Mitch McConnell, the Republican leader in the US Senate, has backed a new round of direct payments to American families, paving the way for a possible compromise with Democrats over a new fiscal stimulus package.

Speaking on the Senate floor on Tuesday, a day after meeting with senior Trump administration officials at the White House, Mr McConnell said the US jobs market needed another “shot of adrenaline” given the new spikes in coronavirus cases and enduring high unemployment.

“We want another round of direct payments to help American families keep driving our national comeback,” Mr McConnell said. “Helping to create more American jobs is an urgent moral priority — and these are just some of the policies we are discussing that will help that happen.”

In the first $2.2tn stimulus bill approved in March, US adults earning as much as $99,000 per year received a payment of up to $1,200 from the Treasury department. The vast majority of those funds has since been paid out, and its impact has faded.

Democrats proposed another similar payment in their plans for a new round of stimulus. Mr McConnell did not specify the details of the Republican plan for the new cheques on Tuesday, but he had previously suggested the income threshold should be set lower, at $40,000 per year.

The fate of the talks over a new fiscal stimulus bill is being closely watched by economists since the outcome will be pivotal for the US economy’s chances of sustaining its rebound from the depths of the coronavirus shock.

In May and early June, Republicans had been deeply sceptical of the need for a new round of direct payments, but doubts about the recovery appear to have caused a shift.

While Mr McConnell’s comment on direct payments will raise hopes for some convergence with Democrats on aid to households, there were no signals that the Kentucky Republican was willing to embrace an extension of enhanced jobless benefits.

Those payments, worth $600 per week, are due to expire at the end of the month, and Democrats are eager to renew them. Instead, Mr McConnell said Republicans were considering “specific incentives to hire and retain workers”.

The Senate majority leader also failed to endorse a key demand from the White House for a cut in payroll taxes.

The talks on a new round of fiscal stimulus could yield a package worth more than $1tn if there is a compromise, although formal negotiations between the parties have not begun.

Kevin McCarthy, the Republican leader in the House, told CNBC a deal may not be struck until the first week in August — after the enhanced jobless benefits are due to expire.

Chuck Schumer, the top Democrat in the Senate, said on Tuesday that it would be wrong to cut back the jobless benefits “when we have over 20m unemployed and we have the greatest economic crisis since the Great Depression”.

Speaking to CNN, he said: “If we don’t renew it and renew it in a robust way, millions more will sink back into poverty and lose their homes, get kicked out of their apartments, and not be able to feed their families.”

As he laid out more details of the Republican bill, Mr McConnell said that it would include $105bn in funds for schools to reopen safely and a liability shield for businesses and charities to protect themselves from coronavirus-related lawsuits, which is staunchly opposed by Democrats.

The Republican lawmaker also said he would support another round of funding for small business loans as long as it was targeted to businesses that were particularly hard hit.



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