In a lame-duck session, stalled negotiations over coronavirus relief showed signs of new life Tuesday.

Centrists Unveil Bipartisan Plan

Trump would need to sign the legislation but Coronavirus Stimulus Talks Restart. 

House Speaker Nancy Pelosi (D., Calif.) and Treasury Secretary Steven Mnuchin planned to speak Tuesday afternoon. Meanwhile, after a month of discussions, a group of lawmakers from both the House and Senate unveiled Tuesday morning a $908 billion aid proposal, seeking a middle ground between Democratic and Republican leaders’ stances.  

“We simply can’t leave town and leave anyone in the cold, without getting something done immediately,” said Rep. Josh Gottheimer (D., N.J.), co-chair of the bipartisan Problem Solvers Caucus, which has endorsed the proposal.

Mr. Mnuchin told a Senate hearing Tuesday that the White House and GOP leaders were interested in further relief, but didn’t provide a target. “We all believe there should be targeted fiscal response,” he said.

The proposal unveiled Tuesday, which would run through March 2021, includes some measures sought by both parties. Lawmakers included $160 billion in state and local funding—long one of the biggest sticking points in talks among congressional leaders.

The bipartisan proposal also nods at one of Republicans’ top priorities: legal protections for businesses and other entities operating during the pandemic. Lawmakers said they would provide a short-term suspension of liability lawsuits related to Covid-19 at the state or federal level, giving states time to put in place their own protections.

The proposal also includes $288 billion for the popular Paycheck Protection Program, $16 billion for the distribution of a coronavirus vaccine, $82 billion for schools, $25 billion for rental assistance and $180 billion for additional unemployment insurance, including $300 a week through March, aides said. In addition, the plan would give $17 billion to airlines.

$908 Billion Aid Proposal

$908 billion is a lot of money, but recall that Democrats sought $2 to $3 Trillion a couple of months ago. 

Reaction From Gold?

It's difficult to say precisely what a market is reacting to, but gold appears to be a beneficiary. 

As I type gold is up about $37 today, but it's still down over $200 from recent highs.

Change in Stimulus Expectations

As noted a few days ago, Biden's Progressive Agenda is Dead on Arrival. 

And recently, Gold had been acting as if Congress would do nothing. Previously, the expectation was Democrats would pick up seats in the House and flip the Senate. 

Had that happened, who knows how high the spigots would have gotten? 

I don't, nor does anyone else, but it is certain that Elizabeth Warren, AOC, and other progressives would apply pressure for all kinds of projects including Medicare for All, energy, and state bailouts.

Gold had been pricing in that possibility when it made new highs over $2000.

Everyone understands that deficits would soar no matter who won the election, so it's these ongoing changes in fiscal expectations that matter as well as the actions of the Fed vs other central banks.