The Corner

Fiscal Policy

Stimulus 4.0

It is clear to me now that Senator McConnell’s strategy of waiting until the last second to take up the fourth stimulus bill was quite purposeful, and that if discussions had begun four-plus weeks ago, it would still have taken until this point to get passed, yet we would have had four weeks of both the House Democrats and the White House adding to it, making it much larger than (as McConnell knows) anything that the Senate would accept.

The “fiscal cliff” is now here, specifically as far as concerns the $600/week of federal supplements to unemployment insurance, and so a deal will get done, but McConnell is confident that a trillion or two (I can’t believe I just wrote that) will be left out that otherwise would be there.

My predictions after more conversations with Capitol Hill sources and friends:

(1) The unemployment benefit will get extended but phased down, and with income restrictions (Secretary Mnuchin is floating a 70 percent level, so ~$400/week vs. current $600)

(2) There will not be a payroll-tax cut, but there will be conditional corporate-tax credits that the White House will hold out as a victory (particularly, an extension of immediate expensing for R&D, Capex, etc.)

(3) There will be a “second bite of the apple” from PPP for small businesses

(4) And significantly for those who desperately believe businesses need to get their employees back to work and school opened, there will be a liability-protection plan.

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