Senate Republicans, White House seek to reduce extra unemployment benefit

Senate Republicans will propose cutting weekly emergency unemployment benefits from $600 to $200 until states can bring a more complicated program online, according to two people familiar with the plan who spoke on the condition of anonymity about details that had not yet been released.

The proposal will come as part of a broader $1 trillion relief bill aimed at stemming the economic fallout caused by the novel coronavirus. Republicans plan to release the legislation later on Monday and start negotiations with Democrats. The $600 weekly jobless benefit expires in a few days, and House Democrats have proposed extending it until January because the unemployment rate remains very high.

Senate Republicans want to reduce the $600 extra payment to $200 until states can implement a new approach that would pay the unemployed 70% of the income they collected before they lost their jobs. The states are supposed to phase in the new formula within two months under the new GOP plan, though it’s unclear how cumbersome that process could prove to be.

Many state unemployment systems are expected to have difficulty implementing the more targeted program, so the $200 weekly payment would be designed to serve as a bridge until the other changes are made. The $200 would come on top of whatever unemployment benefits states already pay, which vary but generally replace 45% of a worker’s wages before they lost their job.

The U.S. economy remains under extreme strain five months after the first American died from the coronavirus. There have now been more than 4 million cases in the U.S. and more than 140,000 deaths. The economy has recovered a bit from its lowest points in April, but fresh outbreaks of the virus—particularly in southern and western states—have led some governors to pause reopening plans. The labor market remains very weak and layoffs have picked up steam in recent weeks.

House Democrats passed a $3 trillion relief bill in May but Senate Republicans and the White House didn’t begin internal deliberations until roughly a week ago. They have struggled to unify behind a single plan, though they said they had worked out most of their differences by Monday.

The GOP new plan was discussed on an internal call with congressional aides on Monday, one of the people said.

A key focus for the White House and Republicans has been trying to find a way to scale back the $600 unemployment benefit. White House officials, Republican lawmakers and some business executives have complained that the $600 weekly payment has created a situation where some Americans are paid more to stay home than to return to their jobs.

But Democrats have countered that the money serves as an emergency cushion for millions of Americans who have been displaced by the labor market’s sudden changes, particularly when many states are reversing reopening plans.

The late afternoon rollout of the GOP legislation will come after Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows spent the weekend on Capitol Hill negotiating final language with key Senate aides. It will be the second try for Senate Majority Leader Mitch McConnell, R-Ky., who had planned to unveil the bill last Thursday. That was canceled at the last minute amid disputes over language on unemployment insurance and other issues.

In addition to the reduced unemployment benefits the legislation is expected to include a new round of $1,200 checks to individual Americans, billions of dollars for schools with some of the money aimed at helping classrooms reopen, and a five-year liability shield for businesses, health-care providers and others.

The legislation also includes at least $100 billion more for the small-business Paycheck Protection Program. It does not contain any new money for state and local governments—a key Democratic demand—but instead gives state and local leaders additional flexibility in spending the $150 billion approved in the Cares Act in March.

Over initial Trump administration objections it contains billions of dollars for coronavirus testing and tracing, the Centers for Disease Control and Prevention, and foreign assistance related to the coronavirus. It’s also expected to include tax credits to encourage businesses to hire and retain workers, and increased business deductions for meals and entertainment.

White House economic adviser Larry Kudlow appeared to backtrack from remarks he made on Sunday suggesting the administration would seek to extend a federal eviction moratorium that has shielded millions of renters from losing their homes. Asked about people being evicted from their homes, Kudlow told CNN on Sunday that the administration “will lengthen the eviction” moratorium.

In an interview Monday on Fox Business News, Kudlow clarified that the administration was preparing to offer additional relief to homeowners, not renters. Homeowners with federally backed mortgages will continue to receive “forbearance,” a form of mortgage relief that allows borrowers to temporarily skip their loan payments, he said. “On the other side, on the rental side, we’re still looking at that. We’re still working through that,” Kudlow said.

Democrats attacked Republicans Monday over the continued delays.

“We have unemployment running out, we have renter protection running out, we have state and local governments going into a new month and won’t have the money and will lay off thousands and thousands of people,” Senate Minority Leader ChuckSchumer, D-N.Y., said Monday morning on MSNBC. “We’re at all these cliffs and we still at this very moment don’t have a plan from the Republicans. We want to sit down and negotiate. But you can’t negotiate with a ghost.”

Given the difficulty of reaching agreement on the multiple contentious issues at play, Meadows and Mnuchin suggested over the weekend that Congress might need to pass a narrow bill including just the unemployment insurance, schools money and liability provisions.

Democrats have rejected that approach, and McConnell has yet to publicly embrace it, either.

The legislation will exclude the payroll tax cut President Donald Trump had demanded, which Senate Republicans opposed. But it is expected to include language related to the FBI headquarters building that is diagonal from Trump’s hotel in downtown D.C. It was unclear exactly what the language would say, but Trump has said he wants to see a new headquarters building built on the site, and his administration killed a plan to relocate the headquarters to the suburbs.

The question of what to do about the expiring unemployment benefits delayed a final deal last week, and Republican lawmakers scrambled over the weekend to hammer out their plan.

In March, congressional lawmakers discussed creating a federal unemployment benefits program to replace 100% of a worker’s prior income, but scrapped the idea because they believed states would be unable to handle the administrative complexity of doing so. Congress ultimately decided to have the federal government add a flat $600 per week to every jobless worker’s state unemployment benefits—creating a system that in some cases paid the unemployed more than what they had received while working. There are now between 20 million and 30 million people collecting these benefits, as the jobless rate is 11%.

GOP lawmakers are also discussing imposing an income cap on the 70% wage replacement plan, one person said, which would limit the size of the program. Replacing 70% of the income of high earners who had lost their jobs could lead them to receive more in benefits than the $600 weekly bonus. The level of the income cap was not yet known.

Congressional Democrats oppose both GOP plans to curb the benefit amount and to transition the payment system to the new model. Critics point out state unemployment offices have already been overwhelmed. The National Association of State Workforce Agencies has warned in a memo circulated on Capitol Hill that targeted wage replacement could take most states “8 to 20 weeks or more” to implement from the date of the Labor Department’s guidance.

“We are skeptical that state UI infrastructure has improved dramatically since the CARES Act given how overloaded the system has been,” Evercore ISI, which conducts market research, said in a Monday note.

There were other parts of the bill that did not appear to have a direct connection to the immediate economic crisis caused by the coronavirus. For example, the White House pushed hard to include language in the bill that would essentially force a new Federal Bureau of Investigation headquarters to be built in Washington DC and not Virginia or Maryland. The bill is also expected to include another measure Trump has long desired, which would provide a tax break for business and entertainment expenses, even though many entertainment venues are shuttered because of social distancing rules.

New parts of the legislation are expected to include a proposal from Sen. Lindsey Graham, R-S.C., aimed at bringing production lines back to the United States from China, legislation by Sen. John Cornyn, R-Texas, that would increase incentives for advanced chip manufacturing, and a measure authored by Sen. Rob Portman, R-Ohio, that would address intellectual property theft at federal funded research centers and universities.