Talks begin on new federal coronavirus relief package

A new coronavirus relief bill being crafted by Senate Republicans and the White House would tie school funding to classrooms reopening and is likely to include a version of the payroll tax cut sought by President Donald Trump, a person briefed on the package said Monday.

As details of the legislation emerged, Trump met in the Oval Office with Senate Majority Leader Mitch McConnell, R-Ky., and House Minority Leader Kevin McCarthy, R-Calif. The president said discussions were going well as the administration and congressional Republicans aim to form a unified front before launching contentious talks with Democrats on the last major relief bill before the November election.

Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows plan to meet with House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., on Tuesday afternoon in what could serve as the opening of formal negotiations. Both sides on Monday appeared far apart, but Mnuchin said he was hoping for some resolution by next week.

The president emphasized his support for a payroll tax cut, a policy that Democrats and a number of Republicans oppose. Trump believes it would help stimulate the economy, but opponents believe it would do little for the millions of Americans who are unemployed.

“It’s been proven to be successful and it’s a big saving for the people. It’s a tremendous saving and an incentive for companies to hire their workers back and to keep their workers,” Trump said.

“The payroll tax to me is very important,” Trump said. The president has previously suggested he would not sign a new relief bill unless a payroll tax cut is included.

The payroll tax is the 7.65% tax paid by employers and employees that goes to fund the Social Security and Medicare trust funds. The administration is considering structuring the payroll tax cut in the legislation as a deferral rather than an outright cut, which would keep down the technical cost of the overall bill, according to the person briefed on the package, who spoke on the condition of anonymity to discuss private deliberations.

Such a deferral could require Americans to pay back the tax cut at a later date, but lawmakers could later decide to wave the repayment entirely.

Treasury Secretary Steven Mnuchin, who was also present in the Oval Office, confirmed Republicans’ plan to reduce the size of a $600-per-week enhanced unemployment benefit approved in March, which will begin running out for millions of Americans later this week. Republicans argue workers are making more on unemployment than they would on the job.

“We’re going to make sure that we don’t pay people more money to stay at home than go to work, we want to make sure that people who can go to work safely can do so,” Mnuchin said. “We’ll have tax credits that incentivize businesses to bring people back to work, will have tax credits for [personal protective equipment] for safe work environments.”

Mnuchin said he and White House Chief of Staff Mark Meadows would be meeting with the full Senate Republican conference at their weekly policy lunch on Tuesday to go over the developing proposal.

McConnell emphasized the legislation will contain liability protections for businesses, health care providers and others. “We don’t need an epidemic of lawsuits” McConnell said.

The legislation is also expected to omit new aid for cities and states that Democrats have been calling for, instead allowing governors and local leaders more flexibility to spend the $150 billion already allocated, according to two other people with knowledge of the talks.

Instead, in the GOP plan, states would get money for schools—but it will be explicitly tied to schools reopening, something that has been a major focus of late for Trump, according to the first person briefed on the negotiations.

It was unclear how exactly the money would be structured to prod schools to reopen—or what would constitute reopening.

People involved with the talks cautioned that negotiations were ongoing and provisions were fluid and subject to change. But the legislation taking shape appears to contain multiple provisions anathema to Democrats, who have already begun to denounce it—leaving it unclear whether Congress will be able to come together around a final deal in the three weeks before they leave Washington for their annual summer recess.

Republicans are aiming to roll out their legislation later this week and expect it to cost about $1 trillion, although they anticipate the price tag will grow significantly once horsetrading with Democrats begins in earnest. Democrats have rallied around a $3 trillion bill the House passed in May, and Pelosi and Schumer have made clear that additional aid to cities and states is a top priority. Democratic votes will be needed for any final deal to pass the House and Senate.

“Unfortunately, by all accounts the Senate Republicans are drafting legislation that comes up short in a number of vital areas, such as extending unemployment benefits or funding for rental assistance, hazard premium pay for front-line workers, or investments in communities of color being ravaged by the virus, and many other necessary provisions,” Schumer wrote in a letter to the Senate Democratic caucus on Monday. “Democrats will need to fight hard for these important provisions.”

Congress passed four major relief bills nearly unanimously in March and April, pumping some $3 trillion into the economy to address the pandemic. But McConnell recently predicted the new bill will involve “dramatically more controversy and partisanship because of the proximity of the election.”

With the economy still reeling, coronavirus infections and deaths on the rise and millions out of work, the coming days will be key in determining whether the negotiations succeed or fail.

The legislation is expected to include a new round of direct payments to individual Americans, potentially at the same $1,200-per-person level in the Cares Act. Presuming a payroll tax cut is included, it’s possible the structure or amount of the direct payments could change.

Other expected provisions include a workplace tax credit to help businesses with costs associated with testing and protective equipment, and an employee retention tax credit.

The bill is expected to include around $70 billion for elementary and secondary schools. In addition to trying to use that money to force schools to reopen, the administration has said some 10% will be set aside for nonpublic schools, another problematic provision for Democrats.

Additionally, Mnuchin told lawmakers on a phone call on Friday that the administration will be seeking more funding for the Paycheck Protection Program that provided forgivable loans for tens of millions of American firms, according to two people with direct knowledge of the call, who spoke on the condition of anonymity to discuss a private conversation. About $100 billion in the fund is unused, but lawmakers have eyed putting as much as an additional $150 billion into that pot as new increases in coronavirus cases threaten businesses across the country.

Speaking to congressional officials, Mnuchin said the administration will be seeking to impose new restrictions on the additional PPP money, the two people said. Among the possible changes, Mnuchin cited requiring companies to prove revenue losses to receive funding; barring publicly traded firms from accessing the money; and enacting a low cap on the size of firms that could qualify.

Mnuchin also told lawmakers on the call that state and local aid money would probably be necessary in the end and that the federal government will have to provide additional funding for child-care services to allow parents to return to work, the two people said.