A Sunday morning meeting between the top House and Senate leaders and Treasury Secretary Steven Mnuchin ended without any breakthrough. One key sticking point is a $425 billion pool of money for loans and loan guarantees that Republicans want to create, which some Democrats are labeling a “slush fund” because the Treasury Department would have broad discretion over who receives the money.
Senate leaders said they were still talking after spending two days trying to arrive at a bipartisan agreement. But the implications for the standoff became more dire as fears about the economy intensify and many households and business owners are looking to Washington for answers.
Senate Majority Leader Mitch McConnell (R-Ky.) said a procedural vote would go forward as planned Sunday afternoon to move forward on the Senate GOP’s $1.8 trillion bill, but Democrats have refused to back that legislation, complaining it disproportionately helps businesses.
“We have integrated a number of ideas the Democrats have had over the 48 hours… now we’re at the point… where people will shortly have to say yes or no,” McConnell told reporters. “And I’m confident — given the desire of the country to see an outcome, — that we’ll get to yes.”
McConnell appeared to be daring Democrats to vote “no” on economic relief that would go to individual Americans and businesses of every size amid a catastrophe affecting every American. But Minority Leader Charles E Schumer (D-N.Y.) said there was no deal yet.
House Speaker Nancy Pelosi (D-Calif.), meanwhile, told reporters: “We will be introducing our own bill and hopefully it will be compatible” with what’s happening on the Senate side. She spoke after meeting with Mnuchin, McConnell, Schumer, and House Minority Leader Kevin McCarthy (R-Calif.) at mid-day Sunday.
“We’re continuing to talk… we want to get to an agreement,” Schumer said exiting the same meeting.
The stock market has lost 10,000 points in six weeks and some analysts believe more than 3 million people filed for unemployment benefits last week. Much of the U.S. economy is frozen as Americans stay home and cut back on spending, fearful about the coronavirus outbreak. The number of cases in the U.S. has grown sharply in the past few days and it does not appear to be slowing.
The congressional breakdown took place because of an impasse over a $1.8 trillion bill that Senate Republicans were assembling. On Saturday night, McConnell announced Republicans would be moving forward to write “final legislative text” of the bill, ahead of a procedural vote at 3 p.m. Sunday — angering Democrats who said important issues remained unresolved.
“I think we have a fundamental understanding, and we look forward to wrapping it up today,” Mnuchin said ahead of Sunday’s meeting on “Fox News Sunday.”
Democrats were pushing for more favorable terms for workers, such as employment protections.
In addition to $500 billion in loans and loan guarantees to businesses, states, and cities, the legislation would appropriate $350 billion for small businesses. It would also send $1,200 checks to many Americans, bolster the unemployment insurance system, and disburse a broad range of emergency funds across the government.
“I’m just going to tell you that we need a bill that puts workers first, not corporations,” Schumer said Sunday.
The Senate bill would be by far the largest financial rescue ever attempted by Congress, dwarfing legislation passed during the financial crisis of 2008.
Typically, when large pieces of legislation become too contentious, lawmakers will try to scale it back to focus on areas of agreement. That could prove complicated this time. The bill includes massive funding streams for both households and businesses, and prioritizing one over the other could cause major issues in the economy.
For example, the bill authorizes direct payments of $1,200 per qualifying adult and $500 per child, a program that is projected to cost around $250 billion. The cash disbursements in the new agreement would phase out for people with incomes of $75,000 and above. The legislation also includes about $100 billion for hospitals and about $250 billion to beef up state unemployment insurance programs — both major priorities for Democrats.
And there’s a huge pool of money in the Senate GOP bill – $500 billion – under a section called “Emergency Relief and Taxpayer Protections.” Many companies have warned they are on the verge of faltering if they don’t receive emergency assistance, and many have already begun laying off employees.
The biggest subset of this $500 billion fund would be $425 billion in loans and loan guarantees meant to rescue “eligible businesses, states or municipalities.” This part of the bill has attracted particular attention from Democrats, some of whom have alleged it would give the Treasury Department broad sway to direct funds to specific companies that have appealed to the White House. President Trump has already talked about how he wants to help the cruise industry and the hotel industry, but dozens of other industries have pleaded for assistance as well. Sen. Elizabeth Warren (D-Mass.) called the bucket of money a “slush fund to boost favored companies and corporate executives – while they continue to pull down huge paychecks and fire their workers.”
Millions may now lose their jobs. And Trump wants our response to be a half-trillion dollar slush fund to boost favored companies and corporate executives – while they continue to pull down huge paychecks and fire their workers. Here’s what I know and how we stop it:
— Elizabeth Warren (@SenWarren) March 22, 2020
This section also includes $50 billion for passenger airline companies, $8 billion for cargo air firms, and $17 billion for companies deemed critical to the U.S.’s national security. The legislation does not include many restrictions on the companies that receive these funds. For example, companies are required to maintain the same employment levels that they had as of March 13 “to the extent practicable,” but it does not define what practicable means.
The bill does appear to prohibit stock buybacks at firms that receive the emergency loans and gives the Treasury Department the opportunity to take equity stakes in the firms so that taxpayers could benefit if a firm regains its financial footing.
Negotiators were looking at language to exclude airline suppliers from tapping the fund, which would effectively block Boeing and General Electric, given their problems before the coronavirus outbreak, according to a senior administration official who spoke on condition of anonymity to comment on private discussions. But it was not immediately clear if that exclusion was achieved in the bill.
The precise design of the overall funding stream was unclear, but negotiators have looked at allowing the government to make direct loans to impacted industries. It’s unclear who would set the terms for these loans or decide which companies qualify.
The legislation includes approximately $350 billion for small businesses, which was originally put into the bill to encourage companies retain workers as well as the ability to keep sending out payroll checks.
Sen. Marco Rubio (R-Fla.), who chairs the Senate Small Business Committee, said there is a “very strong general agreement” that small businesses will be able to obtain loans up to 250 percent of their one-month payroll. That money, as long as it is used for businesses expenses such as paying workers or providing their benefits, or to cover rent, will be entirely forgiven, Rubio said.
“This is money that needs to get into these hands very quickly before these doors continue to close and people keep getting laid off every day,” Rubio said on Fox News’ “Sunday Morning Futures.”
Also sought in the bill is around $100 billion in emergency supplemental appropriations for a variety of public health and other needs, and there also are several tax and health policy changes.
Negotiators in both parties said they were at a logjam over federal funding to rescue large businesses. Democratic leadership demanded any federal “bailout” money to corporations include protections related to workers, such as ensuring job security and health care, pensions and 401(k) contributions, as well as prohibitions on discharging their collective bargaining agreements.
They also have balked at giving Mnuchin latitude to decide how the extra money is spent. It was unclear whether Senate Democrats would vote against the package unless more robust worker protections are included or Congress had more say over how the money was allocated. The disagreement created an impasse in deliberations, according to three people aware of the internal talks.
McConnell appears to be gambling that Democrats will feel they have no choice but to vote to keep the legislation moving, given the scale of the unfolding crisis. There are more than 26,000 confirmed covid-19 cases in the United States, huge numbers of layoffs are happening with more expected, stocks have tumbled, and hospitals are begging for supplies. Much of the nation is at a standstill.
The package, Mnuchin said, includes two weeks of cash flow to help small businesses with payroll and overhead, cash checks averaging $3,000 for a family of four, enhanced unemployment insurance and new abilities for the Federal Reserve to inject liquidity into the economy.
Mnuchin said the sweeping economic package is designed to last for 10 to 12 weeks, and the administration would revisit whether it would seek additional assistance from Congress. He said he expects a vote on the package Monday morning.
Mnuchin dismissed a question on whether the United States was already in a recession as a “technical” one that was “not terribly relevant,” but he acknowledged economic activity will be reduced this quarter and possibly also in the subsequent three months depending on the trajectory of the virus.
Democrats have argued that without protections for workers, companies receiving bailout money could fire their employees, which would undermine the purpose of the federal assistance.
“We are the ones who are on the front lines fighting the virus,” said Sara Nelson, president of the Association of Flight Attendants, which has pushed for strong labor protections in any federal assistance to the airlines. “Our entire economy depends on relief focused on workers. We must keep everyone in their job and connected to their health care.”
The dynamic on Capitol Hill partly results from lingering resentments among Senate Republicans over the last coronavirus relief bill, a $100-billion plus package enacted last week negotiated between Pelosi and Mnuchin. Many Senate Republicans were unhappy with paid sick leave provisions in that bill but voted for it anyway, and to a degree they are now turning the tables on Democrats.
The enormous package being negotiated is Congress’s third coronavirus relief bill. The first one, enacted earlier this month, appropriated $8.3 billion for the public health system, vaccine development and other needs.