republicans might get on board with a notably bigger plan than the $1 trillion the White House previously backed -- which failed to gain traction in the Senate -- is unclear.
Comments Wednesday showed disagreement:
- Thune said the top-line figure “is going to have to stay in a sort of a realistic range, if you know, if we want to maximize, optimize the number of Republican senators that will vote for it.”
- House Republican leader Kevin McCarthy said, “We’d have to see what’s in it, but I think it’s difficult.”
- Johnson said, “The president has his opinion. We have ours.”
- Senator John Kennedy of Louisiana said, “If a bill is chock full of spending porn as Speaker Pelosi’s bill is, I’m not going to vote for it.”
- Senator Roy Blunt of Missouri said, “I think there is a deal to be had here,” of more than $1 trillion, while adding, “My concern is that the window probably closes around the end of this month. And we need to get busy finding out what we can all agree on.”
- Senator John Cornyn of Texas said Trump endorsing the Problem Solvers proposal would be “a pretty good move. Hopefully it will persuade Speaker Pelosi to move off the dime.”
- House GOP conference chair Liz Cheney of Wyoming said, “I would be hesitant to make a commitment about a level that is that high,” and emphasized instead the importance of reopening the economy.
- The top House Ways and Means Committee Republican, Kevin Brady (NYSE:BRC) of Texas, said that it was “not perfect, but helped create momentum.”
The two leaders of the Problem Solvers group, New York Republican Tom Reed and Josh Gottheimer a New Jersey Democrat, issued a statement saying that they were “thrilled to hear of developments” suggesting a potential step toward fresh negotiations.
Pelosi and Schumer, in their statement, said, “We look forward to hearing from the president’s negotiators that they will finally meet us halfway.”
The speaker has continued to push a $2.2 trillion plan even as members of her caucus have questioned the strategy and called for a new vote on a compromise bill. The Trump moves toward a deal appeared to validate Pelosi’s tactics for some Democrats.
“It sounds like it’s working pretty well,” Pennsylvania Democrat Mary Gay Scanlon said after Trump’s tweet.
Representative David Cicilline of Rhode Island, a member of House Democratic leadership, said “I’m cautiously optimistic.” adding that the administration is “realizing the consequences of not acting.