2020’s Unfinished Business

Update 496 – 2020’s Unfinished Business:
Congress to Provide Interim Relief, Finally

Nine months after the last Covid relief bill passed, with the epidemic spiking and the economic recovery stagnating, Congress is facing pleas to act from all sides. Today, the $900 billion compromise relief package and the $1.4 trillion omnibus spending bill are the two must-pass bills outstanding before Congress can adjourn. 

With hours left until the weekend, the business remains unfinished. And should Congress reach an agreement over the weekend, the $900 billion is interim, far less than what’s needed in terms of both relief and macroeconomic stimulus. Here, we examine the state of relief and omnibus bills and what that leaves in Santa’s bag for the next year, next Congress, and the next President. 

Good weekends, all, and happy holidays!

Best,

Dana

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Federal Reserve Chair Powell said Wednesday that the case for fiscal stimulus is very strong. Yet Republicans have dragged their feet for months and are refusing to pass any relief package that exceeds an arbitrary $1 trillion price tag. While the relief bill will be a major step forward relative to no additional relief, this is only the beginning. The relief package provisions are only temporary, and the sunsets will set the timeline for the next package. Congress will need to act again by late February or risk cutting off millions from desperately needed aid. 

  1. Relief Package

House and Senate leaders, joined by Secretary Steven Mnuchin, have met throughout the week to finalize negotiations over the relief bill. Democrats and Republicans agreed to drop state and local aid as well as a corporate liability shield to move negotiations forward. On Wednesday, negotiations slowed as legislators tangled over a key provision of the $900 billion relief bill: the powers of the Federal Reserve’s emergency lending programs. 

Sen. Pat Toomey is leading the Republican charge to curtail the Fed’s famous 13(3) emergency lending authority. The language Toomey is proposing would prevent Biden’s Treasury Secretary from restarting the 13(3) facilities the Fed set up in March (and are set to expire this month) with the remaining $50 billion in the Treasury’s Exchange Stabilization Fund. Importantly, Toomey’s proposal could prevent the Fed or Treasury from starting any kind of new loan program like the ones created this past spring without congressional approval. The dispute could ultimately constitute a poison pill for the stimulus negotiations, if Democrats object that Toomey’s move would cut off an important avenue for state and local aid. 

Toomey’s proposal could represent a drastic change in the Fed’s long standing ability to act as an emergency lender in economic crises. While the specific 13(3) facilities set up this past March by the Fed had mixed results — some working well, some ineffective, and none ameliorating inequality — Toomey’s proposal might go beyond bringing those facilities to a close. Separately, some worry it could mean a significant reduction in the authorities held by the Fed and Treasury even before passage of the CARES Act. None of this is clear and if the issue is forced by Toomey, the 13(3)s — the naughty and the nice ones — will have to be re-examined on the merits when they can be openly and adequately debated, not under cover of silent night.  

While dollar figures are still being finalized, the package currently includes: 

  • Paycheck Protection Program – about $300 billion: The bill includes another round of PPP loans, tapping the $138 billion leftover after the program ended in July. Loans will be limited to small businesses with fewer than 300 employees that have sustained at least 30 percent revenue loss during any quarter of 2020.
  • Expanded Unemployment Insurance (UI) – $180 billion: The relief package extends expanded UI through February and provides a $300 per week top-up. While the CARES $600 per week boost expired in July, the new top-up is not retroactive. Without the extension, twelve million Americans will lose their only source of income come December 26. While the bipartisan $908 billion relief bill initially provided a 16-week extension of UI benefits, Republicans demanded a decrease to 10 weeks in exchange for stimulus payments. 
  • Economic Impact Payments – $150 billion: Senate and House progressives alongside Republican Sen. Hawley refused to vote for any relief package that excludes stimulus payments. In a partial success, this second round of direct payments will likely be half the size of the first round. Sen. Thune is pushing to bar UI recipients from also receiving the stimulus payments, a move which would harm the most economically vulnerable and be administratively unworkable. 
  • Odds and Ends: The package will also include funds for vaccine distribution, transportation, schools, rental assistance, food assistance, health-care providers, USPS, rural broadband, and farmers. 
  1. Budget Bill

With last week’s Continuing Resolution (CR) set to expire at midnight tonight, Congress is inching toward yet another stopgap budget bill to extend government funding through the weekend. House Majority Leader Hoyer indicated both chambers would vote on the CR later today. The stopgap requires unanimous consent, and Sen. Hawley has threatened a shutdown unless negotiators release further details on the relief package. Damages from a weekend shutdown would be minimal unless it bled into Monday, when shutdown orders would go into effect.

Passage of the $1.4 trillion omnibus appropriations bill now seems likely. But because McConnell and Pelosi are aiming to pass the omnibus alongside the relief package, Congress will likely need to pass another CR to keep the government funded over the weekend until negotiations conclude.

At the end of last week, negotiators had yet to resolve differences over three main issues: veterans’ health care, funding for the border wall, and funding for Immigration and Customs Enforcement (ICE) detention centers. Now, however, negotiators appear to have struck deals in each of these areas. 

  • Veterans’ health care: Negotiators deadlocked over whether to exempt $12.5 billion for veterans’ access to private health care from statutory spending limits for this fiscal year. Although House Appropriations Democrats and Senate Republicans were both in favor, House Minority Leader McCarthy opposed the change. In the deal struck earlier this week, Congress will eliminate the emergency designation and instead use budgetary offsets and money from unspent appropriations to cover the cost. 
  • Border Wall and ICE: Republicans demanded $1.96 billion for Trump’s border wall and additional funding to house undocumented migrants in ICE detention centers. Democrats opposed both measures. Although the details have not been revealed, the omnibus will likely include some funding for wall construction in exchange for decreased capacity at the detention centers.
  • Energy: Legislators are also expected to attach to the omnibus a major bipartisan energy bill spearheaded by Senators Murkowski and Manchin. The bill adds funding for a variety of energy efficiency programs and efforts to remove carbon dioxide from the air. A separate bill to scale down the use of hydrofluorocarbons may also be included.
  • Tax Extenders: Senate and House negotiators have also reached a tentative agreement on extending the three dozen-odd tax provisions set to expire at the end of the year. These provisions include renewable energy credits, deferment on payments for qualified businesses, and deductions for certain individual expenditures.
  • To Be Resolved: In a deal made late last week, members agreed to a bipartisan effort to end surprise medical billing. Such a proposal has long faced opposition from physicians’ groups, and it remains to be seen whether the bill will be included in the larger package. Likewise, Congress has yet to reach a compromise on wage protection for projects involving public works.

Progressive Plan for the Next Round

Progressives will likely need to push for bigger and further relief after the holiday recess. Senate Minority Leader Schumer already announced plans to pursue another relief bill after Biden’s inauguration, and Biden intends to release his own plan shortly. Even McConnell is eyeing another relief package with hopes to include his corporate liability shield. 

For the next package, progressives must focus on:

  • Premium pay: Essential workers in retail, shipping, health care, and other industries have received little to no compensation for the additional risks and work they have endured. While several companies introduced hazard pay for their employees at the start of the pandemic, many haven’t or have since phased them out. The House-passed HEROES Act would have provided $200 billion for employers to provide an extra $13/hour to their essential workers retroactive to the start of the pandemic.
  • Unemployment benefits: While the current relief bill extends and bolsters unemployment benefits by $300 per week through February, progressives must push for higher benefits and extension of the programs into the spring. Further, legislation should tie UI to state unemployment rates, which would allow the program to automatically adjust according to need without congressional intervention.
  • State and local aid: Negotiators excluded state and local aid from the relief package after objections from Republicans threatened to doom the bill entirely. Brookings projects that state and local government budget shortfalls will total over $500 billion between 2020-2022, and municipal governments have already had to lay off 1.3 million workers. The failure to include state and local aid will severely slow the recovery. 

Per Moody’s, UI has an extremely high stimulative effect followed closely by aid to states and localities and then by stimulus checks. Significant stimulus is necessary to prevent a double-dip recession, and Congress should prioritize policies that increase equity and get the biggest bang for the buck. This applies equally to the use of funds such as those spent on the 13(3) facilities. At least we know better for next time. 

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