July 20, 2020

The Wall Street Journal: Republicans Put Down Marker on Next Coronavirus-Aid Bill

WASHINGTON—Republicans on Monday outlined their priorities for the next round of coronavirus aid, calling for legal protections for businesses and money to reopen schools but no new funding for states and cities sought by Democrats, kicking off a sprint to pass legislation by early August.

Senate Republicans are expected to unveil their bill later this week at a critical moment in the coronavirus pandemic, with cases increasing in many states and new signs that the economic recovery may be stalling. More than 140,000 people have died in the U.S. as a result of the virus.

But ahead of negotiations with Democrats, congressional Republicans and the White House haven’t yet reached agreement on many issues for the package, including whether to include a payroll-tax cut and additional funding for coronavirus testing and tracing and distribution of an eventual vaccine. And Senate Democratic Leader Chuck Schumer said Monday that a bill that didn’t include new aid for states and cities was a nonstarter. 

President Trump reiterated Monday that he wants a payroll-tax cut, but didn’t repeat a threat to veto the bill if it didn’t include that measure. “We’re talking about a lot of things, not just the payroll-tax cut,” Mr. Trump said at a meeting with GOP leaders.

Treasury Secretary Steven Mnuchin, who said the administration is aiming for a $1 trillion price tag, said the focus of the aid would be on “kids and jobs and vaccines.” He also said the administration wants tax credits to provide incentives for businesses to rehire people and money for states that reopen schools, but without being specific.

Democrats have pushed for funding for schools and universities to cover the cost of reopening during a pandemic. But they oppose conditioning school funding on plans to reopen.

Democrats have called for continuing enhanced unemployment payments of $600 a week through January, another round of stimulus checks for households as well as funding for state and local governments. House Democrats passed a bill in May calling for more than $3 trillion in new aid overall. Senate Republicans and the White House rejected that proposal, but they have signaled support for another round of stimulus checks, and a more modest level of unemployment payments, as the pandemic continues to weigh on the economy.

The bill being drafted by Senate Republicans isn’t expected to include additional funding for state and local governments, a priority for Democrats, according to GOP aides. However, it is likely to give state and local governments more flexibility in how they can spend federal aid approved in previous aid packages that was tagged for only coronavirus-related expenses. Many states say they need additional funding and flexibility to plug budget holes caused by the economic fallout of the pandemic.

“We do anticipate taking steps to give even greater flexibility to states regarding the use of funds that have already been appropriated at this time,” Vice President Mike Pence said during a call with the nation’s governors Monday that The Wall Street Journal reviewed a recording of.

Democrats have warned they will block legislation that doesn’t provide adequate funding for state and local governments, which the House bill set at $1 trillion.

Mr. Schumer (D., N.Y.) said on the Senate floor Monday that the GOP bill will “not even come close to meeting the moment of this great crisis,” citing the lack of local aid among other reasons.

Sen. John Cornyn of Texas, a member of Senate GOP leadership, acknowledged that the final bill was likely to include more funding for state and local governments, given how high a priority it is for Democrats. 

“I do believe there will be something in there,” Mr. Cornyn told reporters, saying that House Speaker Nancy Pelosi (D., Calif.) had made clear “that’s a red line for her.”

Mr. Trump met Monday in the Oval Office with Mr. Mnuchin, Senate Majority Leader Mitch McConnell (R., Ky.) and House Minority Leader Kevin McCarthy (R., Calif.) to discuss the legislation.

During the closed-door portion of the meeting, Mr. Trump called economist Arthur Laffer, an informal adviser, and put him on speaker phone, according to a person familiar with the matter. The president asked Mr. Laffer for his thoughts on a payroll-tax cut, a proposal the economist supports. Mr. Laffer made a pitch for including measures in the bill that would improve transparency about the cost of medical care, the person said. 

A payroll-tax cut would reduce employers’ costs to add and keep workers, but many economists argue that it is inefficient during the current crisis, because millions of people who have been steadily employed throughout the pandemic would benefit too.

Mr. Trump has been pushing the payroll-tax cut idea for months, but few lawmakers have embraced it. Mr. McCarthy told reporters after the meeting that the GOP package would likely include another round of direct payments for households and a payroll-tax cut, although the payroll-tax issue remained in flux Monday. One possibility is to defer payroll taxes, rather than cut them, a GOP aide said.

Mr. McConnell sidestepped a question Monday afternoon about whether his bill would include a payroll-tax cut, which hasn’t been popular among lawmakers from either party.

Senate Majority Whip John Thune (R., S.D.) said a payroll-tax cut might be in a “first draft,” because of Mr. Trump’s interest in it, but that “there are a lot of Republicans who don’t like it for a lot of different reasons.” 

Mr. McConnell said Senate Republicans would discuss the legislation at their weekly lunch on Tuesday to “see if we can develop a common approach to this on our side and then begin to reach out to Democrats.” Mr. Mnuchin and White House chief of staff Mark Meadows are expected to attend the lunch meeting Tuesday. 

Lawmakers are also considering proposals to expand a tax credit for employee retention that was created in March. That idea, which is more targeted than the payroll-tax cut, has bipartisan support.

White House officials and Republican lawmakers have split over how much funding is needed in the next round for key issues, including for testing and contact tracing. Senate Republicans had planned to propose $25 billion for testing, but the administration opposes any new money for testing, according to lawmakers.

“To open schools, we need more tests,” said Senate Health Committee Chairman Lamar Alexander (R., Tenn.) “We ought to provide whatever financial support we should to make it safe for schools to open and that includes widespread testing.”

The White House also wants no additional funding for the Centers for Disease Control and Prevention, including funding for the distribution of a vaccine, drawing a rebuke from a top Republican. 

“The vaccine is not very good if it’s not properly distributed,” said Sen. Roy Blunt (R., Mo.), who leads the health panel of the Appropriations Committee. 

Mr. Mnuchin said Monday the bill would also include tax credits for businesses to buy personal protective equipment and create a safe work environment. Sen. Rob Portman (R., Ohio) has a proposal that would provide businesses a refundable tax credit against payroll taxes for 50% of the costs incurred by testing, protective equipment, extra cleaning and reconfiguring office space until the end of the year.

Speaking Monday, Mr. McConnell again stressed his desire to offer liability protections for employers, saying “we don’t need an epidemic of lawsuits.” The president has signaled he agrees with liability provisions.

A group of six House Democrats and six Republicans signed a letter to congressional leadership last week asking that the next bill include a shield from coronavirus-related lawsuits. Other Democrats, who have emphasized worker safety over employer shields, acknowledge that they will likely compromise on the issue in the bill.

Another key issue is what to do about the $600 in weekly aid the federal government has added to state unemployment benefits, which end this month. Mr. McCarthy suggested that Republicans might support some form of continued unemployment benefits, but at a level lower than the $600 in weekly aid set to expire at month’s end.

In normal times, the benefits would be slightly lower to incentivize people to “pound the pavement,” said Rep. Derek Kilmer (D., Wash.), chairman of the New Democrat Coalition. But during a pandemic, lawmakers want them “to be staying home and staying healthy” until it is safe for them to venture out.


By:  Kristina Peterson, Andrew Restuccia, and Catherine Lucey
Source: The Wall Street Journal


--->