Pelosi-Mnuchin Talks Open Sprint for a Last-Chance Stimulus Deal

(Bloomberg) — Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi will kick off a first round of negotiations on the next virus relief plan even as Republicans are still hashing out an agreement among themselves.

With the pandemic surging across the country and economic data pointing to a stalled recovery, Pelosi and Mnuchin are scheduled to meet Tuesday afternoon, along with Senate Democratic Leader Chuck Schumer and White House Chief of Staff Mark Meadows.

Mnuchin and Meadows will meet earlier in the day with Senate Republicans, where GOP lawmakers will go over their ideas for getting schools reopened and businesses hiring.

The discussions signal the attempts to find a compromise are accelerating.

The White House and Congress have only a few weeks to come up with another stimulus to prevent the economic rout caused by the coronavirus from deepening. The $2.9 trillion flood of federal money that’s been supporting the economy is about to dry up, while unemployment remains at levels not seen since the Great Depression.

The focus of the next phase of relief will be “kids and jobs and vaccines,” Mnuchin told reporters at the White House Monday. Along with money still untapped from earlier rounds of stimulus, Republicans are “starting with another trillion dollars. We think that will make a big impact,” he said.

Senate Majority Leader Mitch McConnell said at the Capitol that Republicans will offer a “starting point” for talks on the stimulus with Democrats “hopefully as early as this week.” In addition to reaching an agreement with Democrats, who’ve proposed a $3.5 trillion stimulus, the Kentucky Republican will have to overcome some divisions within his party on what to include.

McConnell and House GOP leader Kevin McCarthy met at the White House Monday with President Donald Trump, Mnuchin and other administration officials to hammer out the Republican plan.

McCarthy told reporters at the Capitol that the initial GOP proposal would include cutting the payroll tax. That’s been a central demand of Trump and a source of tension between the White House and some Senate Republicans, who don’t view it as a priority.

A spokesman for Senate Finance Chairman Chuck Grassley, Michael Zona, said the inclusion of a payroll tax cut or a suspension hasn’t been finalized. Senator John Cornyn called a payroll tax cut “problematic” because the levy funds Social Security and Medicare.

“The trust funds for Social Security and Medicare are already on their way to insolvency,” Cornyn said. That might force Congress to raise other taxes, he said, adding he’s “not a fan” of that.

The payroll tax cut is “one of many elements we’re discussing,” Trump said. “We’re discussing probably a total of 10 different elements. But payroll tax cut is a very important one.”

During the non-public portion of the meeting, Trump called conservative economist Art Laffer, who has backed a payroll tax holiday, and put him on speakerphone, according to two people familiar with the meeting. Among the issues Laffer raised was getting Congress to put into law an executive order Trump issued requiring price transparency in healthcare, according to the people. The president was agreeable to the request, they said.

Another potential hurdle is that Mnuchin was balking over the weekend at a $25 billion initiative favored by Senate Republicans to help states with coronavirus testing and contact tracing, according to a person familiar with the negotiations.

The GOP legislation also will include several tax credits to help companies that are re-opening after a prolonged shutdown, according to Mnuchin. That includes an expanded employee retention tax credit that was in the stimulus bill passed in March, which gives companies a tax break for keeping employees on payroll. The proposal also will include tax credits for personal protective equipment, workplace cleaning and testing.

Republicans also want to include money to help schools make modifications or pay for equipment needed to re-open classrooms in the fall. The GOP bill likely will include about $105 billion for education, according to an aide familiar with the emerging plan.

Unemployment ‘Fix’

Mnuchin said the unemployment-insurance program needed a “technical fix.” McCarthy said the $600 supplemental payments were a disincentive to work because some people got more in unemployment benefits than they were making at their jobs. He said there are ways to make sure the benefits aren’t more than a worker’s wages.

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