Democrats in the House of Representatives are assembling a new economic stimulus package with a pricetag of $2.4tn, lower than the cost of their existing plan but potentially still too high to broker a compromise with Republicans.
According to one Democratic aide in the House, Speaker Nancy Pelosi asked committee chairs in the lower chamber to design the scaled-back plan, including aid to airlines, restaurants and small businesses, as a basis for new talks with the White House on a relief package.
“We are still striving for an agreement,” Ms Pelosi told House Democratic leaders in a meeting on Thursday.
The move — which could lead to a vote as early as next week — highlights the mounting pressure on Congress to strike a deal that injects new fiscal support into the US economy before the November general election, or to at least show voters that lawmakers have made an effort to compromise.
In recent weeks, hopes of an agreement on Capitol Hill have faded amid disagreements over the size and details of a new package, which have been further exacerbated by tensions surrounding the replacement of the late Justice Ruth Bader Ginsburg at the Supreme Court.
The Democratic move follows pressure to find a middle ground from some rank-and-file members, particularly those in swing districts, but may not be enough to trigger a serious new round of negotiations.
The cost is significantly below the $3tn level of spending Democrats proposed and passed in the lower chamber in May, but is not meaningfully different from where party leaders had privately signalled they were willing to go. It is still well above the $500bn size of the last Republican bill proposed in the Senate earlier this month.
Donald Trump, president, has urged Republicans to move higher, and Steven Mnuchin, the treasury secretary, said he was ready for a new round of talks. But congressional Republicans have not yet indicated that they would stretch as high as Ms Pelosi and other Democrats would find acceptable.
“If the Democrats are willing to sit down, I’m willing to sit down anytime for bipartisan legislation. Let’s pass something quickly,” Mr Mnuchin told the Senate banking committee on Thursday.
Many economists who had been counting on at least $1tn in additional stimulus have in recent days been downgrading their forecasts for the US economy on the basis of no deal and are pointing to a sharp slowdown in growth in the fourth quarter.
“The odds of [new] stimulus are a close call. While still possible, there is a high risk that it does not happen this year. Without it, we would expect the economy to hit a major speed bump in the fourth quarter,” wrote Aneta Markowska and Thomas Simons, economists at Jefferies, in a note.
Jefferies is now forecasting US output to grow at an annualised pace of 2.5 per cent in the fourth quarter, compared to 30 per cent in the third quarter.
This week, Jay Powell, the Federal Reserve chair, and other senior US central bankers, have also been pressing Congress to strike a deal.
“We will see that the economy has a harder time sustaining the growth that we’ve seen,” Mr Powell warned in testimony before the Senate banking committee on Thursday. “That’s the risk.”
As well as fearing the failure of many small and larger businesses grappling with the downturn triggered by the pandemic, economists are also worrying about the impact of the loss of emergency jobless benefits that expired in July and are hurting the finances of many low-income households.
While Democrats want to renew them at their original $600 per week value, Republicans have proposed a smaller additional payment, leading to a stalemate.
“You could get 47 Democratic votes for $600 a week this afternoon, if you’re willing to do it,” Sherrod Brown, the Ohio Democratic senator, told Mr Mnuchin during a testy exchange at Thursday’s hearing.
“If necessary, we can formalise the request by voting on it on the House floor,” Mr Brown added.