US stimulus delayed as Republican talks fall into disarray

The Republican leader in the US Senate was forced to delay the announcement of a $1tn stimulus package as lingering disagreements with the Trump administration and disarray within the party take their toll.

Mitch McConnell, the Republican Senate majority leader, had been expected to announce the party’s stimulus proposal on Thursday morning, only to reverse course later in the day and announce the plan would not come until next week.

Speaking on the Senate floor, Mr McConnell said that a “framework” had been assembled for the proposal, based on an “agreement in principle with the administration”. However, he said the administration had “requested additional time to review the fine details”.

The delay has prompted criticism from Democrats who noted that the House of Representatives, which they control, had passed its own $3tn recovery proposal two months ago.

“Republicans need to pull their head out of the sand, get their act together, sit down with [House Speaker Nancy] Pelosi and me, and start negotiating a real package,” Chuck Schumer, the Senate’s top-ranking Democrat, said.

The dissension came as the latest economic data showed the labour market’s recovery may be stalling. New jobless claims rose to 1.42m seasonally adjusted last week, compared with 1.31m a week earlier, following Covid-19 outbreaks in parts of the US south and west.

Column chart of Initial claims (m) showing Claims for US jobless benefits rise for first time since March

Economists had forecast that claims would match the previous week’s unrevised figure of 1.3m. It was the first time since early in the crisis that weekly applications for benefits have risen. The pace of first-time claims had gradually eased in each of the preceding 15 weeks since hitting a high of 6.9m in March. Weekly claims remain elevated, having hit a peak of 669,000 during the 2008-09 financial crisis.

Following the release of the worrying labour department figures on Thursday morning, US Treasury secretary Steven Mnuchin said that Republicans would consider extending some emergency jobless benefits.

Multiple Republican Senate aides have acknowledged there had been problems finalising the party’s proposal — a follow-up to March’s $2tn Cares Act — even as Mr Mnuchin insisted to reporters that there was “fundamental agreement” over a deal.

“We were ready to go this morning,” one Republican Senate aide had said.

Congressional staffers said the administration and Senate Republicans were continuing to hammer out some final areas of disagreement. But the delay means that a proposal will come just as supplemental jobless benefits are set to expire.

President Donald Trump has blamed Democrats for scuttling his idea for a payroll tax cut, which he has repeatedly insisted that he wanted to see as part of Republicans’ stimulus proposal.

“The Democrats have stated strongly that they won’t approve a Payroll Tax Cut (too bad!) . . . The Republicans therefore didn’t ask for it,” the president tweeted.

In fact, members of both parties had criticised the idea, noting it would not help the millions of Americans who currently find themselves out of work.

Other areas of contention included expanded unemployment benefits, which have provided an additional $600-a-week safety cushion for out-of-work Americans. Those benefits are set to run out on July 31.

Initially, Republicans had pushed back on extending those benefits, arguing that they should be replaced by a return-to-work bonus instead. However, that thinking has changed in recent weeks, with the administration and top Republican leaders pushing for some form of an extension, albeit at a lower level.

This has been met with pushback from some fiscal conservatives in the Republican caucus, as well as from Democrats who said any reduction of benefits would endanger the economic recovery as well as the livelihood of millions of Americans.

Mr Mnuchin has said the administration wants to see a technical fix in the benefits so that no Americans are making more on unemployment than they would at work.

“We want to make sure that the people who are out there that can’t find jobs do get a reasonable wage replacement. So it will be based on approximately 70 per cent wage replacement,” Mr Mnuchin told CNBC earlier on Thursday.

“We’re also going to have a lot of tax credits to incentivise companies to hire people,” he added.

Mr Mnuchin said there was “bipartisan support” for extending the Paycheck Protection Program — the federal government’s rescue fund for small business — and for allowing these businesses, whose revenues are down 50 per cent or more, to tap the fund a second time.

Marco Rubio, the Republican chair of the Senate committee on small business and entrepreneurship, said the follow-up PPP had an estimated cost of $200bn — half of which would be paid using funds that had already been appropriated for the PPP.