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Frustrated negotiators of a massive coronavirus relief bill face heightened pressure with Thursday’s brutal economic news and the rapidly approaching lapse in a $600-a-week expanded jobless benefit that has helped prop up consumer demand.

Talks are at a standstill with few reasons for optimism despite sweeping agreement among Washington’s top power players that Congress must pass further relief in coming days and weeks.

President Donald Trump is eager for another COVID relief package, also a priority for GOP allies like Senate Majority Leader Mitch McConnell, as well as House Speaker Nancy Pelosi and top Senate Democrat Chuck Schumer. Democrats hold a strong negotiating hand, with Republicans badly divided over their own proposal.

Raising the stakes, a bleak government report released on Thursday said the economy shrank at a 32.9 percent annualised rate in the second quarter of the year and the number of Americans filing for state jobless benefits rose for the second week in a row.

The data served up a stark reminder of the economic damage afflicting the country as legislators debate the size and scope of new relief.

The Democrats are saying, my way or the highway.

Senate Majority Leader Mitch McConnell

“This jarring news should compel Congress to move swiftly to provide targeted and temporary assistance to unemployed Americans, employers, and state and local governments, and liability protections for businesses who follow public health guidelines,” said Neal Bradley of the US Chamber of Commerce, the powerful business group.

But bipartisan talks have yet to reach a serious, productive phase. White House Chief of Staff Mark Meadows, a relative newcomer to high-stakes Capital Hill negotiations, declared on Wednesday that the two sides are “miles apart”.

Democrats are playing hardball so far, insisting on a package that is far larger than the Republican $1 trillion-plus plan unveiled by McConnell on Monday. Thursday brought more tit-for-tat.

“They won’t engage. Period,” McConnell said as he opened the Senate. “The Democrats are saying, my way or the highway.”

In an interview late on Wednesday, McConnell showed a willingness to consider some Democratic priorities, like additional food aid. He also said extending additional jobless benefits was urgent and made clear he is standing behind Trump.

“The economy does need more help. We have divided government. We have to talk to each other,” McConnell said on the PBS NewsHour. “And we have to try to get an outcome.”

Schumer continued his daily fusillade against McConnell and Republicans controlling the Senate, noting that McConnell “refuses to go in the room” and join the talks in person, instead transferring ownership of the talks to Meadows, along with Treasury Secretary Steven Mnuchin, who has been a key architect of previous accords.

“We’re trying to negotiate,” Schumer said. “Who’s holding things up?”

Schumer said he will block efforts by individual Republicans to pass a smaller benefit as part of an effort to soften the unemployment insurance cutoff. McConnell has shown no interest in the idea of handling the issue separately and any such manoeuvring is beset with hurdles.

Meanwhile, in-person talks are on hold as Pelosi travelled to Atlanta for the funeral of Representative John Lewis, the civil rights icon.

Stark differences remain between the $3 trillion proposal from Democrats and $1 trillion counter from Republicans. Money for states and cities is a crucial dividing line. Local governments are pleading for help to shore up budgets and prevent deeper layoffs as they incur COVID-19 costs and lost tax revenue in shutdown economies.

We’re trying to negotiate

Senate Minority Leader Chuck Schumer

Trump complained about sending “big bailout money” to the nation’s cities, whose mayors he often criticises.

Democrats proposed nearly $1 trillion for the local governments, but Trump and Republicans are resisting sending the states and cities more cash. Instead, the GOP offers states flexibility to use $150bn previously allotted for the virus on other needs.

It is clear Democrats are trying to push an advantage in the negotiations because Republicans are so split over the prospect of additional government spending. Among the issues sure to gather momentum is a Democratic demand for a 15 percent increase in food stamp benefits.

Trump dismissed the GOP bill as “semi-irrelevant” since it leaves out so many Democratic items.

Trump appears worried about the lapsing of the federal $600 unemployment benefit boost as well as an expiring federal eviction moratorium on millions of rental units, potentially sending households into devastating turmoil. Mnuchin said Wednesday that “the president is very focused” on unemployment aid and assistance for renters.

Republicans propose slashing the $600 weekly unemployment benefit bump to $200 a week for two months, after which the state and federal benefits would combine to achieve 70 percent wage replacement, with a $500 cap on the federal supplement. Pelosi has publicly rejected that cut as inadequate.

Trump has bristled at one provision of the GOP bill – he said his GOP allies should “go back to school and learn” after they baulked at $1.7bn for FBI headquarters. Trump wants the FBI’s central building to remain in Washington, across the street from his Trump International Hotel.

If the FBI moved its headquarters, the site would become prime real estate for a competing hotel.

McConnell has rejected the FBI funding request – added to a $300bn-plus appropriations package in private talks between Meadows and Senate Appropriations Committee Chairman Richard Shelby, Republic from Alabama – since it is unrelated to virus relief.