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A Democrat-Republican feud is underway over what the next round of stimulus should look like.

The Trump administration wants to encourage Americans to go to restaurants and take vacations, but Democrats have other ideas as the White House Weighs Options.

“We’ve been through the rescue phase and we’re now in the transitional reopening phase and I think generally speaking we’d like to move into a growth- incentive phase for the future economy,” the senior administration official said.

The size and scope of the final package, which White House aides predicted won’t be completed until July, will depend in part on the success of state-level reopening efforts and whether the economic downturn begins to reverse.

White House officials are continuing to bet on a V-shaped recovery in which the economy rebounds this summer and continues growing briskly into next year, officials said

The House already passed a monstrous bill but Senate leader Mitch McConnell does not want to exceed $1.0 trillion.

Administration Options Discussed

  1. Reducing the payments to $250 to $300 a week during the second half of the year.
  2. Set the payments as a share of workers’ salaries, ensuring they earn more than the 30% to 40% most would ordinarily receive in weekly jobless benefits. 
  3. Tourism tax deduction
  4. Tax credit for families or individuals who take a vacation somewhere in the U.S. in the next three to six months, one of the officials said.
  5. Making permanent provisions set to phase out in 2022 that allow companies to deduct the cost of capital spending, including relocating from China and other countries.

Options 3 and 4, encouraging people to take vacations, primarily benefit the wealthy. Some people never have the luxury of traveling. Others would prefer a new washing machine or fix their car. 

Those options are especially weak but that is the direction the administration seems headed. 

I prefer something along the lines of option number number 2 because I strongly dislike this problem: At Least for a While, It Pays Better to Be Unemployed

States claim option 2 it is hard to implement.. Perhpas so, but they have a month to prepare if Trump would get behind the idea and make it clear that was a priority.

Number 5 is way too slow to be meaningful now. 

V-Shaped Recovery?

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The administration may be betting on that, but forget about it.

Grim Economic Data

  1. May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
  2. May 15: Retail Sales Plunge Way More Than Expected
  3. May 15: Industrial Production Declines Most in 101 Years
  4. May 30: GDPNow Forecast is Negative 51.2 Percent

Ripple Impacts May Last Years

The economic data has been grim and the ripple impacts will last for years.

Global COVID-19 Risk Ranges Up to $82 Trillion

To understand the total global risk, please see Global COVID-19 Risk Ranges Up to $82 Trillion

Ripple Impacts

For a detailed synopsis of the state of the economy and the ripple impacts, please see The Economy Will Not Soon Return to Normal: Here's Why.

CBO Estimates it will Take 10 Years Just to Get Back to Even

The nonpartisan Congressional Budget Office disagrees as do blue-chip economic forecasters.

For discussion, please see CBO Estimates it will Take 10 Years Just to Get Back to Even.