The Democratic-controlled US House of Representatives has approved a new fiscal stimulus package worth $2.2tn, but the move failed to break the political deadlock over additional relief for the American economy.

The 214-207 vote on Thursday marked the second time since May that the lower chamber of Congress has passed legislation to support for the US economy without the backing of Republican lawmakers and the Trump administration.

Nancy Pelosi, the Democratic House speaker, and Steven Mnuchin, the US Treasury secretary, have been trying to hammer out an agreement in recent days and were expected to continue talks after the House vote.

The negotiations on Capitol Hill are being closely watched by economists, including at the Federal Reserve, who fear the withdrawal of fiscal support could stunt the US recovery. New data released on Thursday heightened the alarm after revealing a 2.7 per cent drop in personal income in August, largely due to the lapse of emergency jobless benefits included in the $3tn first round of coronavirus pandemic-related fiscal stimulus.

Concerns about the recovery of the labour market have been amplified by recent announcements of mass redundancies at companies ranging from Walt Disney to American Airlines, as well as data on new weekly filings for unemployment benefits, which are falling exceedingly slowly.

Democrats had passed a bill in May to deliver more than $3tn in new stimulus measures but scaled back their legislation to make it more palatable to Republicans.

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“The health and economic catastrophe facing our country continues to cry out for urgent action. The American people cannot afford to wait until next year for action, so House Democrats are making good on our offer to compromise,” said Nita Lowey, the chair of the House appropriations committee. The bill contains new direct payments to US households, an extension of emergency jobless benefits. It also includes aid to businesses and state and local governments, which has been one of the biggest sticking points in the talks.

Although Democratic leaders said the House vote was intended to encourage Republicans to compromise, it was immediately dismissed.

“What the Speaker did, even after coming down a full trillion dollars, is throw everything you can imagine into the package, including tax cuts for rich people in California and New York, and free healthcare for illegal immigrants. That sort of thing is not appropriate,” Mitch McConnell, the Senate majority leader, told Fox News.

“I would say Nancy Pelosi is not being serious. If she becomes serious, then we can have a discussion here,” said Kayleigh McEnany, the White House press secretary, in a briefing on Thursday.

Some Democrats from swing districts, including Cindy Axne of Iowa, Conor Lamb of Pennsylvania and Abigail Spanberger of Virginia, joined Republicans in voting against the legislation, defying Ms Pelosi on the grounds that the bipartisan negotiations needed more time.

“In Central Virginia, the people, businesses, communities, and families I serve have been battered by a global pandemic, economic crisis, and rampant unemployment,” Ms Spanberger wrote on Twitter. “Tonight’s bill will not deliver that relief — in fact, it moves us farther from it.”

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Ms Pelosi had said earlier on Thursday that she was “optimistic” about the prospects for a deal but noted there were still big differences with Mr Mnuchin on several fronts. Although the Trump administration has offered to spend more than $1.6tn on a new stimulus deal, Democrats have said that was still insufficient.

“There has to be a recognition that it takes money . . . and it takes the right language to make sure it is done right,” she said.

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Via Financial Times