Renewed federal assistance to people and businesses hurt by the Coronavirus Pandemic is bogged down in the U.S. Congress, debating the last significant bill ahead of the November election. Unfortunately, the bipartisan spirit that led to the passage of four bills that spent $4 billion to cushion the blow of the worst health crisis in more than a century is gone.
According to media reports, Democrats and Republicans have vastly different ideas of how to mitigate the economic damage caused by the deadly disease that has killed more than 150,000. Americans.
The Democrats COVID-19 proposal dubbed the Heroes Act passed the House in May. The 1,800–age bill has “something for everyone.” Its provisions include nearly $1 trillion for state, local and tribal governments, direct payments to individuals including unauthorized immigrants, increased spending on Food Stamps, and $200 billion fo h4azard pay for essential workers and $75 billion for coronavirus testing and contact tracing
The Heroes Act also has proposals that aren’t related to the pandemic but are popular with Democrats, including a bailout of the cash-strapped U.S. Postal Service. It would also reinstate a tax break that enabled taxpayers to deduct their state and local taxes from their federal bills eliminated a few years ago.
Not surprisingly, President Donald Trump and his Republican allies aren’t fans of the Heroes Act, which one Republican supported when it passed the House.
“The bill is simply a Democratic agenda masquerading as a response to the coronavirus pandemic,” said Rep. Tom Cole (R-OK.) told The Washington Post in May. “The bill will go nowhere and go there fast. … Why we’re going through this exercise rather than negotiating in a bipartisan manner is beyond my understanding.”
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March, payments of $1,200 per adult and $500 per dependent were sent to taxpayers earning under $75,000 per year as individuals and $150,000 as a couple, Roughly half the U.S. populations received checks signed with President Trump’s unique signature. Republicans, including Sen. Mitch McConnell (R-KY), also support sending out another round of checks to push for protections for businesses against coronavirus lawsuits, which Democrats oppose.
The Cares Act also boosted state unemployment benefits by $600 a month. Republicans and some business groups argued that the payments were too generous and made it more economical for people to collect a check from the government rather than receive a paycheck from a private employer. They favor cutting the benefit to $200 until states can develop a system that would provide payments equal to about 70 percent of workers’ wages.
“With the CARES Act in March, the goal was to get money out the door as fast as possible to prevent an economic collapse,'” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget a press release. “Was it perfect? No, it was not, but it was remarkably effective in preventing a truly dire situation. Lawmakers acted quickly and impressively in a bipartisan manner to get the money into the economy. Things would have been unimaginably worse had they not acted.”
An analysis by the Center for Budget and Policy Priorities found the CARES Act kept an estimated 12 million to 16 million people out of poverty. According to the think tank, if the enhanced Unemployment Insurance benefits were canceled without a replacement, about 2 million people would lose their jobs. In recent testimony, Federal Reserve Chairman Jerome Powell recently credited the Cares Act with keeping people in their homes thanks to an eviction moratorium, which is due to expire.
According to the New York Times, House Speaker Nancy Pelosi blocked Republican efforts to pass a short-term fix to unemployment benefits without tackling the other pressing issues related to coronavirus relief such as assistance to state and local governments and virus testing.
McConnell’s plan dubbed CARES II will also include $100 billion in federal aid to schools and colleges designed to encourage them to reopen for in-person instruction despite the misgivings of many parents and teachers. It also may include a return-to-work bonus, an infrastructure plan, and a $4,000 tax credit.
Democrats and Republicans sharply disagree over whether state and local governments should get federal pandemic aid. Democrats back the idea, and many Republicans oppose it, arguing that it would reward high-tax Blue states for being fiscally irresponsible.
A bill that would have given local leaders the $1 trillion they wanted to pass the Democrat-controlled House in May but failed to get any traction in the Senate controlled by Republicans. According to the Wall Street Journal, the Republicans favor giving state and local governments more flexibility in determining their spending without providing them more money. The two sides remain far apart on the issue.
Meanwhile, local governments need $400 billion in direct federal aid to avoid layoffs of workers, including teachers, police officers, and firefighters needed to fight the pandemic, according to the liberal think tank the Center for American Progress. ‘
“For example, estimates from a NACO (National Association of Counties) recent survey indicate that counties expect about a $30 billion increase in expenditures from the pandemic through FY 2021,” the think tank says. “And the same survey indicated that 76 counties might have to spend more than 50 percent of their budgets on COVID-19 costs. A recent study of cities by the U.S. Conference of Mayors and the National League of Cities indicates that 96 percent of towns face budget shortfalls this year—in large part due to COVID-19—with at least 43 percent of all cities reporting unanticipated spending increases this year on top of declining revenues.’:
Not surprisingly, cities and counties have ramped up their lobbying in recent months to plead their case to Congress members, hiring nearly 30 firms to assist them, according to the Washington Post.
Whether the Democrats and Republicans can set aside their partisan differences to provide help to those in dire economic circumstances remains to be seen. The pandemic’s weight is pushing the U.S. economy into a downward spiral that will be difficult to emerge from anytime soon. Unemployment currently tops 11 percent, which, although an improvement over recent months, is a massive increase from the 3.7 percent rate from June 2019. U.S. Gross Domestic Product fell at an annualized rate of nearly 33 percent in the second quarter, its worst performance ever. Unemployment claims have topped 1 million for 19 straight weeks.
“Neither the Great Depression nor the Great Recession nor any of the more than three dozen economic slumps over the past two centuries has ever caused such a sharp drain over so short a period,” according to CNBC.
According to a public letter released last week by 159 economists, lawmakers need to provide regular stimulus payments until the pandemic is over given the damage to the economy and the likelihood of more harm to come. Increasing stimulus will create a “chain reaction,” which would trigger increased economic activity, the economists say.
“Many economists believe our response to the Great Recession was too small and too brief, slowing the recovery and causing preventable harm, particularly to low-income people,” the letter says. “Cash assistance is an important element of economic aid, injecting resources through direct stimulus payments, and refundable tax credits into low- and middle-income households that need help and are likely to spend it.”
The wildcard in this debate is Trump. His handling of the pandemic has been widely criticized in the mainstream press. With most polls showing him trailing presumptive Democratic challenger Joe Biden, Trump risks further alienating voters by failing to provide financial help to people and businesses in need of help for reasons beyond their control. Then again, he can’t afford to anger his conservative base by paying too much to do it. Media reports quote McConnell as saying that 20 Republican Senators oppose any additional aid because of worries about the deficit.
Meanwhile, the worst health crisis since the 1918 Spanish Flu Epidemic shows no signs of slowing.
More than 130,000 Americans have succumbed to COVID-19, the disease caused by the coronavirus. Nearly 40 states, along with Washington, D.C., Puerto Rico and the U.S. Virgin Islands are seeing rising infection rates. Public health experts argue the number of people infected could be as much as 13 times higher than the number of reported cases.