By Josh Zumbrun 

WASHINGTON -- Democrats and Republicans remained at odds in weekend negotiations on a new coronavirus economic relief package, including aid to replace the federal $600-a-week boost to unemployment benefits that expired Friday.

House Democrats led by Speaker Nancy Pelosi want any economic-relief package to include a long-term extension of the enhanced unemployment benefit, arguing the extra funds have been a critical support to those who lost their jobs amid the pandemic. The White House and Senate Republicans, however, want to trim that additional payment, saying in some cases people are being paid more to stay at home than if they returned to work.

"The $600 is essential," Mrs. Pelosi said on ABC News's "This Week." "It's essential for America's working families."

Treasury Secretary Steven Mnuchin said, also on ABC, "We absolutely agree on enhanced unemployment. We want to fix the issue where in some cases people are overpaid, and we want to make sure there's the right incentives."

The Democratic-led House has passed a bill extending the $600 federal jobless benefit through January. In recent weeks, Republicans have publicly offered to extend it for one week to make room for negotiations, and to continue it through September at $200, or adjust aid to a portion of lost wages.

The White House had hoped to pass a short-term extension of the federal unemployment insurance, but Democrats have said they want to negotiate a comprehensive package of relief, including state and local aid, increased food-stamp benefits, and funding for schools and testing, among others.

Mrs. Pelosi also said Sunday that in the long run, the "enhancement for unemployment insurance should relate to the rate of unemployment," suggesting that the $600 benefit could be wound down but only once the economy was on firmer footing.

Under such a proposal, benefits would decline once the unemployment rate had improved, an idea known as an "automatic stabilizer" because it would automatically reduce spending on the program during recovery. Some negotiators hope such an idea could bridge the difference between the two sides.

Mrs. Pelosi and Senate Minority Leader Chuck Schumer (D., N.Y.) met with Mr. Mnuchin and White House chief of staff Mark Meadows for more than three hours Saturday morning, later sounding a more positive tone after days of finger pointing over the expired unemployment benefits. Staff meetings were set for Sunday, with another meeting between Mrs. Pelosi and Mr. Schumer, and Messrs. Meadows and Mnuchin to occur Monday.

"We're not close yet, but it was a productive discussion," Mr. Schumer told reporters after the meeting Saturday, calling it "the best discussions we've had so far."

Mr. Meadows said Sunday that Saturday's round of talks were "a step in the right direction," but said he wasn't optimistic a deal would emerge "in the very near term."

Mrs. Pelosi and Mr. Mnuchin also outlined other disagreements in the relief package. Mrs. Pelosi said one priority is funds for state and local governments, to help with their coronavirus response and prevent a revenue shortfall from leading to widespread layoffs of government workers, further swelling unemployment rolls. Mr. Mnuchin said this proposal would "bail out those states that have financial issues" and would cost more than $1 trillion.

Mr. Mnuchin cited other areas of bipartisan agreement, including support for another round of checks that would be mailed to most Americans and for the Paycheck Protection Program, which helped businesses cover their payroll during the pandemic.

As of mid-July, about 17 million Americans were receiving regular unemployment benefits, and an additional 12.4 million were receiving unemployment benefits under a special pandemic unemployment program that covers workers who didn't traditionally receive the benefits.

Further underscoring the stakes, the Commerce Department said Thursday the U.S. economy shrank by 32.9% at a seasonally- and inflation-adjusted rate in the second quarter, or a 9.5% drop compared with the previous quarter. The figures were the steepest declines in more than 70 years of record-keeping.

Economic activity collapsed during the coronavirus lockdowns, and even as economies have reopened, many consumers have been reluctant to return to previous levels of activity as the pandemic rages on.

Despite the decline in economic activity, however, disposable personal income actually increased in the second quarter, because government transfers have been so large that, on balance, they more than compensated for the lost income from job loss or business declines.

--Michael C. Bender and Siobhan Hughes contributed to this article.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com

 

(END) Dow Jones Newswires

August 02, 2020 12:35 ET (16:35 GMT)

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