Call it the looming train wreck everyone sees coming, but isn’t total sure how to stop.
A viscerally divided Congress (and White House) facing a roughly three-week deadline to reconcile diametrically opposed visions of what the economy needs to survive the resurgence of the coronavirus pandemic. Oh, and all that’s hanging in the balance? The US economy. The health care capacity and technological advances necessary to fight the pandemic. The future of education. The future of the millions of unemployed. The future of millions of small businesses. A half dozen or more Senate races. The Presidency. Buckle up.
Bottom line: The starting gun for the legislative sprint will go off next week, as Senate Republicans are slated to release their plan and actual talks will, for the first time, kick into gear. All sides acknowledge the stakes are enormous. What nobody seems to agree on is how – and when – Congress and the White House will come together on an agreement.
What McConnell is doing
A good rule of thumb to remember with Senate Majority Leader Mitch McConnell, on most everything, is the Kentucky Republican’s focus is:
- Protect his members and majority and …
- Keeping his conference unified as long as possible.
When it comes to the stimulus, those two things will (and already have to some extent) diverge.
But the process he’s pursued – a two-month “pause” as a significant portion of his conference signaled unease with new spending or stimulus as money from the initial $2.2 trillion law was going out the door – which allowed for a number of closed-door conference lunches where senators were able to lay out their ideas, or objections, to the next stimulus measure, followed.
Now, a silo-ed drafting of the central pieces of the GOP plan, led by committee chairs and other key members, with McConnell’s team serving as the central clearinghouse for each piece. The idea is to have buy-in from the key members of the conference, on their specific areas of expertise (or jurisdiction) and plan for those senators to then bring the rest of the conference along throughout next week as they “socialize” the proposal with members. The goal: keep the conference unified as negotiations with Democrats kick into gear.
How you know things are really happening
Details of what Republicans are working on are have come out in bits and pieces – and the topline goals for the proposal are well known – but the granular pieces have remained shrouded in secrecy. Those working on it have largely locked down. Paper is not leaking out. Lobbyists on K Street are in large part in the dark. That’s when you know things have gotten very real with McConnell’s efforts.
McConnell’s challenge: It may feel like the country is backsliding into a March-like resurgence of the pandemic, but that doesn’t mean Senate Republicans are in the same place they were in March. The reality is, in the words of one senator: “There’s a 0% chance all our guys sign onto a final deal.”
The timeline
McConnell wants to release the GOP proposal next week. It will likely be summarily rejected by House and Senate Democrats as woefully inadequate and far short of what’s needed. The rejection and objection is a necessary part of the process. Ostensibly, at that point, the sides will finally start negotiations.
Of note: House Speaker Nancy Pelosi made clear House Democrats will postpone their August recess in order to finish a bill. Senate Democrats are in the same place and vulnerable Senate Republicans would certainly be in that space, too. So the overall timing is pretty fluid.
Where Democrats stand
In the same place they’ve been for two months, essentially. House Democrats passed a $3 trillion measure in May – essentially their opening bid for negotiations on the next relief measure. Then they waited. And waited. And are still waiting.
Pelosi took some credit for Republicans moving toward finally releasing their product, telling reporters on Wednesday “we see the public evolution of their thinking” and making clear “there’s going to be a bill.”
One thing is clear: House Democrats and Senate Democrats are standing arm in arm on this. Senate Democratic Leader Chuck Schumer of New York told his members on a conference call this week no negotiations with Republicans would occur without their House counterparts in the room, according to a source on the call.
Schumer also told his members something that has been glaringly apparent in recent weeks: There has been no outreach from Republicans on their forthcoming proposal.
Why things will come together
So with the two sides so dramatically far apart on the actual policy here, a key question being batted around town lines up with what one GOP lobbyist posited to me last night: “How the hell do they come together on all of this in two weeks?”
The shortest answer is: Because they have to.
Deadlines and cliffs spur action like nothing else on Capitol Hill (Seriously, at this point quite literally nothing else spurs action). On the policy side, the sheer amount of money that is likely to be sucked out of the economy in the next month or two (direct payments are all dispersed, unemployment enhancement lapses, the rollback of reopenings is likely to cause consumers to tighten up) would create a devastating hole.
For Senate Republicans looking to hold onto the majority, as they look at several endangered members facing off against Democratic candidates with enormous fund raising ability, the idea of walking away from something the economy most certainly needs would seem on its face to be malpractice.
Don’t underestimate that McConnell is looking to protect his most vulnerable members in the next round of negotiations. For members up for reelection who are facing down historic job losses in their state, a lack of local funding for essential services and calls from local businesses owners that more must be done, failure to act isn’t an option.
A good anecdote to keep in the back of your mind as the next few weeks play out: Senate Republicans weren’t keen on lining up with a Democratic effort to jam them on a short term extension of the Paycheck Protection Program last month. Most weren’t opposed on the policy grounds, but were wary of the process and what it could turn into. Sen. Susan Collins, the Maine Republican in one of the tightest reelection races in the country who had been working with Democrats on the issue, made very clear it was something that needed to get done and was central to clearing the way for its passage.
Why they won’t
The differences really are significant and both sides are far less bought into the idea that a bill needs to come together regardless of the final content. The red lines abound – liability protections for Republicans, where Democrats want OSHA protections. Extension of the $600 unemployment enhancement for Democrats where many Republicans want to do away with it altogether. Tying pieces of education funding to schools re-opening for Republicans, a total nonstarter for Democrats. There are many more, and all are extremely important to each side, their outside groups and their constituencies.
Republicans, who feel like the White House has given too much ground to Democrats in past negotiations, are in no mood to “just take whatever this time around,” as one senator put it to me.
And more importantly, there is a vocal portion of the conference who isn’t ready for another stimulus package, until as one member put it, there is a “full accounting of what happened to the last $3 trillion” the federal government spent.
Democrats, for their part, feel like they have the political and policy high ground on this, according to members and aides, and have only hardened on their positions as the weeks have passed since the House passed its proposal.
“Desperation,” a senior Democratic aide told me when I asked what would bring Republicans close to the Democratic proposal. “Things are only getting worse and they know it.”
We’ll see …
The real cliff: Unemployment insurance deadline
One of the, if not the, biggest policy driver in the talks is the likely lapse in the $600 federal unemployment insurance enhancement at the end of July. Let’s remove “likely.” It is going to lapse. While everyone has targeted July 31 as the deadline, it will largely shut down the week prior. Republican objections to the flat $600 are real and a redline for many, including the White House. But they also acknowledge that eliminating the plus-up entirely in the middle of historic unemployment isn’t palatable.
Scaling back, by several hundred dollars, the enhancement is what has been under consideration for weeks, along with the inclusion of an employment bonus to incentivize people to go back to work. This has been known for awhile. How to structure it – and how to knit those two things together in a way to creates a full salary safety net of sorts, is both extremely complicated and, at this point, being kept very close held.
Small business aid
The one area of actual bipartisan talks over the course of the last month or so has been between the bipartisan (and somewhat close-knit) negotiators on the small business piece of stimulus. Sens. Marco Rubio of Florida and Collins on the Republican side, Ben Cardin of Maryland, Jeanne Shaheen of New Hampshire and Chris Coons of Delaware on the Democratic side, came together to create the Paycheck Protection Program, the changes to it that followed, and now, its next iteration.
Rubio, on CNBC this week, said negotiators were “90% of the way there” and there is significant agreement on using the remaining $130 billion in PPP funds to target to smaller firms (under 300 employees) and those industries that have been hardest hit by the crisis (think restaurants and hospitality).
But even those talks have slowed in the last week or so as Senate Republicans have buttoned up their work product, people involved say. That said, the clearest path to agreement on any element of the overall proposal comes here. It’s a bipartisan group that works well together and is in general agreement on the toplines of the next phase of things.
One thing to keep an eye on: the data release of the initial round of PPP loans has, in the words of one aide working on the issue “thrown some wrenches into how we finalize things.” Tightening up the rules of the loan approval process will “be a necessity at this point. The public heat has just been really intense,” the aide said. Whether that creates issues in the talks, or, perhaps more importantly, restricts the flexibility to address longer term issues for small businesses, is yet to be seen.
State and local funding
Far more under the radar than problems with the Paycheck Protection Program or the deadline for unemployment benefits running out in July is the issue of how states and local governments have struggled to spend billions in federal funding amid the coronavirus. It is one of the top issues lawmakers will have to confront in the next stimulus package and something you can bet they’ve heard about since they’ve been back in their states for the recess.
Right now, billions of the $150 billion Congress allocated in federal funding remains unspent as states and local governments grapple with how to use the money. At a minimum, every state across the country received $1.25 billion in federal dollars. But, that money has not gotten out the door quickly. Four months after the passage of CARES, many state capitols have struggled to get the money to local government. If it has trickled down, many counties and cities are struggling with how to use the money even as they stare down massive budget shortfalls.
While the funding was generous, there were strict restrictions on how it could be used. Treasury guidance dictated that the federal dollars had to be spent on Coronavirus-related expenses like testing, PPE, physical barriers or hero pay to name a few. The money, however, could not be used for revenue replacement to make up for lost sales tax revenue or parking ticket fees. That means that states and county governments have still had to slash their budgets and make tough calls about what services to scale back even as communities struggle with a pandemic.
For months, a handful of Republican senators including Collins, John Kennedy of Louisiana and other have sounded the alarm that restrictions should be loosened. Lawmakers in the House and the Senate have personally lobbied Treasury Secretary Steven Mnuchin and the President. But, conservatives – wary of giving Democratically-controlled states carte blanche to spend federal dollars on bloated pensions and other programs they don’t support – have fought back.
This debate Is going to be front and center when lawmakers return next week. Republican aides have signaled that more flexibility could be on the table in the next package, but it’s still an undecided issue and one to watch.
Education funding
Expect this to be the centerpiece of Republicans proposal. Returning to school is seen as critical to jumpstarting the economy, to getting parents back to work and politically signaling to voters a return to normalcy is on the horizon even as case counts rise in states across the nation. Republicans are eying between $50 and $100 billion in spending for elementary and secondary education with additional funding for colleges and universities, but it’s a moving target. While committee chairmen turned in a series of ideas to McConnell’s office over the last week, the majority leader has kept a close hold on what the final proposal from Republicans will look like. One thing is more certain. The view from Republicans (and the White House in particular) is that the money should be conditional on a school reopening. What reopening means, how many days a week a school would have to be in session and how a school would return safely is still a major topic of discussion, according to GOP aides.
“Obviously, it has to be based on a safe plan to reopen. No one is talking about reopening no matter what,” one aide told CNN.
Point of privilege
As if to underscore just how high a mountain lawmakers and the White House have to climb in the next few weeks, nobody seems to know what to actually call this effort. To some it’s CARES 2 (the $2.2 trillion package was called the CARES Act.) Others say its “phase four.” Still others say it is “phase five.” That final group is *technically* the correct group. This measure, however it comes to be, would be the fifth bill designed to address the coronavirus economic and public health crisis. We’re going with “phase five,” people.
