- Soon after President Donald Trump passed a momentous $2.2 trillion stimulus package in March, he and House Speaker Nancy Pelosi said another relief bill might be necessary.
- Pelosi and House Democrats passed a $3 trillion proposal in mid-May, but Republican leaders, including Mitch McConnell and Trump, immediately dismissed its chances of becoming law.
- Pelosi's package included another round of direct payments to Americans and nearly $1 trillion of aid to state governments.
- After May's unexpectedly positive jobs report, Republican leaders began to say there was less need for another package, or that it should be smaller. June's jobs report was also positive.
- Reported coronavirus infections surged to new record highs in late June, raising the specter of new lockdowns, which would strengthen the case for a new stimulus.
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The federal government made history in March when it passed into law a $2.2 trillion stimulus package that included an unprecedented expansion of unemployment benefits and a massive $349 billion program for small-business lending.
The law was the third stimulus package designed as relief for the coronavirus pandemic — but it might not have been enough. In mid-May, House Democrats passed a fourth stimulus package to the tune of $3 trillion. Senate Majority Leader Mitch McConnell said in a floor speech on May 12, the day the House bill was introduced, that it had "no chance of becoming law," Business Insider reported.
The outbreak, which has infected more than 3.7 million Americans, has shuttered nonessential businesses in most states, including many in hospitality and food services, and led to a record number of jobless claims: nearly 50 million over 16 weeks, though the number of new claims has declined for 14 straight weeks.
House Speaker Nancy Pelosi was an early voice saying that even the massive third stimulus package wasn't big enough. She advocated for another round of direct payments to Americans like the $1,200 checks sent to people as part of the "phase-three" package.
The phase-four "Heroes Act" would also extend the $600 weekly bonus to unemployment benefits through January, which Republicans have repeatedly pushed back against, calling it a "disincentive" for people to go back to work. As Business Insider's Joseph Zeballos-Roig reported, this argument is belied by the fact that wages haven't been climbing, job postings are down versus before the pandemic, and both May and June's jobs reports beat expectations. If congress doesn't extend it, millions of unemployed workers would see a 50% to 75% income cut overnight.
President Donald Trump, who is seeking reelection, said in late March that he supported a package worth around $2 trillion, tweeting his support for an infrastructure-focused relief bill. By June, reports indicated neither McConnell nor Trump wanted the bill to exceed $1 trillion.
The (non-Trump) Republican position to go smaller on the bill was boosted as the economy largely reopened in May, with the May and June jobs reports showing signs of recovery. The sudden spike in reported coronavirus cases in late June threatened that momentum, though, with the US setting new record highs for daily cases in July. Major cities including Los Angeles and Chicago have begun considering or imposing new lockdowns to stem rising cases.
States and cities have been seeking more, since they shouldered much of the economic impact of the pandemic and haven't yet received federal aid. From bidding on personal protective equipment and ventilators in the absence of a coordinated national effort to administering the exploding number of unemployment claims, states have been dealing with a double whammy of increased pandemic relief expenditures and shrinking tax revenues. Without more aid, states could theoretically go bankrupt, even though the current American legal system doesn't allow for that.
The National Governors Association asked for $500 billion in federal aid on April 11, and the National League of Cities and US Conference of Mayors asked for another $250 billion on April 16. Transportation departments asked for $50 billion on April 6.
Finally, public-education systems asked for $200 billion on April 28, which may have been on the low side as it came before the summer surge in infections, which challenged schools' plans to reopen in person in the fall. If schools are to reopen, they will need even more federal funding as they will have to adopt additional safety measures. Democratic presidential candidate Joe Biden supports an additional $34 billion for schools on top of $58 billion allocated in the Heroes Act.
Here's where a phase-four package stands after passage in the House — and what major stakeholders want it to include.
Pelosi wants a retroactive SALT rollback and more money for states and local governments as part of a $3 trillion package.
The House bill, which Democrats are calling the Heroes Act, would provide nearly $1 trillion in additional aid to states and cities to help them pay essential workers like first responders and healthcare workers during the pandemic.
Other measures include providing $75 billion for coronavirus testing and tracing, doling out more $1,200 direct payments to individuals (up to $6,000 per household), extending weekly $600 federal unemployment benefits through January 2021, and giving renters and homeowners $175 billion in aid.
Pelosi told The New York Times in March that her preference for a phase four would include some kind of retroactive rollback of the limit on the state and local tax deduction. Part of the tax cut passed in 2017, the SALT policy change especially hurt high earners in states like New York and Pelosi's California.
Rolling it back would increase tax rebates for about 13 million households, according to the Times' estimates, nearly all of them earning at least $100,000. This provision apparently made it into the Heroes Act, the Huffington Post's Tara Golshan reported.
In mid-July, Pelosi told a group of reporters that Republican senators "know there's going to be a bill." She added that the Republican proposal at that time was $1.3 trillion and "that's not enough," CNBC reported.
Trump has mentioned an infrastructure investment and a 'sanctuary-city' trade-off — at a cost between $1 trillion and $2 trillion.
In a March 31 tweet, Trump said infrastructure should be the focal point of the phase-four stimulus package.
"With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill," the president wrote. "It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4."
About four weeks later, Trump suggested he would support federal aid for beleaguered state and city governments only in exchange for a relaxation of "sanctuary-city" policies. Trump has long sought to punish sanctuary cities and states that have policies to limit or refuse cooperation with the federal government's immigration enforcement.
On May 20, after the Heroes Act passed in the House, Trump joined the Republican chorus of voices opposing an extension of the $600 bonus unemployment benefit, with potentially large implications for the future of the American safety net. Trump and several senators and congressmen have repeatedly rejected the idea as a disincentive for work since the third stimulus passed in late March.
White House officials have advocated various substitutes for the $600 bonus. The last week of May, Larry Kudlow, the director of the National Economic Council, proposed "back to work" cash bonuses for unemployed Americans. And in early June, The Wall Street Journal reported administration officials were weighing cutting the bonus from $600 down to $250 or $300 per week in a new bill, or setting it as a share of' salaries.
Treasury Secretary Steven Mnuchin said in early June that there would "definitely" be another economic-relief bill, The Wall Street Journal reported. Around the same time, Bloomberg reported that administration officials envisioned the next stimulus being up to $1 trillion in size.
Senate Majority Leader Mitch McConnell has sent mixed signals and at one point supported allowing states to declare bankruptcy.
McConnell was initially cold to the idea of a phase-four package but acknowledged in early April that there would be a "next measure." He told The Associated Press he would prioritize healthcare spending and shy away from passing anything unrelated to the emergency, saying Democrats were pushing "unrelated pet priorities."
Another McConnell demand emerged during an appearance on Hugh Hewitt's radio show on April 22, when he said he would "certainly" be in favor of allowing states "to use the bankruptcy route." This would be a major change to American law, as states can't currently file for bankruptcy. David Frum wrote in The Atlantic that this would be an attractive prospect for McConnell, given that the federal judiciary has become more right-leaning during his tenure. Governors from both parties, including Democratic New York Gov. Andrew Cuomo and Republican Maryland Gov. Larry Hogan, dismissed the idea.
Senate Republicans were meeting with the White House on July 20 to discuss a $1 trillion bill that would include no extra aid for states and cities, The Washington Post reported. Instead, the bill would allow states and localities to more flexibly use the $150 billion allocated for coronavirus-related expenses in late March, the report said.
On April 29, McConnell spoke on a private call about a new must-have, according to The Wall Street Journal: a provision that would shield companies from liability over lawsuits related to the pandemic. Republican states were leading the partial reopening of the national economy at the time, but that has stalled out as cases have spiked.
The waiver liability provision appears to be an admission that companies endanger their employees by resuming normal business activity, and that the government should allow them to do so. The Post reported that the bill under discussion in July would include a liability waiver. As for extending the unemployment benefit, the Post has reported that Republicans favor an extension for a lower amount.
Some congressional Democrats want additional relief for people most affected by the coronavirus pandemic.
Some House Democrats have been advocating stimulus measures separate from a phase four. On April 14, a group led by Reps. Tim Ryan and Ro Khanna introduced legislation that would provide payments of $2,000 per month for at least six months to Americans 16 and older who make less than $130,000 per year.
Rep. Pramila Jayapal had previously laid out legislation that would have the government cover 100% of employees' wages and benefits up to $100,000 (a similar idea was proposed by Republican Sen. Josh Hawley). The Niskanen Center's Samuel Hammond reported in early May that the Heroes Act included a payroll rebate that more closely resembles Hawley's proposal than Jayapal's.
Karen Bass, the chairwoman of the Congressional Black Caucus, said she hoped the phase-four stimulus package would address the racial disparity among coronavirus infections. In early July, a New York Times analysis of CDC data found that for coronavirus cases per every 10,000 people, 73% of infections are Latino and 62% are Black. The Times also reported that 43% of Black and Latino people work in jobs that cannot be done remotely.
On July 20, a nationwide strike of essential workers was set to include demonstrations outside New York's Trump International Hotel in favor of passing the Heroes Act.
In early June, Senate Minority Leader Chuck Schumer called on Senate Republicans "to stop sitting on their hands and work with Democrats to immediately pass legislation."
Some congressional Republicans hope to help low-income families — and some have supported McConnell's idea of a business liability waiver.
Republican lawmakers — including House Minority Leader Kevin McCarthy — have echoed McConnell's sentiments on waiting to see how phase three did, though some have joined Democrats in advocating for measures to increase access to broadband internet for low-income families. Sen. Lisa Murkowski told The Hill that she hoped the next package would offer mental-health relief to struggling families. And Sen. Mitt Romney, who pushed for immediate cash assistance in phase three, said he could see phase four targeting local businesses and laid-off workers.
In late April, McConnell's regular interviewer Hewitt outlined a full wish list in a Washington Post op-ed, including longtime Republican goals like recapitalizing the "defense industrial base." Hewitt did say that states should get additional aid with "strings" that "might reasonably be attached," such as "possible bankruptcy reorganization solutions for cities and counties."
By early May, The Washington Post reported, Sen. John Cornyn was working on a bill that would shield companies from liability over pandemic-related lawsuits. Colleges, hospitals, and nonprofits want protections too, Business Insider reported. A senate Republican aide told The Washington Post in early June that party leaders were not pressuring Trump much about stimulus ideas and "most congressional Republicans" were complaining behind the scenes about the trillions of dollars in previous aid packages.
Major banks predict at least another $1 trillion is coming — and the Federal Reserve says more aid should be passed.
On April 22, Bank of America predicted in a research note that Congress would pass another large stimulus worth up to $1.5 trillion. After the introduction of the Heroes Act, it said Congress would "more likely than not" pass additional aid before the end of September.
And on May 13, Morgan Stanley said its "base case" expectation was that Congress would extend certain phase-three provisions by $700 billion to $1.1 trillion, up to $2.4 trillion, with no further action before the election.
Federal Reserve Chairman Jerome Powell agreed on May 13, saying "more fiscal help may be needed." Without mentioning a specific amount, he said it would be "worth it" if it helped prevent long-term economic damage. The current recession is "significantly worse" than any since World War II, he said, with a scope and speed unprecedented in modern history.
Powell continued to sound similar notes after the Heroes Act passed in the House in May and early June.
Mnuchin, testifying before the Senate Committee on Small Business and Entrepreneurship on June 10, said more stimulus checks were still on the table. "I think we're going to seriously look at whether we want to do more direct money to stimulate the economy," he said. "But this is going to be all about getting people back to work."
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