Trump: Virus-aid bill needs tax cut

Business liability limits also favored

President Donald Trump sought to draw a hard line on the coronavirus relief bill Sunday, saying it must include a payroll tax cut and liability protections for businesses, as lawmakers prepare to plunge into negotiations over unemployment benefits and other key provisions in coming days.

“I would consider not signing it if we don’t have a payroll tax cut,” Trump said in an interview on “Fox News Sunday.” Democrats strongly oppose a payroll tax cut, and some Republicans have been cool to it, but Trump said “a lot of Republicans like it.”

Trump also said “we do need some kind of immunity” in the bill. Senate Majority Leader Mitch McConnell,

R-Ky., has repeatedly insisted the legislation must include liability protections for businesses, health care providers, schools and others. Democrats oppose this, too.

The president also argued the economy is “expanding and growing beautifully,” blaming Democratic governors for shutdowns that he insisted were designed to hurt him in the November election.

Trump’s comments come as Senate Republicans are exploring new limits on emergency unemployment benefits for people who were high earners before losing their jobs, according to two people who spoke on condition of anonymity to discuss details of internal planning.

If the White House and Senate GOP priorities make it into the bill, the legislation would effectively cut taxes for people who have jobs while cutting benefits for the unemployed.

McConnell is expected to introduce an approximately $1 trillion stimulus bill in coming days that will include a limited extension of the federal unemployment benefits approved by Congress in March. Those benefits are set to expire as soon as this week.

Republicans are seeking to curb the current infusion of federal spending on unemployment benefits as they try to constrain the overall cost of the relief package, which is likely to include expensive priorities such as state aid and school funding, among other urgent policies to deal with the pandemic.

With a substantial number of conservative Republicans wary of spending too much additional money, GOP lawmakers have discussed proposing the federal benefit be cut from an additional $600 per week to $200-$400 per week. Aides cautioned that negotiations are fluid and details remain in flux. McConnell is expected to release the legislation this week.

McConnell and House Minority Leader Kevin McCarthy, R-Calif., will meet today to discuss the emerging legislation with Trump and Treasury Secretary Steven Mnuchin, who has led talks with Congress on the previous four coronavirus aid packages, White House Chief of Staff Mark Meadows said on Fox News’ “Sunday Morning Futures.”

“It looks like that, that new package will be in the trillion-dollar range, as we have started to look at it, whether it’s a payroll tax deduction, whether it’s making sure that unemployment benefits continue, without a disincentive to return to work,” Meadows said.

House Democrats passed a bill in May that would extend the $600-per-week threshold through January. That bill would increase spending by roughly $3 trillion, and Trump threatened to veto it.

White House officials and GOP lawmakers have argued the current benefit creates a disincentive to work and must be phased out because they say Americans could make more money while collecting unemployment than in the workforce.

“Anytime you’re using federal money, it shouldn’t disincentivize the ability to work,” McCarthy said on “Sunday Morning Futures.” “We made a mistake when we overpaid on unemployment insurance where now it’s hard for people to come back to work cuz they’re making more on unemployment than they can working. So we’ve got to straighten that out as we move forward.”

Democrats and many economists have called for extending the $600-per-week increase to pump money into the economy and provide a lifeline for more than 30 million households.

SPENDING OPPOSED

Meanwhile, the administration is balking at $25 billion in new funding favored by Republican lawmakers to help states with virus testing and contact tracing, according to a person familiar with the negotiations who wasn’t authorized to speak publicly.

Trump’s team also opposes a plan to allocate billions for the Centers for Disease Control and Prevention, and extra funding for the Pentagon and State Department to address the pandemic around the world, the person said — adding that Mnuchin has proposed that the funding for testing be cut, and money included instead for a new FBI headquarters, long a priority for Trump.

A White House spokesman declined to comment, while Treasury officials didn’t immediately comment. The administration’s proposals were first reported by the Washington Post.

Sen. Roy Blunt, R-Mo., a member of the appropriations committee, had been asked to craft a health care section of the bill and has said he wants robust funding for it.

As Senate Republicans seek to provide the means to ramp up testing and contact tracing, the administration argues that previously approved money for testing remains unspent. Trump has also repeatedly questioned the value of widespread testing, contending that the numbers of infections would be lower if fewer tests were conducted.

A spokesman for Joe Biden, the presumptive Democratic nominee for president, termed the administration’s efforts “absolutely unconscionable.”

“Donald Trump is turning his back on his most important responsibility to the American people because, in the words of his own advisers, he ‘doesn’t want to be distracted by’ the worst public health crisis in 100 years,” Biden spokesman Andrew Bates said in an emailed statement Saturday.

Numerous other issues also remain to be fought out in the coming three weeks that McConnell has designated for crafting what will likely be the final major coronavirus relief bill before the election.

The first four bills — totaling around $3 trillion — passed nearly unanimously in March and April, but McConnell has acknowledged that negotiations on this package will be much more difficult as partisan tensions mount.

TRIMMING BENEFITS

Unemployment benefits are typically paid by states, but Congress has stepped in during severe economic downturns to add another layer of temporary aid paid by the federal government. There is often a debate over how and when to let these benefits expire. The unemployment rate in June was 11.1 percent, down from a recent peak in April but still higher than at any other point in recent history.

One idea discussed by Republican policymakers is to eliminate or curb the amount of additional federal unemployment benefits allocated to people who earned above a certain income threshold before losing their jobs. Exactly what that number could be remains unclear.

Republicans are exploring similar measures to target another round of $1,200 stimulus payments for those toward the bottom of the income distribution, although it’s unclear how that would combine with Trump’s insistence on a payroll tax cut.

Limiting unemployment benefits to those further down the income distribution would help the GOP bring down the overall price tag of their bill. It could also raise new complications for the state unemployment offices that have already been overwhelmed by the complexity of getting funding out to an unprecedented surge of jobless Americans.

Andrew Stettner, a senior fellow at the Century Foundation, has estimated that only 18.8 million of 33 million claims had been paid nationwide by the end of May. One person in communication with GOP offices, speaking on condition of anonymity to discuss internal conversations, predicted the idea would ultimately have to be abandoned because of the administrative complexity the arrangement would create for state unemployment offices.

“State unemployment systems have struggled to handle the modest changes from the CARES Act,” said Adam Ozimek, chief economist at UpWork. “Given the backlogs and problems we have seen so far, we should be very hesitant to add the complexity of means-testing.”

The weekly payment to workers will depend on the overall amount devoted to unemployment benefits in the bill. GOP lawmakers have considered spending between $200 billion and $300 billion on unemployment benefits through the end of the year in the coming stimulus package, according to one of the people who spoke on condition of anonymity. That money would help prop up consumer demand compared with allowing the benefit to expire altogether.

It is substantially less than the $400 billion for the rest of the year that the U.S. would spend on additional unemployment benefits if the original increase were extended in full, depending on how the unemployment rate changes, according to Ernie Tedeschi, who served as an economist at the Treasury Department in the Obama administration.

The fate of unemployment benefits is likely to prove one of the key sticking points in congressional negotiations, with tens of millions of Americans financially dependent on the outcome. Senior White House officials have in recent days sought to limit the extension while also denying they are seeking to end federal unemployment benefits.

Larry Kudlow, the president’s senior economic adviser, disputed Friday that the administration wants to dismantle the program.

“Some people are asking me, ‘Why are you getting rid of unemployment benefits when you still have a lot of unemployment?’ The answer is, ‘We’re not,’” Kudlow told Fox Business. “We’re not getting rid of unemployment benefits. Now, a couple of things — we are looking at various ways to cap total unemployment benefits — federal and state and local. We’re looking at various ways to do that.”