Ed Mills, Raymond James Washington Policy Analyst joins Yahoo Finance to discuss the upcoming vote on the 'skinny' stimulus proposal and push-back over the proposal from the Democrats.
ADAM SHAPIRO: We want to talk about the stimulus bill that's expected to be voted upon in the Senate, especially with the latest claims for unemployment from last week. To help us break this down, we invite into the stream Ed Mills. He's Raymond James Washington policy analyst. He's joining us from Alexandria, Virginia. And some people have pointed out that this bill, at least the stimulus bill, might be dead in the water but the continuing claims data for the past few weeks is flattening and that the labor market recovery has lost momentum. What's your take on all of this?
ED MILLS: Well, my take is, where is the catalyst? I mean, what has happened that really has jolted Congress into action? Traditionally, we're looking for kind of pressure points. Politically, a lot of those pressure points were removed when the president signed executive orders, when Congress went home in August. We had been looking towards the September 30 deadline to fund the federal government. But with headlines out that Nancy Pelosi and Steven Mnuchin have cut a deal that does not require a phase four fiscal relief package added onto it, it is getting harder and harder to find that pressure point that gets Congress from talking about it to actually passing any additional support for this economy.
JULIE HYMAN: So Ed, first of all, what would that catalyst look like, theoretically, if it was still to happen? And second of all, yes, markets have been rocky as of late, but it doesn't seem as like, necessarily, that a further rally in stocks is predicated on passage of further stimulus, or is it? I mean, what happens if, indeed, this thing doesn't happen?
ED MILLS: Yeah, I think that's a great question because I do think there has been a bit of a game of chicken going on with the markets. Historically, what I've always told clients at Raymond James is that look to market reactions, and Congress will always respond to that. We saw a market in freefall in March where when Congress kind of looked at the, you know, kind of market, they felt they needed to act, and they quickly got in place the CARES Act.
What we've seen as we got up against the July 31 deadline, as we got up against August recess, market was kind of in full recovery mode. And so the pressure wasn't there. And when I talked to clients, they said, well, part of the reason why we're not reacting is we know that Congress is ultimately going to do this, and they've fooled us before in not getting to this. So if there is a negative market reaction between now and the end of the month, that adds to the pressure.
Outside of that, you need to look at other kind of political pressures coming up from within, rank and file members saying, I do not want to face voters unless we've extended unemployment, unless we've done another round for small businesses. So that's where we look to see if there are some smaller measures that possibly could get added on at the end of the month.
BRIAN CHEUNG: Hey, it's Brian Cheung here. But there's still that pretty large chasm between what the Republicans are proposing, which is about $500 billion and what the Democrats in the House had proposed a few months ago with over $3 trillion of funding. So where do you expect that middle to be? What we do know is that the unemployment insurance-- obviously, that $600 extra a week has expired, but so will-- an I think a lot of people forget about this-- that $300 of extra jobless benefits that were authorized under that Trump executive order, which actually ran out last week.
ED MILLS: Yeah, Brian, you're absolutely right. I think that, you know, what we've seen is that people have thought the sweet spot here is somewhere between $1.5 and $2 trillion. Republicans started off with a $1 trillion bill. Democrats were north of $3 trillion. The middle is $2 trillion.
What we've seen in the Senate is that Majority Leader McConnell does not have support from his members to even do the $1 trillion, so they've walked it back and have done this skinny bill. And I don't know if this necessarily would have the majority vote that it would occur if it was on final passage.
The reason why you will see 51 Republicans support this package is because it will come on a procedural vote. It's easier to convince a individual Republican member that the vote that they're having is about overcoming a Democratic filibuster versus saying, this is exactly what we want. So you know, we are still waiting on what is the kind of full Republican position here that clearly has, you know, the support from their rank-and-file members. And if that doesn't exist, bridging that gap, getting at that top-line number, dealing with the individual details is next to impossible until you kind of have established negotiating positions and a top-line number.
ADAM SHAPIRO: So Ed, just to bring this all home, regardless of the outcome of the election, something will happen with stimulus after the election. It doesn't matter who wins, right?
ED MILLS: Maybe. You know, I think it really-- you know, what you saw is the more the market recovers, the more kind of jobs numbers are not kind of in historically terrible position, the less political will we're seeing in Washington DC. If there is a Democratic sweep, you probably have to wait until December-- until kind of January, after inauguration, because the size of the package will have to be kind of only supported by Democrats. If it is a Republican re-election of Donald Trump, you might have a-- closer to the skinny bill, or you might try to get additional stimulus through infrastructure. But the path towards kind of getting that deal is pretty uncertain, even after the election, unless we have that catalyst, unless we force members to do something.