‘Phase 4’ COVID Package Debate Heats Up - Should Aid for States & Localities, Liability Protections, and a 'Broadway Bailout' Be Included?

What’s the story?

• Lawmakers’ public posturing for negotiations over the contents of the next coronavirus (COVID-19) relief bill is in full force, as the Senate is back in session and the House is tentatively scheduled to return next week depending on the status of those negotiations.
• The “phase 4” relief package could end up being a multi-trillion dollar bill in terms of cost, adding to what the Congressional Budget Office has forecast to be a record setting $3.7 trillion budget deficit for the current fiscal year.
• While there are some provisions like increased funding testing & tracing capacity and more Paycheck Protection Program small business loans will likely gain bipartisan support, there are also several that will be highly controversial. Here’s a look at five potential sticking points in “phase 4” negotiations.

Possible Sticking Points

State & Local Aid:

• House Speaker Nancy Pelosi (D-CA) has called for up to $1 trillion in funding for states & localities, while House Majority Leader Steny Hoyer (D-MD) said about $500 billion of that total would go to states ― an amount that’s in line with governors request for “unrestricted fiscal support.”
• Republicans have said that additional funding to states & localities must be directly tied to expenses related to the COVID-19 pandemic. They’re reluctant to provide unrestricted funds that could be used to shore up long-standing fiscal issues, like underfunded public employee pensions in states like Illinois, and Senate Majority Leader Mitch McConnell (R-KY) said he’d rather a bankruptcy plan be available for those issues.
• The CARES Act provided states & localities with more than 500,000 residents with $150 billion in funding for COVID-19 expenses, and created a $500 billion Municipal Liquidity Facility at the Federal Reserve that states, counties, cities can draw loans from. Additionally, nine states have taken out loans from the Treasury Dept. to cover underfunded unemployment benefit programs, with more to follow.

Funding for Arts & Cultural Institutions:

• House Judiciary Committee Chairman Jerry Nadler (D-NY), Reps. Alexandria Ocasio-Cortez (D-NY) & Pete King (R-NY), and other members of New York’s congressional delegation wrote a letter to House leadership calling for a program of grants & loans to help museums, theaters, and other cultural institutions.
• Their plan would feature a total of $10.5 billion in relief grants, including $6 billion for the Institute of Museum and Library Services, $4 billion for the National Endowment for the Arts, and $500 million for the National Endowment for the Humanities.
• The CARES Act included $150 million in grants evenly divided between the Endowment for the Arts & the Endowment for the Humanities, while the Kennedy Center controversially received $25 million in funding. House Democrats initially sought $300 million each for the Endowment for the Arts & the Endowment for the Humanities, and $35 million for the Kennedy Center in the lead up to the final CARES Act.

Liability Protections for Businesses:

• Senate Majority Leader Mitch McConnell (R-KY) has called protections for businesses and frontline healthcare providers from liability in lawsuits related to the pandemic a “redline” for any relief package that will pass his chamber.
• McConnell said the reforms “will not protect somebody from gross negligence” and will be “narrowly crafted.” The Senate Judiciary Committee is scheduled to hold a hearing on May 12th related to liability protections during the pandemic.
• Hoyer said that Democrats “don’t necessarily think that’s appropriate for this bill” but that “I don’t know what their specific proposal is, so I don’t want to say it’s a hard no.”

More Direct Cash Payments:

• Some Democrats, including Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Bernie Sanders (I-VT), have called for $2,000 in monthly recurring payments to all families regardless of their legal immigration status.
• Other Democrats, such as Reps. Ro Khanna (D-CA) and Tim Ryan (D-OH),  have proposed $2,000 monthly payments to American citizens over the age of 16.
• Republicans have been reluctant to embrace another round of economic impact payments, and would rather the bill be focused on boosting the economic reopening in the near-term in addition to the longer-term recovery.

Tax Relief:

• President Donald Trump has called for a payroll tax cut for the rest of 2020. Sen. Josh Hawley (R-MO) has proposed a refundable payroll tax rebate for employers & employees, which would include a real-time advance for up to 80% of employer payroll costs (up to median wages), with a rehiring bonus & other support for rehired workers. 
• House Democrats and some “blue state” governors have called for a rollback of the cap on state & local tax deduction (SALT), which was capped at $10,000 in annual SALT deductions per household by the Tax Cuts & Jobs Act (TCJA).
• Additionally, President Trump has called for a reinstatement of the business tax deduction for meals & entertainment. Prior to the TCJA, businesses could deduct 50% of the cost of business meals under more circumstances, and 50% of expenses for things like sports tickets and golf outings were also deductible.

— Eric Revell

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