Wednesday, October 07, 2020

Whither Coronavirus Relief Legislation?

David Super

     Keeping track of the negotiations on a possible follow-on coronavirus relief package has been no mean task.  Just this week, President Trump ordered Secretary Steven Mnuchin to break off negotiations with congressional Democrats, declaring that any relief package would have to wait until after the election.  He then almost immediately began demanding that Congress pass relief legislation for business.  Previously, the negotiations have gone through many starts and stops, with some accounts declaring that agreement was close at hand and others insisting that relief legislation was dead.  It may be useful to look at what is really happening. 

     The last sweeping coronavirus relief legislation, the CARES Act, was enacted March 27, more than half a year ago by the Gregorian calendar and much longer in COVID-19 time.  It was built around a trade of liberalized unemployment compensation benefits and state fiscal relief sought by Democrats for massive business subsidies sought by Republicans.  It also included one round of economic relief (“stimulus”) payments to many low- and moderate-income taxpayers (although it missed many of the poorest of the poor).  Both parties’ highest-priority provisions were effectively time-limited:  the unemployment compensation changes had formal expiration dates; the state fiscal relief sufficed to make up for perhaps a quarter of the shortfalls states were facing; and many of the business subsidies, although vast, had fixed allocations of funds.  The assumption was that these limits would force the parties back to the table to craft new legislation.

     In April, Republicans complained that the fund for business subsidies was already being exhausted and urgently needed to be replenished.  The Democrats countered that states and cities were in dire shape as well and that hunger was rising, but Republicans refused to allow either any further state fiscal relief or any expansion of food assistance into the package.  They attacked Democrats as being anti-business for refusing to move a business-only relief package, and apparently the Democrats’ focus groups found those attacks were having some success.  The Democrats therefore passed the Republicans’ package in exchange for the President’s promise, confirmed in a tweet, that state fiscal relief would be included in another bill to follow quickly. 

     As soon as the April relief legislation passed, the White House, and especially Senate Majority Leader Mitch McConnell, made clear that they were in no hurry to move additional bill.  In May, House Democrats passed the HEROES Act.  The HEROES Act extended the unemployment compensation improvements, gave states and localities the fiscal relief they needed to weather the crisis, provided for an additional round of economic relief payments, and offered further subsidies to businesses suffering because of the pandemic.  Anticipating difficulties ahead, House Speaker Nancy Pelosi refused to allow the HEROES Act to become a “Christmas tree” with packages for every Democratic constituency, turning away many sound proposals to keep the legislation focused, defensible, and relatively lean (given the enormity of the problems).  

     Senator McConnell declined in May, June, and most of July either to allow the HEROES Act to the Senate floor or to offer proposals of his own.  At the very end of July, just before the CARES Act’s $600 per week supplemental unemployment benefits were due to run out, he floated a minimalist, half-hearted piece of relief legislation but made no meaningful effort to negotiate a deal with Democrats.  The unemployment benefits, along with the CARES Act’s eviction moratorium, therefore expired.  Negotiations continued on and off for a while, but Republicans again made no attempt either to close the gap with Democrats or to move legislation of their own. 

     The President tried to relieve political pressure on his party with a series of largely cosmetic announcements of steps to continue some of the expired provisions.  He sought to tap disaster relief funds to provide partial substitute unemployment benefits for a few weeks, albeit in violation of the Stafford Act.  The Administration later invoked its public health powers to block some evictions, although its action appears to have had little effect on the vast majority of low- and moderate-income tenants lacking the lawyers or legal skills to invoke that order effectively in landlord-tenant court. 

     The practical impact of these moves was modest – and did nothing for struggling state and local governments that were facing large lay-offs because of reduced tax revenues – but they created enough confusion that Republicans were politically comfortable abandoning coronavirus relief legislation.  Efforts to include additional relief measures in the “continuing resolution” – the legislation keeping the government running into December – also largely failed. 

     Over the last week or so, Treasury Secretary Mnuchin has been negotiating one-on-one with Speaker Pelosi and reportedly had made considerable progress toward a deal.  The Administration’s renewed willingness to contemplate relief legislation may reflect the President’s deterioration in the polls.  It may also reflect the fact that it is now too late for any Postal Service funding  -- a major sticking point in prior negotiations – to affect the delivery of ballots. 

     It soon became apparent, however, that Republicans were divided on the political desirability of further relief legislation.  President Trump remains enamored of the idea of sending out another round of economic relief payments bearing his name before the election. 

     Congressional Republicans, on the other hand, find coronavirus relief legislation a divisive topic.  Some feel pressure to aid constituents in dire condition due to the economic downturn or worry about a deepening recession if the federal government’s contribution to aggregate demand shrinks.  Federal Reserve Chair Jerome Powell strongly highlighted the need for more stimulus.  Other Republicans, however, worry that passing another large stimulus bill will anger conservatives who see recessions as golden opportunities to shrink government.  (This explains the particular hostility to state and local fiscal relief.)  According to some estimates, Majority Leader McConnell could count on little more than half his caucus to vote for any stimulus legislation that came to the floor. 

     Senate Republican opposition to stimulus legislation became overwhelming after the death of Justice Ginsburg.  They saw the prospect of placing a sixth conservative on the Court energizing their conservative base and worried that passing a substantial relief bill would dissipate much of that enthusiasm.  Accordingly, neither Senator McConnell nor House Minority Leader Kevin McCarthy participated in the negotiations with Secretary Mnuchin and Speaker Pelosi.  Senator McConnell reportedly was resigned to the political necessity of allowing a vote on any deal that was reached, but his and his colleagues’ lack of enthusiasm may have contributed to the President’s announcement that he was breaking off negotiations. 

     The President’s subsequent demands for particular pieces of business relief legislation cannot be taken seriously.  Having already been burned by agreeing to a business-first approach in April, neither Speaker Pelosi nor Senate Minority Leader Chuck Schumer will go down that road again.  The President might change his mind on relief legislation after the stock market’s glum reaction to his announcement or because airlines are threatening mass layoffs (with many of their hubs in swing states).  At this point, however, it may be too late to issue economic relief payments with the President’s name on them before the election.  It therefore seems unlikely that a package will materialize now.

     If coronavirus relief does not move before the election, its future is murky.  The next major formal deadline is the end of December, when millions of unemployed workers will be cut off unemployment benefits completely.  (The expiration at the end of July affected an even larger number of workers but resulted primarily in a sharp cut in benefit levels rather than complete losses of eligibility.)  Many states’ unemployment compensation agencies have antiquated computer systems that will make it difficult for them to reinstate benefits should Congress allow them to lapse.  On the other hand, many Senate Republicans facing perilous contests in 2022 may still be unwilling to alienate their conservative bases by passing further relief legislation. 

     Also uncertain is the impact on state and local governments.  Many enacted unrealistic placeholder budgets to wait and see what federal fiscal relief might be forthcoming.  Now that those prospects have dimmed considerably, they may be forced to reconvene their legislatures to close the yawning budget gaps the recession caused.  This likely will lead to painful cuts that could result in large lay-offs.  Whether they are eager to do so before the election, however, remains to be seen.   


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