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.
@DavidASuper1