Image for Stage Set for Negotiations on Another Round of Financial Aid

Senate Republicans released their $1 trillion version of coronavirus financial relief this week, setting up a tense and time-constrained negotiation with House Democrats who passed a $3 trillion relief package May 15.

There are huge differences to resolve, including an extension of an unemployment insurance supplement, which expires July 31. The House approved extending the $600 weekly unemployment compensation supplement through the end of the year. The Senate would extend supplemental payments through September, but only at a rate of $200 per week.

The House-passed legislation contains $1 trillion in financial relief to struggling state and local governments. The Senate version offers no additional aid, but it does grant greater latitude to states and municipalities in how to spend the $150 billion they received from the previous CARES Act.

The Senate version would provide liability protection from coronavirus-related medical claims for businesses that opened during the pandemic, made “reasonable efforts” to comply with public health guidelines and didn’t engage in “willful misconduct or grossly negligent behavior”. The House didn’t include a business immunity provision.

Under the Senate proposal, most Americans would get a second direct cash payment of up to $1,200 per adult, with the amount beginning to phase out when annual incomes exceed $75,000 for single filers and $150,000 for married couples. It also would provide $500 per dependent of any age. This is comparable to what’s in the House measure.

Other Senate provisions include:

  • Workplace tax credit: Employers would get a payroll tax credit to cover 50 percent of the cost of a worker’s virus protection expenses, such as testing, personal protective equipment and workplace remodeling.
  • Restaurant deduction: The measure would remove the existing 50 percent limit on tax write-offs for business meals through December 31, something backers like Senator Tim Scott,  R-S.C., say will help save restaurant industry jobs. But notably Senate Finance Chairman Charles Grassley, R-Iowa, didn’t include it with the main tax title of the package and has said he opposes an expanded meals break.
  • Appropriations: Federal agencies would get $306 billion in emergency funding, with the biggest single bulk of money – $118.4 billion – going to the Department of Health and Human Services for vaccine research, testing and other medical needs. Schools would get $105 billion to help them to reopen safely. The military would get $29.4 billion to meet the pandemic needs of troops, including nearly $8.1 billion to support the “defense industrial base”. Farmers and ranchers would get $20 billion in direct payments and low-income families and housing agencies would get $3.2 billion in rental assistance.
  • Paycheck Protection Program: Small businesses could apply for a second round of forgivable loans aimed at keeping their workers on the job during the pandemic. About $190 billion would be available for loans, including previously appropriated funds that have yet to be spent. Companies seeking a second loan would be required to have fewer than 300 workers and show a revenue decline of at least 50 percent.
  • Trust fund “rescues”: Congressional “rescue committees” would be appointed to recommend bipartisan plans for shoring up Social Security, Medicare and highway trust funds. Recommendations from the committees would get expedited consideration in the House and Senate.
  • Restoration of Pentagon Budget: Some $3.8 billion is restored to the Pentagon budget, replacing money President Trump diverted for his border wall.
Senate Majority Leader Mitch McConnell and his fellow Senate Republicans propose extending enhanced unemployment benefits, but at a sharply reduced amount because they believe $600 per week is too generous and serves as a disincentive for workers to return to their jobs. Economists credit enhanced unemployment benefits with preventing the economy from cratering.

In the everyday world, if one party offered to sell something for $300 and a potential buyer countered with a $100 offer, you would expect they would settle at around $200. That may not apply to the partisan standoff in Congress over coronavirus financial relief, where each side has given their proposals names – HEROES Act by the Democrats, HEALS Act by the Republicans. The negotiations involve a third party – the White House, where President Trump is still smarting over the absence of the payroll tax cut that he sought.

The most contentious point of the negotiation will be over enhanced unemployment benefits, even though economists credit the payments for providing a crucial financial lifeline for the millions of Americans, including self-employed and gig workers who lost their jobs because of the pandemic lockdown. Economists say the money unemployed workers received helped to keep businesses that stayed open afloat, avoiding a more serious economic crash. There are even early indications the poverty rate declined in large part due to the $600 weekly payments. However, Senate Republicans adamantly believe the $600 payments are too large, creating an incentive for workers to stay off the job.

A less obvious bone of contention centers on the Senate provision to buttress trust funds, including Social Security and Medicare. Critics call the “Romney Plan” a backdoor way to cut benefits and create an expedited path through Congress to approve the cuts.

Democrats are unlikely to back any plan without some level of financial assistance to state and local governments.

It appears unavoidable enhanced unemployment insurance payments, at whatever rate, will lapse before Congress can reach a compromise. The Senate expects to vote on its proposal by the end of the week unless a deal can be struck before then.