Update 456: Coming Cutoffs, Cong. Recess
Forcing a Fight over Next COVID Package
After months of urging from Democrats for another coronavirus package, Congress is finally set to begin active negotiations next week, facing expanded unemployment benefits expiration on July 31 and PPP benefit cutoffs on August 8.
With the coronavirus surging in a majority of states and public opinion turning rapidly against Republican governance, Democrats have the moral high ground and time, or lack of it, on their side. But the final package will require major concessions from both sides.
Where does this package stand ahead of an intense round of negotiations in the next two to three weeks before Congress begins its August recess? We cover the state of play below.
Good weekends, all…
HEROES: Head Start and Benchmark
On May 15, the House passed H.R. 6800, the HEROES Act, the ambitious Democratic-led follow-up to the CARES Act. The HEROES Act serves as the Democratic starting point for negotiations over the next coronavirus package. The bill, which totals about $3 trillion, focuses on workers’ and families’ economic struggle through the pandemic. Major provisions:
- State and Local Assistance: HEROES appropriates $1.13 trillion for state and local aid. This includes $915 billion in flexible aid, which governments can use to cover revenue losses.
- Unemployment Insurance (UI): HEROES allocates $437 billion to extend expanded UI through January 31, 2021. The CARES Act’s increased UI benefits by $600 per week and expanded eligibility for furloughed and contract workers.
- Direct Cash Payments, 2.0: HEROES provides $435 billion more in direct payments, a supplement to the CARES Act’s initial $292 billion. It provides $1,200 payments for individuals with salaries under $75,000 and couples with household income under $150,000. Individuals would also receive an additional $1,200 per dependent, capped at three.
- Hazard Pay: A priority for Democratic Leader Schumer, the HEROES Act appropriates $190 billion for a ‘Heroes Fund’ to increase essential workers’ pay by $13/hour. Pay increases would be capped at $10,000 per worker, retroactive to January 27.
- Election Funding: After seeing problems in several primaries, House Democrats prioritized $3.6 billion for election funding in the HEROES Act. States and localities could use the funds to provide PPE for voters and poll workers and implement universal vote-by-mail.
When the House passed HEROES, Republicans derided the bill as a “parade of absurdities” with no chance of consideration by the Senate. But after months of foot-dragging, Sen. McConnell publicly recognized the need for another relief bill but objected to a $3 trillion price tag.
McConnell and other Republicans assert that expanded UI benefits discourage workers from returning to work, rejecting the possibility of extension. Republicans appear willing to compromise in exchange for protections for businesses. McConnell suggested a reduced expansion around $200 to $400 in additional benefits per week. Congress may let the expanded benefits expire at the end of the month before passing an extension.
Aid for states and local governments has been a Democratic priority, but a constant sticking point in coronavirus negotiations. Speaker Pelosi is committed to securing flexible funding for states and localities currently facing unprecedented budget crises. In late April, McConnell suggested that states consider declaring bankruptcy (an impossibility) instead of seeking additional federal aid.
Republicans at both the state and federal levels have pushed leadership for additional aid, both in the form of grants and higher federal Medicaid matching rates. Now, McConnell seems willing to entertain additional aid, although potentially at only half the level passed by the HEROES Act.
Beyond Ground HERO
Outside of the HEROES Act, House progressives and Senate Democrats have offered other plans for coronavirus relief. Rep. Jayapal’s H.R. 6918, the Paycheck Recovery Act, would subsidize salaries for workers up to $90,000. The bill has bipartisan support from 105 cosponsors but was not included in the HEROES Act.
A similar bill introduced by Sens. Warner, Sanders, Jones, and Blumenthal, S. 3793, the Paycheck Security Act, indicates support across the Democratic caucus. But inclusion of a wage replacement program in the final package is unlikely without championing from leadership.
Some House Democrats unsuccessfully pushed for inclusion of automatic stabilizers — fiscal support tied to economic conditions — in the HEROES Act. Two weeks ago, however, Leader Schumer and Sen. Wyden released the American Workforce Rescue Act, which would tie expanded UI benefits to state unemployment rates through March 2021. Republicans are unlikely to cave to both extending the expanded benefits and making future extensions automatic.
GOP Dragged to Talks, Yet Divided
Mitch McConnell intends to offer the Republican alternative to the HEROES Act next week to kick off negotiations in the Senate. Although Republicans remain divided over the contents of another coronavirus package, McConnell was clear that his caucus wants a much smaller bill, aiming to keep costs below $1 trillion. Such a price restriction will crowd out much of the Democrats’ key asks. Key components of the Republican relief package will include:
- Liability Immunity: McConnell confirmed that liability immunity for schools, hospitals, and businesses will be included in the GOP relief package. Since April, Republicans have demanded that businesses receive protections from potentially frivolous or opportunistic lawsuits. The GOP may propose a five-year blanket for business owners; Democrats will likely insist on stronger OSHA standards workers, consumers, and businesses to neutralize the paralytic impact that liability immunity could have.
- Aid to Schools: Senate Republicans, at the behest of the White House, are now developing an aid package engineered to push schools into reopening this fall. This new priority came after Trump threatened to withhold federal funding from schools. While Democrats have supported increased aid to schools since April, they have opposed pushing them to open before communities are ready.
Glimmers of Bipartisanship
Areas of bipartisan agreement have emerged over the past few weeks. Some Democrats have pushed for more direct stimulus payments, which they secured in the HEROES Act. While Republicans were initially opposed to the idea, President Trump announced his support for another round of $1200 checks late last month.
Following Trump’s lead, McConnell endorsed a second round of targeted payments — but only to individuals earning $40,000 or less and joint filers earning $80,000 or less. Pelosi expressed some skepticism about lowering the income cap so dramatically, but McConnell’s switch indicates that a second round is likely.
Congressional Republicans are also signaling support for increased election funding after voting rights advocates voiced fears of an election day disaster. Senate Rules Committee Chair Roy Blunt voiced his commitment to “look at more money for the election this year” on the Senate floor before the July recess. The Senate Rules Committee will hold a hearing on July 22 to examine preparation for the general election.
Reading the Tea Leaves
Yesterday, President Trump, a background figure in the negotiations, demanded that a payroll tax holiday be included in the final package — a tax break that would do nothing for the 20 million Americans made jobless by COVID but would disadvantage revenue-poor state and local governments. Even many Senate Republicans have scoffed at the idea of a payroll tax holiday. Any relief package will be a leadership compromise, with the White House offering approval or disapproval post-hoc.
The next Corona package will hinge on liability immunity, expanded UI benefits, and state and local aid. With benefits such as expanded UI expiring, Pelosi has indicated she would be willing to delay August recess to pass the bill. The tea leaves point to a final relief package on a $1-2 trillion scale, passed in early August, enabling members of Congress to begin recess and return to their races.