On November 20th local time, U.S. Treasury Secretary Mnuchin and Senate Majority Leader McConnell held discussions proposing to use the unused Federal Reserve rescue funds as part of the new rescue plan, paving the way for restarting negotiations on the bailout bill. But the old problem, including the size of the bill, is still a huge obstacle between the two parties.
Meanwhile, as more and more people facing long-term unemployment are no longer eligible for regular unemployment benefits, once Congress makes no progress this time, they may fall into the “rescue cliff” and receive nothing.
Using the excess funds of the Federal Reserve to bail out?
According to Bloomberg, U.S. Treasury Secretary Mnuchin is restarting the deadlocked rescue negotiations with congressional Democrats, and he proposes to use the unused Federal Reserve bailout funds as part of the new rescue plan. Mnuchin and Senate Majority Leader McConnell discussed the strategy on November 20, marking the first time the Trump administration has taken action on the bailout bill after the election.
McConnell, according to the report, supported Mnuchin’s proposal and agreed to use the unused portion of the funds allocated to the Federal Reserve’s loan guarantees, small business rescues, and other anti-epidemic programs.” Congress should repurpose the money to emergency, important and targeted relief measures that Republicans have been trying to pass for months, but Democrats demand either all or none, repeatedly obstructing these measures.” McConnell said in a statement.
“We’re going to come up with a plan, sit down with Pelosi and Schumer, and work on a targeted bill for those who really need it, and hopefully Democrats will work with us and hopefully complete this plan.” Mnuchin previously said on the American Consumer News and Business Channel (CNBC).
However, House Speaker Pelosi and Senate Democratic Leader Schumer did not immediately respond to Mnuchin’s proposal. Pelosi and Schumer had previously written to McConnell asking him to return to the negotiating table for the bailout bill, but so far, the two have not sent any signal that they are willing to lower the demand for the $2.4 trillion scale.
McConnell has said on many occasions that the starting point of the bailout negotiations should be the $500 billion scale supported by Senate Republicans.
The plan will not provide $1,200 in stimulus funds directly to individuals, nor will it provide assistance to state and local governments. Therefore, the offensive and defensive battles between the two parties around the rescue bill will return to the original pattern, and whether to use the remaining Fed rescue funds for a new round of measures is only part of the scale dispute.
Will the emergency loan scheme not be renewed?
According to the Wall Street Journal, Mnuchin refused to extend several emergency loan programs jointly developed with the Federal Reserve, including the Federal Reserve’s corporate credit, municipal loans and mass commercial loans, according to the Wall Street Journal. The Treasury’s move means that most of these crisis response plans, which are critical to maintaining economic stability, will come to an end on December 31.
The Federal Reserve has previously expressed disappointment at Mnuchin’s decision. “The Fed hopes that the set of emergency response mechanisms set up during the COVID-19 pandemic will continue to play an important role in supporting our still tight and fragile economy,” it said in a statement.
Fed Chairman Powell previously noted that he did not think it was appropriate to let these plans expire.” Whenever needed, the Fed will be firmly committed to using all our tools to support the economy until the work is done and really complete.” “When the right time comes, we’ll put those tools away, but I don’t think it’s the right time or anytime soon,” he said.
But in a letter to Powell on November 19, Mnuchin said that these loan programs have clearly achieved their goals.” Banks have the ability to lend to meet the borrowing needs of corporate, municipal and non-profit customers.” He wrote that the decision-makers’ responsibility is to bring financial conditions back to normal in response to the coronavirus pandemic, “although some areas of the economy are still severely hit and require additional financial support, the financial environment has responded with limited use of these emergency lending instruments.”
These loan programs were previously supported by the U.S. Treasury Department, and the funds were authorized under the CARES Act passed in March. Mnuchin now concludes that he believes that Congress intends to allow authorized appropriations under the CARES Act to expire on December 31. He has asked the Federal Reserve to return the unused funds to the Treasury Department, saying that Congress will redistribute the funds, and the Federal Reserve said on November 20 that it will comply with the requirements of the U.S. Treasury Department to return the unused funds.
A large number of unemployed people are going to the “saving cliff”
The impact on the livelihood of the people’s livelihood is concentrated on the unemployed due to the expiration of the old support plans and the delay in the delay in the new round of relief measures.
According to data released by the U.S. Department of Labor on November 19, the number of first-time jobless claims in the United States last week was 742,000, up from 707,000 people expected by the market, the first increase in five weeks. The unexpected rebound in first-time jobless claims suggests that the recovery of the U.S. labor market is slowing amidst a surge in confirmed cases of COVID-19 and new business restrictions, the analysis finds. With infections soaring and winter unemployment likely to increase, the need for relief support is even more urgent.
Data previously released by the U.S. Department of Labor shows that the number of people receiving regular unemployment benefits in various states is decreasing, because people facing long-term unemployment are no longer eligible for unemployment benefits and turn to the epidemic relief plan.
Reuters analysis said that if nothing changes, millions of Americans will be at risk of ending the rescue, which may make them unable to pay rent, buy daily necessities and pay other bills. The decline in household income, coupled with the increase in infection cases, may further drag down consumer spending, resulting in a sharp decline in living standards and increased poverty.
Whether it is routine relief or epidemic relief, the expiration of these plans will form a “cuff of relief”. Lauren Bauer, an economics fellow at the Brookings Institution, said that “saving the cliff” may lead to a very fragile state of the economy as a whole, especially if it will hit “those who have difficulty re-employment after losing their jobs”.
According to a survey of 100 economists by Reuters on November 10-16, more than 90% of economic analysts said that the worsening coronavirus epidemic poses greater risks to the U.S. economy for the rest of the year than the uncertainty of the election results. They worry that the already sluggish economic situation may worsen further due to the inability of the U.S. Congress to introduce new stimulus measures soon.
“Financial support is currently basically exhausted, causing disposable income to decline in the last few months of this year. But the biggest risk is that the third wave of outbreaks may worsen as winter temperatures drop.” “Europe’s reopening of lockdowns is a reminder that the U.S.
is also facing significant downside risks this winter,” said David Merrick, chief U.S. analyst at Goldman Sachs. Other economists predict that while manufacturing, construction and most retail will remain open, restrictions on other areas will pay a huge economic cost, and millions of jobs may be at risk.