Party Calculation: Why Democrats Rejected US Economy Support Package Against COVID-19

American lawmakers were not able to get the required number of votes to adopt a package of measures to support the national economy in the context of the spread of coronavirus infection COVID-19.

In support of the document proposed by the Republican Party, only 49 senators voted with the required 60. The situation, in particular, was complicated by the fact that five Republican senators quarantined because of a pandemic after a positive test for the disease was revealed by a senator from Kentucky Rand Paul.

“This country was founded by geniuses, but it is ruled by a bunch of idiots,” he said. “Do you know what Americans are thinking now?” They think the brain is an amazing organ. He begins to work in the womb and doesn’t stop doing this until you are elected to the US Congress, ”said Louisiana Senator John Neely Kennedy.

The vote on the eve of the meeting was also fraught with a large number of complaints from representatives of the Democratic Party. As a result, during the March 22 vote, the results were equal - 47 votes in favor and 47 against.

Presumably, the total amount of financial injections into the economy by the state is almost $ 2 trillion. The proposed measures are intended to support companies and ordinary citizens amid the coronavirus pandemic, which has already brought down a number of sectors of the economy. As stated earlier by the leader of the Republicans in the US Senate, Mitch McConnell, the package of proposals includes four main areas of work. These are direct financial assistance measures for ordinary Americans, support for small business, healthcare, as well as general measures to stabilize the economy.

• US Congress Building
• Reuters
• © Jason Reed

The proposed measures, in particular, include the payment of benefits to individuals with an annual income of less than $ 75 thousand in the amount of $ 1200 per person. Married couples can count on government support in the amount of $ 2,400, plus $ 500 for each child. At the same time, citizens who have not paid taxes before will be able to receive only $ 600. For those who before the crisis earned more than $ 75 thousand per year, payments are provided in a reduced amount.

Republicans plan to allocate about $ 50 billion to support airlines affected by the crisis, and about $ 150 billion to other large enterprises in distress due to the pandemic. In addition, corporations will be able to defer tax payments until the fall.

Enterprises with less than 500 employees will be able to get loans in the amount of $ 10 million, but not more than the amount of the average monthly expenses of the company. Loans should be used to cover current mandatory expenses, such as paying salaries and paying rent. Part of the loan spent on salaries can be written off to the company, provided that it does not fire employees. Moreover, the ban on the dismissal of employees by the bill is not provided.

Another proposal restricts the management of companies that will now receive large loans, the right to raise their salaries, the moratorium should last two years.

However, these measures provoked a protest from the Democrats, who insist that the emphasis should be on supporting ordinary citizens, not corporations.

On March 21, Republicans agreed to make concessions to the Democrats by including expanded unemployment benefits in the bill. According to the amendments, the state should allocate $ 250 billion to the payment of unemployment benefits.

According to The Hill, the Democrats also demanded an additional $ 750 billion for state stabilization funds, but this idea was rejected by the Republicans.

• US President Donald Trump
• Reuters
• © Jonathan Ernst

At the same time, the total volume of all programs designed to support the American economy in the context of the global crisis may reach $ 4 trillion. This was announced on March 22 by US Treasury Secretary Stephen Mnuchin, he explained that it was a joint effort by the Treasury and the Federal Reserve to provide liquidity to enterprises in need.

However, this concession from the Republicans did not satisfy the Democrats, who still believe that the bill includes too many business privileges at the expense of ordinary Americans. As the leader of the Democrats in the US Congress, Nancy Pelosi, said the Democrats are ready to develop their own package of proposals to support the national economy.

For their part, Republicans see the Democratic Party’s proposals as excessive and capable of doing more harm than good.

WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!

“We cannot allow treatment to be worse than the disease itself. At the end of the 15-day period, we will decide on which way we want to go! ” - wrote US President Donald Trump on his Twitter.

Speaking to reporters in the White House after the Republican initiative was rejected in the Senate, Trump suggested that in the end, it would be possible to take the necessary measures.

“We must help workers. We must save the companies, ”Trump emphasized.

Experts have no doubt that the measures of state support will be carried out by the American leadership by increasing public debt. As explained by Yury Rogulyov, director of the F. Roosevelt Foundation for the Study of the USA at Moscow State University, in an interview with RT, this is not the first time that Washington is ready to go on a colossal increase in foreign borrowing.

“A colossal public debt was formed, for example, after the war in Iraq, under President Bush. He grew even more under Barack Obama due to the global economic crisis. Now the level of public debt fluctuates around 100% of US GDP. But American economists take this calmly - as the economy grows, the country is coping with debt servicing. But this is a rather thin line - the balance between debt and economic growth, ”the expert said in an interview with RT.

A similar point of view is shared by Vladimir Vasiliev, the chief researcher at the Institute of the USA and Canada of the Russian Academy of Sciences .

“Of course, all financial injections will come precisely from borrowed funds, printed securities. True, then you will have to pay for them, but now no one thinks about this on the principle of “after us at least a flood”. The only point is to reach the next presidential election, although the US is balancing on the verge of bankruptcy, ”the expert said in an interview with RT.

The essence of the dispute

Republicans insisted that a package of financial support measures be adopted no later than Monday. Otherwise, the situation in the financial markets may worsen, worsening the prospects for the American economy.

“I want everyone to fully understand: if tomorrow we can’t act, our colleagues on the other side who continue to bargain at a time when the country expects us to take concerted action to resolve the problem will be the fault,” said Mitch McConnell commenting on the results of the Sunday vote.

In turn, Senate Democrat leader Chuck Schumer accused Republicans of trying to ignore the Democratic Party’s point of view.

• Senate Majority Leader Mitch McConnell
• Reuters
• © Mitch McConnell

“Early this morning, the leader of the (Republican majority in the Senate Mitch) McConnell presented us with a bill that, being prepared only by the Republicans, has a pronounced narrow-party character. He also said that today he will put the document to the vote. Well, who has a narrow party agenda here? After all, he perfectly understands that the support of both Democrats and Republicans is needed to approve this initiative, ”said Schumer, commenting on the initiative of the Republicans.

Republicans and the White House insisted that a deal be reached by Monday, otherwise financial markets would deteriorate even further, exacerbating the already precarious situation of the US economy.

Recall that against the backdrop of the COVID-19 coronavirus pandemic, on March 12, the main US stock indexes crashed by almost 10%. According to American media, this is the largest stock market crash since Black Monday 1987, when the Dow Jones index fell immediately to 22.61%.

At the same time, attempts to rectify the situation using borrowed funds also pose serious risks, Vladimir Vasiliev believes. According to the expert, if a package of measures is adopted even in the format that the Republicans are proposing, this will double the budget deficit.

• Reuters
• © Eduardo Munoz

Speaking about the reasons for the disagreement between the Republicans and the Democrats over the measures of financial support, Vladimir Vasilyev emphasized the political motives of the legislators.

“According to forecasts, the main recession will occur in the fourth quarter of 2020, and it is at this time that the presidential election is scheduled. Therefore, Republicans are interested in the fact that the package of measures will mainly work in the second half of the year. Today it is important for them to distribute aid so that most of it comes precisely at the time of the election. Therefore, Republicans are not in a hurry to increase funding so far as the Democrats demand, they need a reserve for the fall, ”the expert explained.

For their part, democrats are interested in stimulating the economy as precisely as possible right now, so that the peak of the crisis falls at the end of the year.

“This, in fact, is the real essence of the discussion that has now unfolded around the bill. But there is also the danger of panic in the markets, which can bring down the debt pyramid, ”says Vasiliev.

According to Yuri Rogulev, the confrontation between Democrats and Republicans is not constructive.

“Now they do not even debate what measures are needed to find a compromise. So far, one side is simply trying to block the initiatives of opponents. If the parties do not reconsider the approach, then, judging by previous experience, the adoption of the bill may be delayed until society itself pushes politicians to a compromise, ”the expert summed up.