Fears of a faltering US recovery have energised talks on a new fiscal stimulus package in Congress, marking a shift in the political dynamic in Washington that could bring some relief to the global economy.

Republicans and Democrats on Capitol Hill on Friday signalled their willingness to compromise on a plan to inject hundreds of billions of dollars — and possibly up to $1tn — into the world’s largest economy with a deal before the end of the year. 

Negotiations on additional relief measures had been stalled for months, with congressional Democrats holding out for a very large bill and Republicans resisting on the grounds that the recovery was self-sustaining and only limited government support was needed. 

However, sharp increases in coronavirus infections, hospitalisations and deaths have spurred movement on Capitol Hill. The sense of urgency was reinforced by a weak November jobs report on Friday that showed employment growth slowing to a monthly pace of 245,000.

“This jobs report is a blaring warning that a double-dip recession is looming and must be a wake-up call for anyone who is standing in the way of true bipartisan emergency relief,” said Chuck Schumer, the top Senate Democrat. 

Joe Biden, the president-elect, sought to spur the talks in an address in Wilmington, Delaware, saying: “The folks out there aren’t looking for a handout. They just need help.”

Nancy Pelosi, the Democratic speaker of the House of Representatives, dismissed suggestions that her party had misplayed its hand by pressing for a bigger package, saying Mr Biden’s election had given them incentive to discuss a bipartisan plan with a lower price tag.

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“With a Democratic president committed to a scientific solution for this, with the idea that we will have vaccine, it’s a complete game-changer,” she told reporters.

Others in her caucus said a deal was overdue. “I wish something would have happened in the fall,” said Tim Ryan, a Democratic representative from Ohio. “Making average people go up to the end of the holiday season given the public health [crisis] and what they’ve been through already, to me just shows you how broke the political system is.”

Republicans have expressed more interest in striking a deal in recent days. Mitch McConnell, the Senate majority leader, said on Thursday it was “heartening to see a few hopeful signs in the past few days” and that there was “movement in the right direction”.

Business groups also chimed in. “The fire alarm is sounding on our economy and the only question is whether Congress will respond,” said Neil Bradley, vice-president for policy at the US Chamber of Commerce. “The time for Congress to move a bipartisan bill is now.”

Both sides have indicated that negotiations will be based on a $908bn plan presented this week by a bipartisan group of senators, including Democrats Mark Warner of Virginia and Joe Manchin of West Virginia and Republicans Susan Collins of Maine and Mitt Romney of Utah.

The proposal included $288bn in small business aid, $180bn in unemployment benefits and $160bn for cash-strapped state and local governments. It would also offer aid to troubled sectors, including $17bn for the airline industry. 

The drive towards an agreement could still falter, as there are important sticking points. Republicans have long insisted on liability protections for businesses so they can keep running during the pandemic, but Democrats see this as a threat to worker safety. Many Republicans are also sceptical of aid to states and local governments, a key priority for Democrats. 

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Progressive Democrats such as Alexandria Ocasio-Cortez of New York have been calling for any bill to include a new round of direct payments to Americans, along the lines of the $1,200 per individual sent out earlier this year, which means Ms Pelosi could face a backlash from the left to any agreement. On Friday, Bernie Sanders, the leftwing Vermont senator, issued a statement opposing the budding compromise.

“Given the enormous economic desperation facing working families in this country today, I can’t support this proposal unless it is significantly improved,” Mr Sanders wrote on Twitter.

Josh Gottheimer, a Democratic representative from New Jersey who is helping to craft the legislation, said it was unlikely a final deal would include stimulus cheques.

“That was one of the items that there, frankly, wasn’t strong support for from some pockets of the negotiations,” he said. He said the bipartisan group would be working on a new version of the legislation with an aim to pass a bill before many emergency stimulus measures run out on December 26.

Any deal will need the approval of outgoing president Donald Trump, unless there is a veto-proof majority. Speaking to reporters at the White House on Friday, Peter Navarro, Mr Trump’s trade and manufacturing adviser, suggested the president was likely to support a deal.

“Capitol Hill needs to do its job right now — they need to do it quick. They need to stop fiddling around while Rome is burning,” Mr Navarro said. “There’s a train wreck coming, folks. OK? And it’s your job to flip the switches so, so that the trains don’t hit.”

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Via Financial Times

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