We need stimulus. Pelosi wants stimulus. But she isn't forcing GOP to choose "shutdown or stimulus"

While the economy has managed to claw back a decent amount of what was lost in March and April due to the shock of COVID shutdowns and the ongoing structural changes in spending habits, we are far from out of the woods. Wall Streeters are aready warning that because DC lawmakers might stop pumping so much money into the economy, they are dropping their US growth estimates for the coming months.

In a note to clients published Sunday, Ellen Zentner and the economics team at Morgan Stanley lowered their fourth quarter GDP forecast to annualized growth of 3.5%, down from 9.3%. For the full-year 2020, Morgan Stanley now expects the economy will contract 2.7%, more than the 1.5% forecasted previously.

And this move followed downgrades to growth from JPMorgan and Goldman Sachs last week. JPM now sees fourth quarter growth coming in at 2.5% with the economy contracting 4.2% in 2020. Goldman expects the economy will grow at a 3% clip in the fourth quarter and contract by 3.5% for the full-year 2020.

All three firms targeted the same culprit: a lack of new fiscal stimulus.

Though in cutting these outlooks for growth, all three firms acknowledge that it does seem a better-than-feared dynamic has come to pass for consumer spending and the state of household balance sheets.

Well, I’m not sure that the balance sheet and spending situation has survived if you're among the tens of millions getting unemployment benefits these days. But the fact that the economists are noting that the economy in general will move along illustrates how lopsided our “recovery” has been.

With the threat of massive amount of restaurants, hotels, and retail businesses closing as the weather cools, and with an election looming in 5 weeks, House Dems and the Trump Administration both have their reasons for wanting to add stimulus to try to keep that from happening. House Speaker Nancy Pelosi and her cohorts are expected to do their part, passing a stimulus bill that is less than the $3 trillion+ HEROES Act that was passed in May, but still would give a lot of aid to a wide swath of Americans.

Writing to House Democrats on Monday night, Pelosi said her party is “making good on our promise to compromise with this updated bill” because it cuts more than $1 trillion from their original plan.

The new legislation would:

Reinstate the $600 per week enhanced unemployment benefit through January

Send a second $1,200 direct payment to most Americans

Give $436 billion in relief over one year to state and local governments

Authorize more money for a second round of Paycheck Protection Program loans for the hardest-hit businesses and industries

Send $25 billion to airlines to cover payroll costs

Inject $75 billion into Covid-19 testing and contact tracing efforts

Put $225 billion into education and $57 billion into child care

Set aside billions for rental and mortgage assistance

You hope it isn't too late, but passing this would at least put pressure on the GOP-run Senate and the Trump Administration to sign onto a deal, as they would be rightly blamed for doing nothing as economic conditions deteroriate in October.

But Pelosi made a strategic error last week that could allow the GOPs to slink away, let things fall apart, and force an incoming Biden Administration to have to waste lots of time cleaning up an economic mess. That's because Pelosi told her caucus to pass a Continuing Resolution that would fund the government through early December. Which means instead of the possibility of a government shutdown coming tomorrow, most federal government departments will continue to operate as they do today.

I think Pelosi's strategy of passing the CR first was completely stupid. You know what would have gotten the Republicans more likely to sign on to big-ticket Dem assistance bill? The possibility of a government shutdown if they didn’t agree to a stimulus deal.

Especially with the Senate GOP already in serious danger of losing their majority, being seen as uncaring and causing a shutdown 5 weeks before the election would have guaranteed a serious ass-kicking at the polls - even more than what they currently have coming to them. Nancy could have made GOP senators take a position on the stimulus, and draw voters' attentions to what they (wouldn't) do, especially if the GOPs would have chosen to shut down the government

But NOOOOOOO, that would have been mean!

Nancy opted for stability, taking the GOP Senate out of the loop in the process (which Moscow Mitch is more than happy to be. It lets them sneak through more judges instead of doing real work that people pay attention), and gave this reasoning as to why the Trump Administration would "do the right thing".

Pelosi at her weekly press conference said she hoped to sit down soon with White House negotiators. “Now that the CR’s done, we hope that the Administration will come forward with the resources to meet the needs of the American people,” she said.

Hey Nancy, do you really think TrumpWorld cares, about what's responsible? All they care about is doing just enough for low-info voters not to get upset, and (in their minds) get re-elected and avoid prison.

You know what would have made TrumpWorld feel like it had to do something, and take time away from screwing more with the American justice system? Seeing the American people get furious about a government shutdown the month before an election. Instead, it's an open question whether Trump or the GOP Senate will go along with a Dem stimulus package, meaning we could end up with nothing, and our already-fragile growth ends with a thud.

This is the game that GOPs always play – mess things up and then blame Dems when they step up to avoid catastrophe. And because the average American dope hasn’t punished the GOP for being so negligent, they do it again and again. Yet DC Dems like Nancy Pelosi think “being the adult in the room” and maintaining stability is still something that wins elections over fighting for things that the people want and need and making the bad guys pay for hurting Americans with a rigged economic and political system.

I'm trying not to be negative, because that creates a bad feedback loop that you don’t need before an election, but demanding the CR makes me wonder how badly Nancy wants to crush the opposition. And crushing the GOP is the one way we can get real change that makes the country much better than the failing status quo.

Instead, Pelosi seems to care more about not rocking the boat to make sure the Dem keep 218+ seats in the House, without wanting to cause a showdown that might give Dems 275 seats. That’s a mentality that might have worked 20 years ago on “The West Wing”, but isn’t a winner in the wreck known as 2020. Dr. King called this out 60 years ago, during another time of great turbulence.

I'm glad that Pelosi and House Dems recognize that we need more stimulus to keep the economy from falling back into recession this winter. But if she would have hardballed the GOP by threatening a shutdown for tomorrow, we'd probably be more likely to have stimulus already, and at a much more robust level.

I hope playing it safe doesn't backfire. Not just for Dems' hopes at the ballot box, but also in getting much less than we could have, and seeing the economy backslide as a result.