3 Reasons Pelosi Should Take Trump's $1.8 Trillion Stimulus Deal

Last Friday, the Trump administration presented Nancy Pelosi with a $1.8 trillion stimulus offer. That is $1.2 trillion smaller than the relief package that House Democrats passed in May (which the White House ignored for the past five months). The administration's offer is $400 billion smaller than the scaled-down stimulus bill that Democrats passed late last month in a spirit of compromise, and lacks a strategic plan for combating the coronavirus through robust testing and tracing. It provides less in fiscal aid to states and cities than the Republican senators from Mississippi and Louisiana have called for. And it's not remotely clear that Donald Trump can even deliver what he is promising, given widespread opposition to a large spending package within Mitch McConnell's caucus.

Pelosi should take the deal anyway.

To this point, the Speaker has opposed Treasury Secretary Steve Mnuchin's offer. One can imagine a variety of coherent reasons for her stance, of differing levels of defensibility. Officially, Pelosi deems the administration's offer inadequate, and believes she can secure a more comprehensive package by holding out. Both these premises are plausible. One week ago, the speaker rejected a $1.6 trillion offer and Mnuchin responded by rustling up another $200 billion; after Pelosi rejected the $1.8 trillion bid on Friday, White House economic adviser Larry Kudlow suggested that the president was prepared to go higher still. Assuming that Trump can actually get McConnell to pass whatever deal he signs off on, every extra $200 billion in the White House's offer sheet will mean fewer cuts to public services and employment in the states, and more jobless Americans securing enhanced unemployment benefits.

A less charitable interpretation of Pelosi's recalcitrance is that she does not want a deal before Election Day, lest October headlines about Trump brokering a bipartisan compromise -- and the arrival of stimulus checks in voters' bank accounts -- revive the president's flagging reelection campaign.

But whatever her reasons for holding out, the case for accepting the $1.8 trillion offer -- or something like it -- is stronger, in both substantive and political terms. Here are three reasons Pelosi should get to yes quick.

1) The U.S. economy is on the brink of collapsing into a vicious downward spiral.

From one angle, the COVID-19 recession is nearly over; from another, it is just beginning.

Across April and May of this year, 20 million Americans lost their jobs. Never in U.S. history have so many people been put out of work so quickly. And yet, unlike in the Great Depression or Great Recession, this labor-market collapse was not born of pathologies internal to the financial system, but rather, of a sudden -- and presumably fleeting -- epidemiological shock. Roughly 90 percent of those out of work in May described their unemployment as temporary: For public-health reasons, their employers had shuttered operations, but intended to call them back once the threat had passed. This reality -- combined with the CARES Act, Congress's historically robust fiscal stimulus -- has kept America's economy in bizarrely good shape. In April, at the height of America's economic shutdown, U.S. households enjoyed record-high personal-income growth. In the midst of a recession, $1,200 relief checks, $600-a-week unemployment benefits, and robust central-bank support for asset markets allowed the typical American household's financial condition to improve: Fewer Americans were living in poverty in June 2020 (amid a historic economic crisis) than in 2019 (at a time of historically low unemployment). And the benefits of helping the working class trickled up: As U.S. households spent their relief checks, retail sales rebounded, and the stock market soared.

As a result of this support, and the easing of pandemic restrictions on commerce, about 10 million Americans have regained jobs since May. And this has caused America's headline economic numbers to convey the impression of a rapid recovery.

But the unprecedented movement of millions of furloughed workers back into reopened businesses -- and billions of public dollars into Americans' bank accounts -- has obscured the growth of permanent unemployment. More than 97,000 small businesses have shuttered for good this year. And in the two months since the CARES Act's unemployment benefits phased out, the pace of recovery has markedly slowed. Less than half of America's jobless today describe their unemployment as "temporary." As economist J.W. Mason notes, "Even though unemployment is officially much lower than it was a few months ago, unemployment as we usually think of it is still rising."

Unless Congress intervenes soon, this growth in permanent job losses could feed on itself. Although the pandemic still shadows large sectors of the economy, the problem we're facing now is a much more conventional one. In a typical recession, a pullback of spending and investment produces job losses, which force affected households to reduce their spending, which reduces profits for the businesses they typically patronize, which leads those businesses to cut investment and slash jobs, which forces affected households to reduce their spending, in a vicious cycle.

By providing (uncharacteristically) prompt and robust fiscal support last March, Congress forestalled this recessionary spiral. But if Democrats do not secure more fiscal support now -- if they decide they'd rather pass a package in January, when they may well be able to dictate the terms without concessions to the GOP -- the economy will likely be caught in a self-reinforcing decline by the time Biden's hypothetical "honeymoon" begins. And in the interim, millions of Americans will suffer needlessly.

When it comes to recessions, $1.8 trillion of prevention is worth more than $2.2 trillion of cure. Yes, it's possible that by holding out, Pelosi could secure better terms. But the closer we get to Election Day, the less likely it is that relief money would be dispersed in time to plausibly help Trump -- and thus, the more likely the president will be to renege on his current offer. Democrats must secure aid while (or if) they can.

2) This might be the last chance to secure a large stimulus package for years to come.

The substantive case for striking a deal is clear. It is true that there is some political risk in giving Trump a big, bipartisan "win" -- and the economy he presides over a jolt of income growth -- on the eve of Election Day.

But there are political risks to not doing so as well.

At present, Biden is an overwhelming favorite to win the presidency next month. But even in that scenario, Democrats are by no means guaranteed to reclaim the Senate. At present Republicans hold 53 seats to Democrats' 47, and the party's Alabama incumbent Doug Jones looks like a goner. Which means that Democrats need to flip at least four Republican seats in the remaining contests. Although Democrats are leading four competitive Senate races against GOP incumbents, they are not blowing them out. Meanwhile, Michigan Democrat Gary Peters has failed to put away Republican John James, despite Biden's strong lead in the Wolverine State. In both 2016 and 2018, pollsters wildly overrated Democratic Senate candidates' standing in key races. If Bill Nelson could fumble Florida in a "blue wave" midterm, don't put it past Peters to forfeit Michigan.

All of which is to say: It is entirely possible that Biden takes power with McConnell as captain of the Senate. Even with a Republican in the White House facing down an election-year recession, McConnell's far-right caucus has been loath to approve stimulus. With a Democrat in the White House, there's little doubt that they would block any relief package of a $1.8 trillion scope.

And this means that -- if Democrats do not secure aid now -- there is a significant chance that Biden will inherit a deepening recession, and no viable means of addressing it. In other words: There is a significant chance Biden's presidency will be over before it starts.

If your sole concern is the political health of the Democratic Party, blocking stimulus to deny Trump's campaign a lifeline is a bad gamble (especially since the president's poll numbers didn't improve all that much when the CARES Act's funds were still flowing).

3) Agreeing to a deal with the White House--only to see McConnell & Co. kill it--may be the best-case scenario for Democrats in purely electoral terms.

In an understandable attempt to lay blame for congressional inaction on the Senate GOP, some liberals have defended Pelosi's recalcitrance on the grounds that Mnuchin doesn't actually have the votes to back up his offer. But this is no argument against accepting the White House's proposal. To the contrary, in crass electoral terms, there is no better outcome here than the White House and Democrats reaching a deal -- only to see McConnell's caucus kill it.

As already mentioned, Democrats need a boost in the race for Senate control more than they need one in the race for the presidency. Shifting culpability for the absence of economic relief away from "Washington" in general -- and toward the Senate GOP majority in particular -- would put some extra wind in the DSCC's sails. This is all the more true now that McConnell is trying to shift blame for the dearth of stimulus onto House Democrats, by presenting his $500 billions mini-stimulus as the only bipartisan bill on the table.

Meanwhile, striking a deal with Trump -- that Senate Republicans reject -- would almost certainly do nothing to aid the president: The "deal artist"-in-chief failing to cut a deal with his own party, on a matter of national importance, doesn't seem like an event that would redound to his campaign's benefit. Further, watching Republicans dissolve into internal strife between Trumpists and anti-spending true believers could well demoralize a critical fraction of GOP voters.

So, Pelosi has little to lose from passing the White House's $1.8 trillion offer, and putting it in McConnell's lap. Either his caucus will fold, and the U.S. economy will receive much-needed, timely fiscal support, or it will collapse into politically damaging in-fighting.

Given the costs of further delay -- both to unemployed Americans who need financial assistance now, and to the prospects of passing any relief before Election Day -- Pelosi should accept the White House's offer posthaste (and pray that it isn't already too late).