America’s economy faces severe new strains in the two months between Tuesday’s election and January, a period when Washington could be consumed by political paralysis and gridlock.
This window is typically used by successful presidential candidates to plan for the outset of their administration, but several large economic sectors are bracing to be hit by both an increase in coronavirus cases and the arrival of winter weather.
These factors could exacerbate extreme slowdowns in the travel, restaurant and hospitality industries, and further depress an oil industry already roiled by low prices.
Millions of Americans are also at risk of having their power and water shut off with unpaid utility bills coming due, while protections for renters, student borrowers and jobless Americans will expire by the end of the year absent federal action.
The looming economic pressures come amid a breakdown in bipartisan stimulus negotiations on Capitol Hill and an acrimonious turn in talks between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin. Pelosi and Mnuchin, who have worked together throughout the year to successfully secure passage of trillions in emergency aid, instead traded barbs in recent days, with Pelosi saying Tuesday the administration had “failed miserably” and Mnuchin attacking Pelosi’s “ALL OR NONE approach” in a letter on Friday.
President Trump and Pelosi have both said they would pursue an economic relief deal during the lame-duck session of Congress, but compromise has proved elusive.
“All signs suggest that we’re in for the worst of this at the same time the situation in Washington is also becoming its worst and most horrible,” said Michael Strain, economic expert at the American Enterprise Institute, a right-leaning think tank.
Washington’s political conflict has escalated amid a surge in coronavirus cases and tremors in the global economy. Wall Street was sent reeling last week, with the Dow Jones industrial average and S&P 500 seeing their biggest weekly declines since March.
With cold weather expected to curb outdoor dining, 40 percent of all restaurant owners nationwide say they expect to go out of business by March without more government assistance, according to industry surveys.
Travel has still not recovered even half of its lost business, according to the Transportation Security Administration. On Wednesday, about 700,000 people cleared the agency’s checkpoints compared with about 2 million one year earlier. Nearly 4 million travel industry jobs have been lost during the pandemic, and another 1 million could vanish by year end without federal intervention.
The largest hotel industry group said in September that 2 in 3 U.S. hotels would not last another six months.
Major airlines have already announced tens of thousands of furloughs by the end of the year after their federal aid programs expired in September.
Democrats and Republicans in Congress moved further apart in recent weeks, with a number of Republicans raising concerns about government spending levels and Democrats demanding more action. They could face major decisions during the lame-duck session of Congress.
Emergency weekly federal unemployment benefits have been cut off for months. Several million people will begin to exhaust their base unemployment benefits starting in the middle of December. Absent action, a separate federal unemployment program for as many as 10 million gig workers and others not eligible for traditional unemployment insurance will expire Dec. 31.
The week after the election, the Supreme Court will take up the Affordable Care Act, which could result in tens of millions of people losing their health insurance.
Amid all this, lawmakers must also reach an agreement by Dec. 11 to avert a shutdown of the federal government.
A surge in coronavirus cases has led cities and states across the country to impose new coronavirus restrictions with hospitalizations and deaths on the rise. Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, recently told The Washington Post “we’re in for a whole lot of hurt” and that the United States “could not possibly be positioned more poorly” for handling the virus in the fall and winter.
Among the biggest mysteries hovering over this uncertainty is what Trump and his aides will do after Election Day, particularly if he loses to Democratic nominee Joe Biden. There are almost three months between the Nov. 3 election and the next inauguration on Jan. 20 — approximately the period of time when both public health experts and economists fear the coronavirus will strike the nation with renewed ferocity. As colder weather pushes people indoors, the Trump administration has not outlined a plan for how to deal with an expected surge of cases and hospitalizations.
Trump and Pelosi have repeatedly sparred over key policy matters. In her letter on Thursday, Pelosi said Democrats and the administration remained divided on liability protections for businesses, money for state and local governments, and tax credits for children, among other issues. Trump last week attacked Pelosi as uninterested in a deal, and White House officials have repeatedly criticized Pelosi for pushing $1,200 stimulus checks for undocumented immigrants and “bailouts” for states and cities, provisions Republicans say they are not prepared to accept.
The president’s attitude toward a stimulus package has fluctuated wildly over the past several months and could change again after the election. Several former White House officials and numerous Republican aides on Capitol Hill said they believe it is possible the president loses interest in the stimulus package once it has no utility for his 2020 presidential campaign.
“I don’t think he’s got much interest in stimulus,” said Casey Mulligan, who served as chief economist for the White House Council of Economic Advisers until last year. “He doesn’t like to give anything for free, and I don’t think he’s going to start now. That’s not his style.”
When the first wave of coronavirus cases hit, lawmakers quickly came together on a bipartisan basis to approve trillions in emergency federal aid — the bulk of it aimed at distressed businesses and families.
That aid was temporary, however, and the vast majority of it has already landed. Of the $2.7 trillion that this year’s congressionally approved pandemic aid is expected to cost, $2.4 trillion — or 90 percent — has already been disbursed or committed, according to Marc Goldwein, vice president of the Committee for a Responsible Federal Budget, a nonpartisan think tank that tracks the pandemic response.
Now, even as the number of coronavirus cases begins to balloon, the United States is hurtling toward policy deadlines and economic pressure points amid an increasingly murky political situation, one in which experts warn it could be weeks before the election results are clear.
The Trump administration unilaterally extended an eviction moratorium for renters, but it ends at the end of the year. Renters will still be required to pay for the months where they missed payment, creating a backlog that could put 30 million to 40 million Americans nationwide at risk of eviction once the moratorium expire, according to nonprofit housing groups. Hunger has also risen dramatically. The share of adults reporting that their household did not have enough food to eat dramatically rose from last year, according to data compiled by the Center on Budget and Policy Priorities, a left-leaning think tank.
Other parts of the American economy are bracing for problems. The NYC-area Metropolitan Transportation Authority warned in October of as many as 8,000 layoffs. Amtrak last month warned of 2,400 layoffs without federal help. Of the 100,000 workers in the private bus industry, as many as 80,000 have already been furloughed and as many as 30,000 of them could lose their jobs permanently in coming months without federal support, according to Peter Pantuso, president and CEO of the American Bus Association, an industry group. As many as 30 percent of bus operators face bankruptcy by Jan. 1, Pantuso said.
Boeing, the aerospace giant, announced more than 7,000 layoffs last week. More than a dozen major retailers have already filed for bankruptcy during the pandemic, and analysts say many more could follow if they’re not able to shore up sales during the crucial holiday period, particularly if forced to close during the Christmas shopping season. The pandemic has cost the oil and gas industry more than 100,000 jobs, with ExxonMobil announcing an additional 1,900 U.S. job cuts last week amid a continued downturn in oil prices. Employment was down this September by more than 40 percent in movie, arts and entertainment industries, numbers that could deteriorate further without federal help in the winter.
Many economists still say the broader U.S. economy will continue to recover even if there is deep scarring in certain sectors through the winter.
The unemployment rate has ticked down to 7.9 percent from its highs over the spring. The federal government reported a record 7.4 percent jump in gross domestic product in the third quarter as the U.S. economy partially recovered from its pandemic lows, propelled in part by federal stimulus. White House senior economic adviser Larry Kudlow has supported a stimulus deal but said the economy is on a “self-sustaining” recovery that does not require additional federal support.
“I don’t think the biggest risks are common or national-level. The biggest risks are specific geographies and specific parts of the population,” said Ernie Tedeschi, who served as an economist in the Obama administration. “But the pain for those segments could be very deep.”
Trump has repeatedly said last week that he would pursue a massive stimulus package following the election. He said he would do so after Republicans recapture the House in Tuesday’s elections, a scenario most political strategists view as extremely unlikely. “After the election, we’ll get the best stimulus package you’ve ever seen,” the president said.
White House spokesman Brian R. Morgenstern said in a statement that Trump “remains committed” to a stimulus agreement, but he reiterated the administration’s opposition to Democrats “attempts to exploit the virus to fund a liberal wish list,” including by providing billions to state and local governments.
Pelosi and Senate Majority Leader Mitch McConnell (R-Ky.) may face their own political incentives to delay emergency relief. If Democrats hold the House and retake the Senate, they may want to wait for the next Congress to pass another relief bill because they would then no longer have to compromise with Republicans. And McConnell’s conference was already wary about spending trillions more in the economy, with conservative senators balking at the rising national debt — pressure that may escalate should Republicans aim to avoid aiding an incoming Democratic administration.
“If it’s hard now, pre-election, for Senate Republicans to come to terms with the White House — the consensus is that it becomes nearly impossible after the election,” said John Lettieri, president and CEO of the Economic Innovation Group, which has been lobbying lawmakers for small-business relief. “The costs will be enormous. It will be a self-inflicted wound on an already destabilized economy.”