The US Congress is negotiating a $US2 trillion package to boost the economy and support Americans through the pandemic. (Reuters: Jim Young)
As Wall Street watched, and with millions of people’s financial futures at stake, US senators and the Trump administration struck an agreement on Wednesday (local time) on a $US2 trillion package to help the US economy manage the impact of coronavirus.
It’s been described by one currency strategist as a fiscal “bazooka”. But with so much money on the line, negotiations between Republicans and Democrats on the exact measures of the bill have been tense.
The agreement has come after days of dispute, and the bill itself still needs to be passed. Some renegades have suggested they might still block it.
So we’ve had a look at what the US Government is planning to do and what has been holding it up.
What’s the stimulus package about?
It’s been described as the largest rescue package in American history.
More than $US2 trillion ($3.3 trillion) will be poured into America’s economy with the aim of trying to save it from the damage inflicted by COVID-19.
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Just to give you an idea of how much money is at stake in the stimulus legislation, the amount exceeds what the US spends on national defence, scientific research, highway construction and other discretionary programs, combined.
Or to put it another way, it is half the size of America’s $US4 trillion annual federal budget.
The package includes money to help recently unemployed Americans pay bills, gives emergency loans to small businesses, and increases funding for hospitals, health systems and other health care needs, among other things.
But perhaps the biggest measure contained in the bill is a $US500 billion fund to help hard-hit industries with loans, and another fund to provide direct payments of up to $US3,000 to millions of US families.
There are some similarities to Australia’s stimulus package, including the payments to furloughed workers.
But the bill was held up after Democrats asked for businesses to be held to account
One of the big problems Democrats had voiced over the bill earlier this week was the approximately $US500 billion in funds for loans and loan guarantees for companies, states and others experiencing financial distress.
Congresswoman Alexandria Ocasio-Cortez has expressed some concerns that the stimulus package prioritises corporations over people.
(Reuters: Carlos Barria)
They blocked the legislation and asked for more concessions, arguing that there hadn’t been enough guidelines or oversight to make sure companies used the money appropriately.
While Republicans have since agreed to add more oversight, some Democrats are still wary given their experience with the Troubled Asset Relief Program during the 2008 global financial crisis.
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Back then, banks awarded executives with bonuses after receiving bailout money. It sparked public criticism of the lack of oversight provided in the Government’s bailout measures.
So, this time, some have argued they will be pushing to make sure that any corporation receiving assistance under the new legislation “does not lay off workers, cut wages or benefits, ship jobs overseas, or pay workers poverty wages”.
@AOC Just a reminder that there is absolutely no good reason why Senate Republicans are tying a historic corporate giveaway to getting relief money in the hands of families.
While Republicans are keen to limit the economic fallout, Democrats have also said they want to ensure that any bailout for large companies will primarily benefit workers.
Now there are issues about specific wording
The proposed stimulus bill is more than 500 pages long.
But one passage in the unemployment section has enraged some Republican senators.
“The amount determined under subsection (a) shall not be less than $600,” the bill says in the recovery rebate section.
That would give all unemployed Americans $US600 (more than $1,000) a week to stay afloat.
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The current unemployment benefit in the US is about $US385 (or $652) a week.
A group of Republican senators say they won’t vote for the stimulus package until that section is changed.
Senator Lindsey Graham says people should not receive higher unemployment benefits because it will dissuade them from returning to work. (Reuters: Erin Scott)
“This bill pays you more not to work than if you were working,” South Carolina Republican Lindsey Graham said.
“If this is not a drafting error, then this is the worst idea I’ve seen.”
The Republicans say the unemployment proposal would encourage employers to lay people off so they could access the payment.
They also believe it will dissuade people from returning to work once the coronavirus crisis subsides.
@LindseyGrahamSC Only in Senator @BernieSanders world does it make sense to pay people more NOT to work than TO work.
Democrat senator and presidential candidate Bernie Sanders says he will not vote for the bill until the Republicans drop their objections.
“I cannot at the last minute allow some right-wing senators to try to undermine the needs of workers and think they are going to get away with that,” he told the New York Times.
Despite all this, it could still pass
US Treasury Secretary Steven Mnuchin has dismissed Republican concerns about the unemployment benefit, saying most people will want to keep their jobs.
The bill was drafted in the Senate, so it still needs to be passed by the US House of Representatives.
Mr Mnuchin says that could happen as quickly as tomorrow.
House Speaker Nancy Pelosi has urged her Democratic colleagues to vote in favour of the bill.
@CNNSitRoom “Be confident. Be positive. We have to believe in America,” House Speaker Nancy Pelosi tells @wolfblitzer
“What is important is for us to recognise the good that is in the bill, appreciate it for what it does,” she told CNN.
“Don’t judge it for what it doesn’t, because we have more bills to come.”
That may be a message to more progressive members of the House like Alexandria Ocasio-Cortez.
The New York congresswoman has said she has concerns about the package because it favours corporations over families.
Will this save the US economy?
It’s hard to say at this stage. When Mr Mnuchin was asked how long the aid would keep the economy afloat, he replied: “We’ve anticipated three months”.
Federal Reserve Bank of St. Louis President James Bullard says unemployment could peak at 30 per cent. (AP: Mark Lennihan)
“Hopefully, we won’t need this for three months,” he added.
The Government faces a tough task ahead, with the US Federal Reserve’s James Bullard predicting the unemployment rate in America could hit 30 per cent.
To put that in perspective, unemployment peaked at 25 per cent during the Great Depression.