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Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows held a late meeting last night with House Speaker Nancy Pelosi (D-CA) and Senate Democratic leader Chuck Schumer (D-NY) and continued to offer a narrow coronavirus bill to extend expanded unemployment benefits. Politico Playbook reported that the Administration offered to extend the current $600 unemployment add-on for 4 months, which Democratic leaders rejected, calling for an even longer extension. More generally, Democrats have called for a much broader bill and have opposed a narrow stopgap. The expanded unemployment benefits appear certain to expire today.

Roll Call reported Speaker Pelosi as saying, "I think they understand that we have to have a bill, but they just don't realize how big it has to be." Chief of Staff Meadows said, "I'm not very optimistic on anybody who's counting on enhanced unemployment to have any relief anytime soon," and earlier said he is not optimistic "we'll reach any kind of comprehensive deal," with the chances of lawmakers ending up empty handed growing as talks wear on.

The stalemate comes against the backdrop of not only the unemployment benefit expiration but a record economic contraction, with the Commerce Department reporting real gross domestic product (GDP) decreased at an annual rate of 32.9% in the second quarter of 2020.

Senate Majority Leader Mitch McConnell (R-KY) did set up a legislative vehicle for an extension of unemployment benefits, making it the pending business for next week following a 47-42 procedural vote along party lines. Democratic support would be required to pass any measure. Leader McConnell took the action in part because Senator Schumer objected to short-term extensions, including Senator Martha McSally's (R-AZ) consent request for a one-week extension of the current $600 unemployment benefits add-on. A vote could be called next week on a GOP proposal to provide a weekly unemployment benefit add-on of $200 or 2/3 salary.

The Washington Post reported that economists are urging Congress to 'go big' on the next relief bill. "This recession was a huge consumption shock. Health care, food, transportation, all those things collapsed," said former CBO Director Doug Holtz-Eakin. "We have to do things to ensure people's safety and make them feel confident to go back out. Spend what you need to do it."

Tax — Carried interest regulations were released this morning.

Election — In eulogizing the late Rep. John Lewis (R-GA) in Atlanta in the company of other former presidents yesterday, former President Obama suggested, in the context of voting rights legislation, the possibility of eliminating the Senate filibuster that poses a 60-vote threshold for most bills. Presumptive Democratic presidential candidate Joe Biden has expressed some openness to the move, which is backed by Biden ally Senator Chris Coons (D-DE) but opposed by members including Senator Joe Manchin (D-WV). If Biden is President and Democrats control the Senate next year, they likely would still be well short of the 60 Senate votes necessary to move much of their agenda on a party-line basis (though budget reconciliation would likely be tapped for some of it). Former President Obama also said as part of his tribute, "What a gift John Lewis was. We are all so lucky to have had him walk with us for a while and show us the way."

A New York Times story focused on the Kansas Senate Republican primary (Senator Roberts is retiring) and Senator McConnell's pleas to President Trump to endorse Rep. Roger Marshall (R-KS) over the more controversial Kris Kobach, whose candidacy is being advocated by those including Senator Ted Cruz (R-TX). The GOP primary is August 4, with the winner set to face state Senator Barbara Bollier in one of several close races that could determine control of the US Senate, which Republicans hold with a 53-47 majority.

The global EY Tax COVID-19 Response Tracker is updated through July 30.

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