House Set to Pass New Stimulus With Plans to Dole Out More
(Bloomberg) -- With the House poised to give final passage to a $484 billion package of new pandemic relief funds on Thursday, lawmakers and the Trump administration are already turning their focus on the next round of stimulus for the stalled U.S. economy.
The legislation that the House will take up, which passed the Senate Tuesday, includes $320 billion for the Paycheck Protection Program, designed to help struggling small businesses keep their workers on the payroll. It’s widely regarded as an interim step as the coronavirus pandemic continues to cause death and economic havoc.
“We’re ready to go on to the next bill,” House Speaker Nancy Pelosi said Wednesday morning on MSNBC.
Both parties are looking at follow-up legislation that would be more comprehensive and costly.
President Donald Trump, who met Tuesday with New York Governor Andrew Cuomo, said aid to state and local governments would be part of a so-called phase four stimulus, as would money for road projects and expanding broadband service.
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“Infrastructure is going to be a big part,” Trump said at a White House briefing. “We have to rebuild our country.”
At the same briefing, Treasury Secretary Steven Mnuchin declined to put a price tag on the next package, but Cuomo and other governors have called on the federal government to provide at least $500 billion into state aid alone.
The $484 billion legislation moving through Congress this week comes on top of the $2 trillion package enacted last month and follows tens of billions of dollars in earlier measures passed in response to the pandemic. While the dollar figure so far is historic, so is the scale of the downturn, with some economists expecting double-digit contraction in gross domestic product in the second quarter.
Capital Economics forecasts an unprecedented 40% annualized drop in that period. The unemployment rate is likely around 17% already -- the highest since the Depression era of the 1930s -- based on the roughly 22 million jobless claims filed during the coronavirus epidemic so far that wiped out a decade of labor market gains.
“More is still needed. Almost definitely, this is not going to be a 1, 2, 3 bill thing, just as this pandemic isn’t going to be a couple of months thing,” said Troy Ludtka, an economist at Natixis. Lawmakers and the administration need to “just keep throwing money at the problem,” he said.
While putting more stimulus into the economy has bipartisan support and the backing of Trump, the spending is sending the U.S. further into debt. This year’s deficit is on track to hit almost $4 trillion, about 18% of the total economy. The Committee for a Responsible Federal Budget forecasts that the nation’s debt will rise to levels not seen since the country emerged from World War II.
Senate Majority Leader Mitch McConnell said Congress should take “measured steps” with additional rescue measures.
“Let’s weigh this very carefully, because the future of our country in terms of the amount of debt that we’re adding up is a matter of genuine concern,” the Kentucky Republican said.
Democrats want a broad spending package for the next round. Pelosi and Senate Democratic leader Chuck Schumer said it should include funds for state and local governments, hazard pay for front-line workers, food aid, election security and funds for the U.S. Postal Service.
More money is needed “to help our heroes, our health care workers, our firefighters, our first responders, EMS, our folks who are doing all the wonderful work to save lives as they risk their lives,” Pelosi said. “Now they may lose their jobs.”
Pelosi emphasized that the latest bill sets aside billions for smaller businesses, many of which didn’t receive money in the program’s first round. She said it was a “very sad thing” that some larger companies with annual revenues in the hundreds of millions of dollars instead received the federal aid.
“Congress will be watching, you can be sure,” she said.
It’s not clear how quickly a plan with bipartisan support can be drafted. Congress isn’t scheduled to return to Washington until May 4, though negotiations can take place and provisions drafted without most lawmakers in town.
The Senate approved the latest measure in an almost empty chamber, with almost every senator back in their home states after signaling to party leaders they had no objection to passing the legislation. The House plans to return to Washington Thursday for a formal vote.
The latest package would provide $320 billion to allow the PPP to take new applicants for the program, which provides forgivable loans to small business that keep employees on the payroll for eight weeks.
It sets aside $30 billion of the PPP loan funds for banks and credit unions with $10 billion to $50 billion in assets and another $30 billion for even smaller institutions. Democrats pushed for that, arguing such institutions could better serve “under-banked” small business like those owned by newer businesses or those owned by women and minorities.
The measure includes $60 billion in loans and grants for a separate Economic Injury Disaster Loan program, and makes farms and ranches eligible for the loans. Also, there is $75 billion for hospitals, with a significant portion aimed at those in rural areas and $25 billion for virus testing.
Funds for Testing
The testing funds include $18 billion for states, localities, territories, and tribes to conduct Covid-19 tests, $1 billion for the Centers for Disease Control and Prevention and $1.8 billion for the National Institutes of Health. As much as $1 billion would cover costs of testing for the uninsured.
The drafting of the legislation was punctuated by delays and partisan wrangling in negotiations with Schumer and Pelosi on one side and Mnuchin and McConnell on the other.
McConnell and Schumer on Tuesday traded blame for passage not coming until after the small business aid program ran out of its original allocation of money.
“It’s unfortunate that it took our Democratic colleagues 12 days to agree to a deal that contains essentially nothing that Republicans ever opposed,” McConnell said. “The American people cannot be political leverage.”
McConnell’s original proposal to replenish the Paycheck Protection Program didn’t include any of the other provisions that were ultimately included in the legislation, including aid for hospitals and money to bolster testing for the coronavirus. Democrats also sought and won measures aimed at ensuring that businesses without relationships with major banks can get access to Small Business Administration assistance.
“The hard work of negotiation paid off,” Schumer said. “This legislation is significantly better” than the original offered by Republicans because it includes an addition $220 billion for small businesses, health care providers and a “down payment” on a national testing program, he said.
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