Northwest Arkansas Democrat-Gazette
Bill said to tie school funds to reopening
Source says payroll tax cut likely in GOP virus aid plan
WASHINGTON — The coronavirus relief bill being crafted by Senate Republicans and the White House would tie school funding to classrooms reopening and is likely to embrace some of President Donald Trump’s key priorities, including a payroll tax cut and little aid to state and local governments, a person briefed on the package said Monday.
Some of these provisions are already sparking pushback from key Senate Republicans, and an even bigger showdown with Democrats appears inevitable.
Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows are set to meet today with House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Charles Schumer, D-N.Y., for the first bipartisan talks on what will likely be the last major coronavirus relief bill before the November elections. Mnuchin and Meadows will also meet with Senate Republicans today as they seek to quell any discontent.
Senate Majority Leader Mitch McConnell, R-Ky., is giving Congress three weeks to write the bill before
adjourning for summer recess. With multiple issues dividing the two parties and creating rifts between the White House and Senate Republicans, it’s shaping up as a daunting task.
Mnuchin said Monday that the White House wants the bill to amount to roughly $1 trillion in new programs, though officials are expected to use budget gimmicks to make the initial package slightly larger. Still, Democrats were looking for a much bigger bill. Their opening offer is a $3 trillion package they passed in May that would extend unemployment benefits, include new stimulus checks, and help cities and states, among other things.
The GOP package is expected to include $75 billion to help schools reopen. It will likely replace an expiring $600 weekly unemployment benefits boost with a smaller amount, send a fresh round of direct $1,200 cash payments to Americans below a certain income level, and create a sweeping five-year liability shield against coronavirus lawsuits.
The bill is also expected to omit new aid that Democrats have sought for cities and states, instead allowing governors and local leaders more flexibility to spend the $150 billion already allocated, according to two people with knowledge of the talks.
Under the GOP plan, states’ funding for schools would be explicitly tied to schools reopening, a major focus of late for Trump, according to a person briefed on the negotiations. It was unclear how exactly the money would be structured to prod schools to reopen or what would constitute reopening.
Mnuchin confirmed on Monday that Republicans plan to reduce a $600-perweek enhanced unemployment benefit, approved in March, which will begin running out for millions of Americans later this week. Republicans argue that workers are making more on unemployment than they would on the job.
“We’re going to make sure that we don’t pay people more money to stay home than go to work,” Mnuchin said, adding that he hoped to see Congress act on the issue before benefits expire at the end of the month.
Additionally, the administration was panning the proposal’s $25 billion in new funds for virus testing and tracing, said two Republicans familiar with ongoing discussions but granted anonymity to discuss them.
Sen. Lamar Alexander, R-Tenn., the chairman of the Health committee, opposed to removing the testing and tracing funds, said, “All roads to opening school, going back to work, opening child care lead through testing.”
Schumer did not wait to discuss the legislation with White House officials before denouncing it in a Senate floor speech Monday.
“It appears that the Republican proposal is unlikely to meet the moment,” Schumer said. “From what we understand from press reports, McConnell’s bill will prioritize corporate special interests over workers and Main Street businesses. It will fail to adequately address the worsening spread of the virus. There are currently between 20 million and 30 million unemployed Americans, and from all accounts the Republican bill will not do nearly enough for them.”
People involved with the talks cautioned that negotiations were ongoing and that provisions were fluid and subject to change.
PRIORITY FOR TRUMP
At a White House meeting Monday, Trump touted the benefits of a payroll tax cut, something he has pushed for close to a year, telling reporters: “It’s a tremendous saving, and I think it’s an incentive for companies to hire their workers back and to keep their workers. So the payroll tax cut, to me, is very important.”
The payroll tax is the 7.65% tax paid by employers and employees that goes toward the Social Security and Medicare trust funds. The administration is considering structuring the payroll tax cut in the legislation as a deferral rather than an outright cut, which would keep down the technical cost of the overall bill, according to one person briefed on the package, who spoke on the condition of anonymity to discuss private deliberations.
Such a deferral could require Americans to pay back the tax cut at a later date, but lawmakers could decide to waive the repayment. Congress already deferred the employer portion of the payroll tax cut in an earlier coronavirus bill.
After first floating the idea of a payroll tax cut last year, only to be met with bipartisan opposition, Trump renewed his push once the coronavirus pandemic began to affect the economy this spring. Trump has said such a tax cut would give workers more money to spend, but critics argue that unlike sending stimulus checks to individual Americans, cutting payroll taxes benefits only those who have jobs. More than 20 million Americans remain unemployed.
Mnuchin and other White House officials have faced enormous push-back from lawmakers in both major parties over blocking this funding, with Sen. Roy Blunt, R-Mo., telling reporters that the idea was “wrong.” Blunt also criticized the proposal to put conditions on education funding for school districts.
Trump has made the payroll tax cut a major sticking point and said he may not sign the legislation if it doesn’t include the cut. McConnell appears set to include the provision in his bill. There were signs Monday, however, that he could face difficulties getting Senate Republicans to fall in line.
“I think it’s problematic because, obviously, the trust funds for Social Security and Medicare are already on their way to insolvency,” Sen. John Cornyn, R-Texas, told reporters Monday, referring to cutting the payroll tax. “And then we’d raise them again, we’d raise taxes … I’m not a fan.”
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, sounded skeptical when asked about the payroll tax cut Monday evening.
“I think you’d better ask me after [today] so we can hear from the administration if they’re really serious about it,” Grassley said.
The proposed virus aid package would be the fifth, after the $2.2 trillion bill passed in March, the largest U.S. intervention of its kind. While many Republicans hoped the virus would ease and economy rebound, it’s become clear more aid is needed as the first round of relief runs out.
With 17 straight weeks of unemployment claims topping 1 million — typically about 200,000 — many households are facing a cash difficulties and losing employer-backed health insurance.
Despite flickers of an economic upswing as states eased stay-at-home orders in May and June, a federal ban on evictions from millions of rental units is about to expire and the jobless rate has remained in double digits, higher than it ever was in the last decade’s recession.
Pelosi’s bill, approved in May, includes $75 billion for virus testing and tracing, funnels $100 billion to schools to safely reopen and calls for $1 trillion to be sent to cashstrapped states to pay essential workers and prevent layoffs. The measure would give cash stipends to Americans, and bolster rental and mortgage and other safety net protections.
STATES, CITIES
For many state and local governments, which are borrowing heavily and making steep budget cuts trying to weather the financial storm brought on by the coronavirus, the main hope for avoiding even deeper cuts is to get help from Congress.
Before the pandemic, states generally were meeting revenue goals for their budget years. Now Congress has already allocated more than $3 trillion in coronavirus aid to individuals, businesses and governments that went into financial shock last spring as much of the nation’s economy shut down.
Bipartisan groups including the National Governors Association and the National League of Cities, along with a long list of businesses, want a major aid proposal. If it does not come through, they foresee harsh consequences.
States face a cumulative budget gap of $312 billion over the next two years, and local governments would need nearly $200 billion to meet their expenses, Moody’s Analytics said in a report last month.
Without quick aid, the U.S. economic crisis could deepen, costing 4 million jobs in government and the private sector, according to the economic research arm of the credit rating agency.
Some other estimates, including one from the Center for Budget and Policy Priorities, put the state budget gap even higher — about $555 billion for states alone over the next two fiscal years.
Governments with higher debt and smaller reserves have the greatest needs. Many conservatives are in no hurry to help them.
A group of more than 200 current and former state lawmakers joined with tea party leaders in signing a letter circulated by the American Legislative Exchange Council warning that “a federal bailout would only encourage this cycle of debt and spending to continue.”
Meanwhile, state lawmakers, city councils and school boards are trying to balance their budgets with tax revenue dropping and expenses rising as the nation keeps fighting the virus.
In many cases, the answer has been furloughing or laying off employees.
By last month, there were about 1.5 million fewer people working for governments in the U.S. compared with February, according to seasonally adjusted data from the federal government. More than half the layoffs were in education.
Information for this article was contributed by Erica Werner, Jeff Stein, Robert Costa, Seung Min Kim and Paul Kane of The Washington Post; and by Lisa Mascaro, Aamer Madhani, Andrew Taylor, Zeke Miller, Alexandra Jaffe, Alan Suderman, Geoff Mulvihill and staff members of The Associated Press.