WASHINGTON (Sinclair Broadcast Group) — Lawmakers on Capitol Hill remained divided Monday afternoon over how to structure what has quickly become the largest emergency stimulus bill they have ever considered, as debates raged over who the federal government should help, how much it should give them, and what strings should be attached.
Markets sank as partisan rancor rose over the urgent need to cushion the U.S. economy against the impact of the coronavirus pandemic that has infected more than 40,000 Americans and left hundreds dead. Several more states and cities have announced orders for citizens to remain in their homes as the nation struggles to contain the outbreak.
“#DemocratsAreDestroyingAmerica” and “#GOPSlushFund” were trending on Twitter Monday as Democrats and Republicans continued to point fingers at each other for a series of legislative setbacks. A procedural vote to move forward with a $1.8 trillion relief package in the Senate failed Monday afternoon for the second time in 24 hours.
Senate Minority Leader Chuck Schumer, D-N.Y., said earlier Monday he was working closely with Treasury Secretary Steven Mnuchin to try to reach an agreement by the end of the day. Democrats have insisted they support much of what’s in the bill but they object to handing Mnuchin a “slush fund” for corporations with minimal oversight of how it is spent.
“I'm in my office with the president's secretary of treasury, the president's congressional liaison, getting things done,” Schumer said. “We Democrats are trying to get things done, not making partisan speech after partisan speech.”
However, Senate Majority Leader Mitch McConnell, R-Ky., accused Democrats of moving the goalposts, trying to squeeze environmental and labor reforms into what is meant to be an emergency stimulus package. He claimed Democratic leaders were pushing for new tax credits for renewable energy and stricter emissions standards for airlines to “dust off the Green New Deal.”
“This is not a juicy political opportunity, this is a national emergency," McConnell said.
Several sectors of the U.S. economy essentially remained at a standstill Monday with millions of Americans stuck at home, many low-wage workers already laid off, and doubts growing that the country will bounce back quickly when this crisis is over. The stock market has now erased all the gains it made since President Trump took office in 2017 and emergency measures by the Federal Reserve have so far done little to calm investors.
“The rescue package is absolutely vital to prevent this economy from plunging into a new Great Depression,” said Emily Gallagher, an assistant professor of finance at the University of Colorado Boulder and a visiting scholar at the Federal Reserve Bank of St. Louis. “Without it, and without prompt action from the Federal Reserve, the nation will experience massive unemployment and a collapse of demand, a vicious cycle that will pull us down and down, potentially to the point where it takes years and ongoing interventions to recover.”
As Senate leaders and Mnuchin negotiate toward a potential compromise, House Democrats are moving forward with a plan of their own, adding new complications to the debate.
The Take Responsibility for Workers and Families Act introduced by House Speaker Nancy Pelosi, D-Calif., Monday would require corporations that receive taxpayer bailouts to protect workers’ wages and benefits, provide grants and loans for small businesses, and strengthen unemployment insurance. It also provides direct payments to Americans, expands guaranteed family and medical leave, and offers free coronavirus treatment for patients.
“The Senate Republicans’ bill, as presented, put corporations first, not workers and families,” Pelosi said in a statement. “Today, House Democrats will unveil a bill that takes responsibility for the health, wages and well-being of America’s workers.”
The House legislation would also direct $40 billion to schools and universities to stabilize their funding while also providing assistance to those trying to pay off student loans. In addition, it addresses growing trepidation about the outbreak impacting the November elections by requiring 15 days of early voting and no-excuse absentee voting, with billions of dollars in grants to states to facilitate those changes.
Many of those provisions will likely be non-starters with Republicans in the Senate, who are still frustrated they had to accept the House’s $250 billion emergency relief bill last week. GOP leaders set out to craft the Senate bill themselves, bringing Senate Democrats into negotiations only after reaching a consensus within their caucus and leaving the House out of the talks entirely.
"We were this close. This close and then yesterday morning, the Speaker of the House flew back from San Francisco,” McConnell said on the Senate floor Monday. “And suddenly the Senate's serious bipartisan progress turned into this left-wing episode of ‘Supermarket Sweep.’ Unrelated issues, left and right.”
Under the Senate bill, individual taxpayers earning $75,000 or less ($150,000 for joint filers) would receive a $1,200 credit, plus $500 for each child, with payments phasing out for those with higher incomes. The Tax Foundation estimates the rebates will cost the federal government about $301 billion, and more payouts are possible if economic disruptions continue.
The legislation provides $350 billion for small business loans aimed at companies that retain workers. It also includes $100 billion for hospitals and $250 billion for state unemployment insurance programs, which Republicans see as significant concessions to Democrats.
Though Democrats still want more for workers and hospitals, their primary concern is the $500 billion set aside for loans and loan guarantees to corporations, states, and local governments, including bailouts for airlines, cargo air firms, and companies deemed essential to national security. They say the bill provides too much discretion to the Treasury Department and places too few restrictions on companies that receive the loans.
The text of the legislation appears to limit stock buybacks and executive pay raises, but Democrats say Mnuchin could waive some of those requirements. They also take issue with language that calls for companies to maintain employment levels “to the extent practicable” but does not define what that means.
With hotels and resorts among the businesses seeking assistance, Democrats fear President Donald Trump’s companies could seek taxpayer funds as well. Trump did not rule that out at a press conference Sunday night, complaining that he does not get enough credit for donating his presidential salary and saying, “Let’s just see what happens because we have to save some of these great companies.”
With more money going to business bailouts than to workers or small business loans, some economists are skeptical the proposed Senate bill will sufficiently mitigate the economic losses being seen across the country.
“I think the way they’re thinking about is this is like a typical economic problem where you have some recessionary forces and the fiscal stimulus is to fight back against that,” said Roland Rust, a professor at the University of Maryland’s Robert H. Smith School of Business. “It’s the typical play in the playbook for this type of situation. The problem is this is not acting like a typical recessionary force.”
According to Stan Veuger, a resident scholar at the American Enterprise Institute, Democrats have good reason to doubt the Trump administration can be trusted to oversee payments and loans to businesses. He would prefer to see that power shifted to less partisan authorities.
“Self-dealing has been rampant in this administration, from opportunity zones to direct cash payments to the president's businesses,” he said. “Congress needs to provide aggressive oversight or give states and localities or relatively independent agencies like the Fed and the IRS a more powerful role to play.”
Direct payments to the public and loans that are forgivable for companies that keep workers on their payroll are wise moves, Gallagher said, because they will help speed up the economic recovery on the other side of this public health crisis.
“The unemployed can't spend, which is poison to the economy,” she said. “Businesses that don't lay off will have a ready workforce when the crisis passes. The virus is a temporary crisis. We know it will fade with time. The goal is to prop up business and consumers until the pandemic passes so that everyone gets back to work fluidly.”
Although the nearly $2 trillion price tag on the Senate bill dwarves the extraordinary steps Congress took to stabilize the economy during the 2008 financial crisis, experts say even that may not be enough as it is currently structured.
“Probably even more spending is called for, mainly because I believe the way the Republican bill is put together, a lot of people are left out,” Rust said.
The $350 billion for small business loans is an improvement on the $300 billion Republicans originally proposed, but Veuger suggested it still falls short of what is needed to plug holes in the balance sheets of businesses.
“The small business response should be bigger, especially if we do not want to come back add and expand that part later,” he said.
Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council, is fine with Congress coming back for more later if it means businesses can get some money now because every minute counts and many business owners are eager to apply for emergency loans as soon as they can.
“We’re in uncharted territory,” Kerrigan said.
Before the coronavirus pandemic shocked the markets earlier this month, businesses felt good about the economy in 2020, hiring and expanding aggressively with the expectation that prosperity would continue. With little to no revenue coming in now, Kerrigan noted many small businesses only have about a two-week cash buffer in reserve, so they need funds to avoid closures and layoffs.
“Capital is key right now. When this hit, small businesses were feeling pretty confident,” she said.
While experts stressed the urgency of getting money into the hands of workers and small-business owners, they acknowledged financial assistance for corporations might be necessary as well. For example, the travel and hospitality industries are clearly suffering due to the virus outbreak and are responsible for a lot of jobs and economic activity.
“I don’t think it’s clear that’s not the right thing to do,” Rust said. “It’s possible those industries need to be supported or they’ll be in big trouble.”
However, unlike the bank bailouts in 2008 that officials believed were necessary to prevent the collapse of the financial system, Veuger said the corporations and airlines seeking federal aid do not deserve priority over smaller businesses.
“It is not obvious why we should treat them differently from restaurants and hairdressers,” he said. “They do not play the systemically important role financial institutions play.”
For lawmakers who still feel burned by the political fallout from the 2008 bailouts, the coronavirus pandemic presents a challenge as they try to balance speed with oversight to ensure that an unprecedented amount of money gets distributed quickly and responsibly.
“We can't spend and lend this much money fast without mistakes, waste and fraud,” Gallagher said. “There will be both, but it's a price we must pay to save the economy from a vicious downward cycle that will leave us all poorer. Speed is vital here. We can catch the cheaters later.”