It seems unlikely that we'll see a second stimulus bill, let alone stimulus check, that lives up to the scale of the CARES Act. A Republican-led Senate is unlikely to approve the measures currently being pushed by the Democrat-controlled House of Representatives. The recent economic numbers have given some strength to the market and provided optimism to those who worried the ramifications of the shutdown on workers could be pervasive.
Current legislation up for vote
The big subject of discussion right now is the HEROES Act. The legislation has already made it through the House of Representatives, but faces a bit more scrutiny in the Senate.
We just saw the largest stimulus package in U.S. history with the $2 trillion CARES Act. The HEROES Act outpaces it with $3 trillion in further proposed stimulus. To be direct, the legislation is probably already dead. Mitch McConnell, Senate majority leader, has already said that any further stimulus would be smaller than the CARES Act. He also said it would be the last.
The span and scope of the bill is simply too much. Democrat in origin, it calls for an extension on unemployment benefit protections to carry through to January 2021 instead of July 2020. One of the debates here is the incentive to get people back into the workforce. With expanded unemployment protections, that incentive decreases. A billion dollars of the plan would be for first-line workers and teachers, and $200 billion would go to create a fund for essential workers. Direct stimulus payments would be similar to before: $1,200 per individual, with an increase to $1,200 each for up to 3 dependents. For a Republican-held Senate, that's going to be a tough sell.
To find common ground, there has to be a demonstrated need. So far we haven't seen a second wave of coronavirus infection. The economic numbers from May also haven't done the legislation any favors.
Jobs might be coming back faster than expected
We watched stocks take off last week as news broke that the U.S. added 2.5 million jobs in May. This came as a surprise in a month for which economists had forecast job losses of 8 million, and it's a huge contrast to the 20 million jobs that disappeared in April. The unemployment rate was 13.3%. That's a 1.4% improvement from April. Again, this was below what economists had expected. Visa (V -1.34%) reported that U.S. payments declined at a slower rate in May than in April. This gives credence to the idea that consumer spending started to right itself last month.
This unexpected upside is just the sort of thing that the Republican Senate can use to oppose further stimulus.
Will you see that check?
Overall, the stronger-than-expected economic data and political divide between the House and the Senate make it unlikely that people will be seeing a stimulus check. To say that further economic stimulus is completely out of the question would be premature. The Senate probably won't vote on this right away, and that leaves time to see what happens in terms of COVID-19 cases as well as the economy. Nothing seems impossible these days, however, a Republican-held Senate will oppose spending unless it's absolutely essential to avoid a deep recession.