As the end of the week approached, Washington was still waiting for a complete initial package from Senate Majority Leader Mitch McConnell (R-KY) on what will be a fifth COVID-19 relief measure. Negotiations that had started within the White House on Monday between the President’s staff and Republican Congressional leaders from the House and Senate produced some core pieces of a $1 trillion bill. That package lacked full consensus between the President, the Senate leadership, and House Republicans.
The bill is seen as the first step to allow further negotiations between House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Charles Schumer (D-NY). The core elements of the $1 trillion McConnell package is unofficially said to include:
- Another round of $1200 rebates (modified in some way by income or maybe not)
- Another round of small business loans called the Paycheck Protection Program (PPP) modified in size and conditions from the first PPP perhaps targeted to smaller businesses (under 300 employees) that can demonstrate a loss of 50 percent of revenue
- An extension of the supplemental unemployment weekly benefit modified to be less than the $600 a week currently available (and ending on July 31 or this weekend)
- Business tax deductions/credits including writing off the purchase of personal protection equipment (PPE) and restoration of a deduction of business lunches/meals to 100 percent of the meal cost
- Liability reform limiting lawsuits against businesses, non-profits, schools, and medical providers
- $105 billion for schools to reopen with $70 billion to K-12 and $30 billion for colleges and universities (with half of the $70 billion tied to actual reopening)
- $15 billion for child care
- No state and local budget relief simply an easing up on the use of state relief of $150 billion provided in the CARES Act (bill # 3)
This bill would leave out a range of priorities for CWLA and many other advocates including:
- Increase in the matching rate for Medicaid and Title IV-E (FMAP)
- No designated funding for child welfare including child welfare services, Chafee Independent Living funds, extended IV-E funds to prevent “aging-out,” no additional support for relative caregivers and increases for kinship navigator programs and court funding and CAPTA funding
- More funding for child care closer to $50 billion instead of the bill’s $15 billion
- No increase in Temporary Assistance for Needy (TANF) funds
- No increase in the Social Services Block Grant (SSBG) funds
- No increase in nutrition (SNAP) funding
- No access to funds for immigrant populations
- No general state and local state budget relief.
There were divisions between the President and Congressional Republicans and divisions with the House Caucus and the Senate Caucus. There were concerns by some that the package is too big. Other Congressional Republicans wanted more alignment with the Trump Administration while others sought a greater separation. Certain specific items split the caucuses, such as continuing the $600 in weekly unemployment benefit supplements with some caucus members wanting to discontinue it or cut it. There was consensus that the President was going to have to accept more funds for testing ($25 billion). The President for his part was starting to give up on a payroll tax cut. There is bipartisan opposition (at least behind closed doors) to the President’s insistence on a Social Security/Medicare-FICA tax reduction.
The Payroll tax amounts to a flat tax of approximately 7.5 percent on your earned income/salary.
Approximately 6.2 percent is dedicated to the Social Security Trust fund, while 1.45 percent is dedicated to the Medicare Hospital trust fund. That tax is matched by your employer. Opponents are concerned about the impact on those two trust funds, although it is assumed the federal treasury would replace that lost revenue. Another complicating factor that undercuts the President is that such a cut would not help people who are not working and could take months to implement. As a tradeoff, the President received support for a full restoration of the deduction for business lunches.
The elimination or expiration of the $600 unemployment supplement will be controversial. The flat add-on of the $600 per week is because it is felt that most state computerized systems could not calculate a lower benefit based on actual wages. According to census data, the bottom quarter of wage earners in the United States represent one-third of the people receiving the benefit. Another important point is that, of the people earning $25,000 per year, two-thirds are out of work. Elimination of the benefit could have a ripple effect as workers lose the ability to pay bills, including rent.