Why Chief Economist Thinks Local Gov'ts Need Additional Aid

Phase Four Relief Negotiations Remain Stalled

“The threats of a short-term government shutdown are increasing,” says Washington Policy Analyst Ed Mills, “but hope remains that a deal can be reached.”

Negotiations still stalled: Some discussions have occurred in the last week as Republicans introduced a “skinny” phase four bill, but little progress has been made. Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer have said they will return to the negotiating table if Republicans agree to a $2 trillion topline funding number.

Republican “skinny” bill: The bill is a $1 trillion package that includes $300 weekly unemployment benefits until December 27, liability relief, $29 billion in healthcare funding, $105 billion for schools and $10 billion in CARES Act loan forgiveness for the U.S. Postal Service. Senate Majority Leader Mitch McConnell is hoping to move the bill in the Senate to establish a negotiating position, but it’s unclear whether it has enough support to win a majority vote.

Postal service fight: The House of Representatives passed a $25 billion Postal Service bill, but little advancement is expected in the Senate. Postmaster General Louis DeJoy has vowed to delay additional changes until after the election and asserts the U.S. Postal Service can handle and prioritize mail-in ballots.

Unemployment update: The Federal Emergency Management Agency (FEMA) has guaranteed three weeks of benefits, retroactive to August 1. Thirteen states have been approved, and Arizona has begun administering an additional $300 as of Friday. South Dakota is the first state to decline the additional benefit. A number of the approved states will not provide the supplemental $100. California could take 20 weeks to update its computer system to implement the program.

House in recess: The House is in recess until September 14, but it can return if a fiscal relief deal is reached. 114 House Democrats sent a letter to Pelosi last week urging an unemployment insurance extension.

Looking for new deadlines: Is September 30 the new July 31? As we look at the congressional calendar, the next hard deadline is funding the government by September 30. The need for FEMA funds (the source of unemployment insurance benefits) due to hurricane season could be a new catalyst.

Bottom line: Unless there is a breakthrough, we are on a collision course between finding a deal that funds the government post-September 30 and striking a phase four fiscal deal. The threats of a short-term government shutdown are increasing, but hope remains that a deal can be reached.

All expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized.