Update 488 – Cong. Lame-Duck a Turkey?
“Must-Pass” Items Will; Relief, Not So Fast
This Friday the 13th comes as coronavirus cases in the U.S. top 140,000 a day, three times a month ago, and the unemployment rate remains twice as high as it was in February. As we head into a lame-duck session of Congress, the agenda is long but missing, among the “must-pass” bills, is the federal relief that millions of struggling Americans have sought in vain for half a year now.
The Senate GOP lacks any semblance of support for an adequate COVID package. Must-passes, like a continuing budget resolution and tax extenders, will be at the front of the line. Congress must act to avoid another government shutdown deadline, but the next Congress will find COVID relief at its doorstep. Its makeup still unknown, a Biden administration is bound to be more responsive to pleas for economic relief and stimulus than the current one.
Good weekends, all…
After a stormy election, lawmakers returned to Washington this week for a very busy lame-duck session. Busy with promoting unfounded claims of widespread voter fraud and pursuing fruitless lawsuits in swing states, Trump is likely to be absent from any congressional negotiations. It will be up to Speaker Pelosi and Majority Leader McConnell to get something, anything, done.
Below we examine the status of the relief negotiations, a continuing resolution, and other action items expected to be handled during the lame-duck session.
Relief Negotiations a Slow-Mo Mirage
About eight months have gone by since Congress passed the CARES Act. While jobs numbers improved during those months, more than 21 million Americans remain on some form of unemployment assistance and another 51 million are food insecure. Negotiations for another coronavirus package have been unsuccessful. House Speaker Pelosi and Treasury Secretary Mnuchin have so far been unable to reach a deal. Senate Majority Leader McConnell has been absent from these discussions, but last week McConnell finally announced his willingness to come back to the negotiating table.
Although McConnell’s announcement inspired some hope for another round of relief, Democrats and Republicans remain far apart on the size and scope of the package. The contents of the relief package are wholly dependent upon the price tag, but it will likely include another round of Paycheck Protection Program loans, increased funding for coronavirus testing and treatment, and a renewal of the expanded Unemployment Insurance.
Yesterday, McConnell told reporters that he hopes for a targeted relief bill, resembling the GOP’s $500 billion “skinny bill” proposal that Senate Democrats blocked before the election. Though Democrats continue to aim for a package around $2.2 trillion, their negotiating position is considerably weaker in the aftermath of the election.
Must-Avoid: a Government Shutdown
In late September, Congress passed the Continuing Appropriations Act, 2021 and Other Extensions Act, which was subsequently signed by President Trump on September 30, hours before the deadline. The bill averted a potential government shutdown by providing temporary funding for government agencies at constant levels through December 11, 2020. It also included additional provisions for pandemic-related nutrition assistance, FEMA, and inauguration and transition costs.
Both Speaker Pelosi and Senate Majority Leader McConnell indicated their intent to pass a new budget (and not another CR) during the lame-duck session in mid-December. The House Appropriations Committee passed all twelve of its appropriations bills in July, but the Senate Appropriations Committee only just rolled out all of its bills on Tuesday. The Republican-led Senate bills total $1.4 trillion, almost half of which is allocated for defense. The bills also include non-starters like $15 billion in funding for Trump’s border wall.
Disinterest from the White House may sully chances for an annual budget. If McConnell and Pelosi can’t reconcile the House and Senate budget bills in time, Congress will need to pass another CR to buy time for negotiations and avoid a shutdown.
Other Action Items
The docket for the lame-duck session is long, but one priority for the final legislative session will be filling two open seats on the Fed’s Board of Governors. Trump nominated Judy Shelton, a known gold standard sympathizer, for a four-year term and Christopher Waller, research director at the St. Louis Fed, for a ten-year term. McConnell filed cloture for Shelton’s nomination on Thursday. So, the Senate may take up Shelton’s nomination as soon as next week. Filling one or both seats will frustrate President-elect Biden’s plan to tighten financial regulation since governors vote on bank enforcement, merger approvals, and supervision decisions.
Some other priorities for the last legislative session of the 116th Congress include:
- Fed Facility Extensions: With the Federal Reserve’s 13(3) lending facilities set to expire at the end of the year, a partisan fight is brewing in Congress over whether the Fed should extend the facilities. While Democrats see the Fed programs as a potential tool to deliver more aid if Congress doesn’t act, some Republicans like Sen. Toomey are worried about relying too heavily on central bank lending powers rather than congressional spending decisions. Fed Chair Powell has not offered an opinion on an extension, but Sec. Mnuchin expressed reluctance in extending the Municipal Lending Facility.
Fed and Treasury officials have touted the 13(3) programs as a success, especially those backstopping capital markets. But other programs like the Municipal Liquidity Facility and the Main Street Lending Program have been lightly used, despite the clear financial need among medium-sized businesses as well as states and municipalities. Over $259 billion in funds intended for coronavirus relief will be clawed back after December 31 with no extension.
- Tax Extenders: Almost three dozen specialized, temporary tax deductions will sunset at the end of 2020. These deductions are commonly referred to as “extenders” due to the expectation that Congress will renew most or all of them. Timely extension of the tax breaks could be critical for businesses struggling to survive. Hard-hit industries like airlines and small breweries, wineries, and distilleries are among those pushing for the extensions in the lame-duck. Senate Finance Chair Grassley indicated in October that tax extenders could be one of the few areas for bipartisan agreement.
- The National Defense Authorization Act (NDAA): The House and Senate are in a dead sprint to reach a compromise on the NDAA before the end of the year. The NDAA has passed every year for almost six decades, and both the House and Senate passed versions of the bill during the summer through their respective chambers. We are expecting a conference committee next week. The two chambers’ bills feature some important differences; for example, the House version included an amendment from Rep. Carolyn Maloney to prevent financial abuse by anonymous shell corporations and prevent money laundering. There are concerns, however, that Trump may veto the bill as both the House and Senate versions include language requiring bases named after Confederate generals to be renamed.
It’s unclear how much, if anything, will pass with a now disgruntled Trump administration. If Trump continues to be a poor sport, the administration may be unwilling to sign any legislation, unless it will hamstring a future Biden administration. What’s clear is that the American people will be forced to wait another two months for meaningful relief from a growing health and economic crisis.