Coronavirus stimulus checks: Democratic sweep is no guarantee of quick relief

Chances of a stimulus deal before the election are fading away quickly and the focus is now shifting to a post-election deal. Many believe that if Democrats win the election next month, they would come up with a major post-election stimulus package. One economist, however, doesn’t agree with this, saying a Democratic clean sweep is no guarantee of a quick coronavirus stimulus package, including checks.

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q3 2020 hedge fund letters, conferences and more

Does Democratic sweep guarantee quick coronavirus stimulus checks?

According to Andrew Hunter, senior U.S. economist at Capital Economics, a likely reason for no rapid delivery of the stimulus package is that the Democrats are “unlikely to win a filibuster-proof majority in the Senate.”

A Look At The Portfolio Of Billionaire Charlie Munger

Charlie MungerCharlie Munger is one of the world's greatest investors. Over the past six decades, he's helped his business partner and friend, Warren Buffett, turn a struggling textile business called Berkshire Hathaway into one of America's largest firms. Q3 2020 hedge fund letters, conferences and more If you’re looking for value stocks, and

Even now, one major obstacle in the passing of the stimulus package is the resistance from the Senate. Mitch McConnell, Senate Majority Leader, said recently that he wouldn’t present a massive stimulus bill onto the Senate floor. Instead, he came up with two targeted relief bills, which were blocked by Senate Democrats.

So, if Democrats are unable to get 60 or more seats in the Senate, they would have to depend “on the budget reconciliation process to pass a bill" without GOP support, Hunter says. This, as per the economist, would limit Democrats from using the procedure to boost the federal budget deficit beyond a 10-year horizon.

Also, Hunter says that only one reconciliation bill on taxes and spending is permissible each year. This could mean that Democrats would have to choose from competing priorities.

Earlier this month, the House of Representatives approved an updated version of the HEROES Act costing about $2.2 trillion. The original HEROES Act, passed in May, was over $3 trillion.

Joe Biden, the Democratic presidential candidate, has also promised to come up with a massive spending plan if he wins the election next month. Biden’s plan would cover healthcare, infrastructure, education and climate change, and is expected to cost about $5 trillion.

“The upshot is that passing a quick stimulus bill to counter the pandemic would force the Democrats to wait to implement Biden’s broader economic agenda at a later date,” Hunter says.

Will Democrats pass a massive stimulus bill?

Last week, Sen. Bernie Sanders promised that Democrats would come up with a massive relief package if they win the Senate next month.

“If the Democrats gain control of the Senate, the first order of business will be a massive stimulus bill to protect desperate working people throughout this country,” Sanders told Hill.TV’s “Rising.”

Sanders referred to the Senate’s resistance to support a package costing more than $500 billion as “pathetic." However, Sanders also expressed concern over the content of the bill, saying any stimulus bill should include unemployment benefits, as well as stimulus checks.

“It’s not just a number, 1.8 or 2.2 or whatever it is, it is what is in the bill. I am concerned about a slush fund that the Trump administration would have within that bill,” he said. “So the devil is in the details in terms of what is in the bill.”