No Deal Yet on Additional COVID-19 Relief
Despite negotiating for several weeks, Treasury Secretary Steven Mnuchin, White House Chief of Staff Mark Meadows, Speaker Nancy Pelosi and Senate Minority Leader Charles E. Schumer have not yet reached agreement on a draft proposal for additional Covid-19 relief. Most recently, Senator Schumer and Speaker Pelosi met with Secretary Mnuchin and offered the Trump administration $2.4 trillion for a new coronavirus stimulus package, a trillion less than the previous Democratic proposal. However, that offer was reportedly rejected and President Trump set a deadline of this afternoon for administration officials and Congress to reach a breakthrough, or else he said he will take unilateral action to provide some form of temporary economic relief.
Negotiations have broken down on several key issues, including rental assistance funding, an extended eviction moratorium, and additional funding for state and local governments to address coronavirus-related expenses. Secretary Mnuchin said there remains a wide gap on the amount and purpose of state aid. House Democrats proposed $916 billion in direct funding for states as part of the HEROES Act approved in May, but President Trump and many Republican senators have been forceful in rejecting that approach, stating that taxpayers shouldn’t reward states and localities with money to close general revenue shortfalls. The President said he is prepared to take action on behalf of states with regards to additional coronavirus expenses but that he is not going to support a deal that is designed to generally bail out states financially.
If a broader deal doesn’t emerge by the end of the day today, Secretary Mnuchin and Chief of Staff Meadows will attempt to work out a so-called “skinny deal,” which is essentially an extension of unemployment benefits for a couple of weeks (an estimated benefit of between $200 and $600 per week). Democrats have repeatedly rejected this strategy. If there is no agreement on a skinny bill, the President said he’s prepared to issue an “executive order” likely to involve a payroll tax cut, an extended eviction moratorium, student debt relief and some way of keeping unemployment benefits flowing. The administration is specifically looking at the possibility of using money left over from CARES Act that hasn’t been spent to extend the supplemental unemployment benefits. But there are potential legal hurdles to redirecting the money. The CARES Act included a total of $150 billion for state and local governments. The Treasury Department recently released data showing that, as of June 30, only a quarter of that money has been spent. The President believes he can tap as much as $81 billion of that unspent money to offer states the ability to take advantage of beefed up unemployment benefits. Whether or not the president has the legal authority to cut payroll taxes and renew emergency unemployment benefits remains murky. Most experts believe the White House couldn’t unilaterally declare a payroll tax holiday or backfill Social Security trust fund revenues without an act of Congress.
Senate Majority leader McConnell, who has effectively taken himself out of the negotiating process, said he will be postponing the Senate’s scheduled August break until a deal is reached. He said senators can return home, but will be called back if there’s a breakthrough in talks. The House is in recess, but lawmakers there have been told by leadership they could be recalled to Washington, DC on 24 hours’ notice in order to vote on a compromise bill.
Crisis Fund Proposed for Community Development Financial Institutions
On August 4, Senator Brian Schatz, member of the Senate Banking, Housing and Urban Affairs Committee, introduced a bill (S.4430) that would seek to establish a Community Development Financial Institutions (CDFI) National Crisis Fund. The new $2 billion proposed emergency fund would automatically provide capital for CDFIs during a natural disaster or economic crisis. According to the bill, any CDFI applying for funds from the program would have to commit to spending 90% of the funds in areas affected by the emergency, according to the legislation. The bill also sets aside 30% of the crisis funding for minority CDFIs.
The bill’s $2 billion CDFI Crisis Fund would serve as a complement to the Treasury’s CDFI Fund. It would be refilled as funds are deployed each year, and can be activated nationally or state-wide through two automatic triggers: by an increase in the state’s six-month moving average of the national unemployment rate (or if nationally, three-month moving average) by 0.50 percentage points or more relative to its low during the previous 12 months; or a Stafford Act major disaster declaration where the Individual Assistance Program is activated. To view the text of the full bill, click here.
Senators Romney, Collins and McSally Offer Unemployment Insurance Extension
On July 30, Senators Mitt Romney (R-UT), Susan Collins (R-ME), and Martha McSally (R-AZ) introduced legislation that would prevent Americans from experiencing a sudden lapse in their supplemental benefits. The CARES Act authorized an extra $600 per week in federal unemployment payments, on top of state unemployment benefits. The Federal Pandemic Unemployment Compensation Extension Act would incentivize states to improve outdated unemployment insurance programs to better handle wage replacement. The bill would seek to ensure that unemployed workers receiving federal benefits maintain an average of $400 per week for the next three months as those payments are phased down. Specifically, the legislation would allow states to choose one of two options for unemployment insurance: an immediate 80% wage replacement, or a declining amount of $500 per week in August, $400 per week in September, or $300 per week in October. The bill would also provide an additional $2 billion for states to update their unemployment insurance systems to better handle targeted wage replacement. The full text of the bill can be read here.
Senators Rubio and Collins Introduce Small Business Relief Package
On July 27, Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, and Senator Susan Collins (R-ME), a senior member of the Senate Committee on Appropriations and Committee on Health, Education, Labor, and Pensions, introduced the Continuing Small Business Recovery and Paycheck Protection Program Act, a relief package that seeks to build on the success of the bipartisan Paycheck Protection Program (PPP) and other small business relief programs in the CARES Act. The package aims to ensure small businesses, including minority-owned firms and those in underserved communities, have the necessary resources to respond to the COVID-19 pandemic. The bill would allow the most severely affected small businesses to receive a second PPP loan and would also create a new long-term recovery loan program, which would provide working capital to industries that have been hardest hit by the COVID-19 pandemic. The $60 billion long-term recovery loan program would seek to target low-income communities, minority-owned, and seasonal businesses. Specifically, the bill would allow businesses to utilize forgivable PPP funds for personal protective equipment for workers, adaptive investments needed for businesses to operate safely amid the COVID-19 pandemic, as well as additional expenses. It would also seek to simplify the forgiveness application and documentation requirements for smaller loans under $150,000. To view the section-by-section summary of the Continuing Small Business Recovery and Paycheck Protection Program Act, click here.