Stalling recovery raises stakes for Trump’s new demands on economic relief bill

WASHINGTON - Fresh signs emerged Wednesday of a stalling economic recovery, raising the stakes in President Donald Trump’s surprise refusal to sign a $900 billion stimulus package into law unless changes are made.

The Labor Department reported that jobless claims remained high last week, with 803,000 people seeking new benefits. And the Commerce Department said U.S. household spending slipped in November for the first time in seven months. People’s incomes also fell 1.1 percent last month, a worrisome trend.

After months of stop-and-start negotiations, the congressional relief package was supposed to shower the economy with new stimulus, aimed at helping households and businesses through the winter. Treasury Secretary Steven Mnuchin had praised the package as recently as midday Tuesday, giving lawmakers the impression that the president was enthusiastically supportive. But that all changed Tuesday night when Trump posted a video calling the bill a “disgrace” and saying changes must be made.

Trump’s latest actions, and the uncertain path forward, mean up to 14 million Americans could lose unemployment aid the day after Christmas, a moratorium on evictions will expire at the end of the month and billions of dollars in aid for small businesses, schools, vaccine distribution and other initiatives is on hold.

The president is demanding that lawmakers approve $2,000 checks to go out to the vast majority of American households instead of the $600 checks Congress approved in the relief bill. Senate Republicans have been reluctant to go that high since much of the money will go to people who still have jobs and it will increase the cost of the bill by $370 billion, according to Ernie Tedeschi, an economist and former Treasury Department official during the Obama administration. Trump suggested cutting foreign aid and tax breaks in the annual government spending bill to fund larger checks, though it’s unclear if Congress would go along with these changes.

If no agreement is reached by Monday night, the federal government will shut down, causing even more people to lose a job on top of the more than 20 million currently receiving unemployment aid.

[Trump’s demand for $2,000 stimulus checks plunges relief talks - and Republicans - into tumult]

These developments come as millions of Americans have waited months for aid amid a deteriorating recovery, many of them destitute for the first time. JP Morgan Chase had estimated that the sheer size of the stimulus bill would have been enough to prevent the economy from contracting in the first three months of 2021. Now the outlook is much less certain - for the overall economy and many families.

Brandon Harvey spent Wednesday researching shelters that could take in his family. He and his wife lost their warehouse jobs in April in South Fulton, Ga. He’s been getting $194 a week in unemployment, which isn’t enough to pay the family’s $1,300 rent. His landlord has filed for eviction and told the family they will be out as soon as the courts allow it. The family is two months behind on rent.

Harvey’s unemployment is slated to end on Dec. 26. A father of two, Harvey cried over the weekend when he couldn’t buy any presents for his older son’s 13th birthday. Now the family is facing even bigger problems. They only have grapes and fruit juice left in their refrigerator.

“I am so stressed out. I’m not going to have a home in January,” Harvey said. “This year has changed my life. I went from making $18 an hour to zero.”

Harvey, 33, is a certified forklift driver who has applied to any open warehouse jobs he sees. The only place that called back said they might have something by the end of January. He said he watched Trump on Tuesday in shock as he realized all aid would likely end for him in a matter of hours.

“My message to Trump and Congress is, ‘Please, please help us. Help Americans who need it,” Harvey said. “I have always worked until this year. I work to take care of my kids.”

As Americans have become more anxious amid the pandemic’s latest wave, retail sales have weakened and hiring has slowed markedly. The travel and tourism industries have not recovered much of the business lost since March, and millions of companies - particularly restaurants and bars - have closed.

Health experts warn it will likely take months before vaccines are widespread, making it unlikely people will feel safe enough to venture out before the summer or fall. In the meantime, the coronavirus pandemic is surging with record force. Just in the past week in the U.S., covid-related hospitalizations rose 4.7 percent. New daily reported deaths rose 5.4 percent, with the virus killing more than 322,000 people across the country.

“The economy is slowing in response to the surge in COVID cases,” wrote Grant Thornton economists Diane Swonk and Yelena Maleyev in a note Wednesday. “The risk is that we slow further in response to another uptick in cases following the Christmas holiday. The aid bill passed by Congress should help to blunt losses as we move into January. The challenge now is to get the bill signed and cash into people’s pockets.”

Congress passed the $2.2 trillion Cares Act in March to rescue the economy as the pandemic began its first sustained wave. That law sent $1,200 stimulus checks to millions of Americans, provided new unemployment benefits, and directed billions of dollars to airlines and small businesses. The $900 billion agreement reached just days ago was supposed to renew some of those programs.

“What we did with Cares Act was we built a firewall around the covid-impacted parts of the economy,” said Constance Hunter, chief economist at KPMG. “We did a very good job of building the firewall, and what we saw in today’s data is that firewall is eroding.”

More layoffs are expected as businesses and state and local governments run out of funding.

Before the pandemic, Carmela Roth employed 25 people at her company specializing in meeting and event planning, plus promotional items and apparel. She cut her team to 17 when the crisis hit and just had to lay off another employee last week.

Roth hoped to apply for more funding from the Small Business Administration’s Paycheck Protection Program to save more employees. The relief bill includes over $300 billion more for small businesses, but with that aid on hold, Roth says she will have to let two more employees go after Christmas.

“I think sending any message to the White House is like a moot point. That’s just a futile effort,” Roth said. “I think (Congressional leaders) should cancel their vacations...Get it done. That’s what you’re elected to do, to represent your constituents. That’s what small businesses do. I don’t get to go on vacation unless I do my job.”

Trump did not play much of a role in the economic relief talks that resulted in Congress passing the $900 billion stimulus package.

In the video Trump posted on Tuesday evening, his demand for larger stimulus checks was just one area of criticism he leveled at the bill. He also decried the manner in which the 5,593-page bill was hastily assembled, a complaint that a number of Democrats and Republicans shared. But Trump waited to weigh in until after Congress passed the bill, and his aides helped assemble the legislation, leaving lawmakers confused when Trump suddenly announced opposition.

Many economists don’t think sending $2,000 checks to over 150 million households is a wise use of taxpayer money because the bulk of the funds would go to people who did not lose a job. In the first round of stimulus checks, only about 40 percent of the money was actually pumped back into the economy through consumer spending. The rest was saved or used to pay off debt.

[Tucked into Congress’ massive stimulus bill: tens of billions in special interest tax giveaways]

Some critics of Trump’s approach believe the aid should be targeted toward the unemployed and small businesses that really need it most. In addition to the check, the relief bill would provide over $3,000 in additional aid to unemployed workers, though that is lower than the more than $6,000 extra for the unemployed that Democrats originally wanted.

Many struggling families told The Post that while $2,000 could make a big difference in their ability to afford food, medications, rent and car payments, what they need most is quick relief.

“If it’s possible to do more, fine, but they’d better hurry. That’s all I can say,” said Deedee Smith, 57, who lost her job working in catering at a big hotel and convention center in Albuquerque, New Mexico. “I will take $600. At this point, anything would help.”

Trump’s new demand is holding up the entire economic package, delaying any new money and potentially pushing back the date when any checks could be sent to Americans.

Democrats quickly rallied around Trump’s call for $2,000 checks. House Speaker Nancy Pelosi, D-Calif., plans to try to hold a vote on it as soon as Thursday. But it could be virtually impossible to pass such a measure through Congress with unanimous support, leaving the entire bill’s future uncertain.

The stimulus package would extend unemployment benefits of up to $300 per week, beginning as soon as Dec. 27 and run at least through mid-March. The measure also would extend Pandemic Unemployment Assistance - which targets part-time and gig workers who did not qualify for state unemployment insurance benefits - for 11 weeks.

“The key thing from this morning is just how many people are still on those federal programs that will expire,” said Heidi Shierholz of the Economic Policy Institute. “All of those people are the ones who will get hit massively if Trump doesn’t sign the bill.”