White House, GOP kill payroll tax cut idea, but flounder over broader coronavirus bill

Senate Republicans killed President Donald Trump’s payroll tax cut proposal on Thursday, but did not reach agreement with the White House on a broader coronavirus relief bill, setting off a frantic scramble with competing paths forward.

Administration officials floated a piecemeal approach, but encountered pushback from both major political parties, and the entire effort appeared to teeter on the brink of failure.

Senate Majority Leader Mitch McConnell, R-Ky., had planned to roll out a $1 trillion GOP bill Thursday morning, but that announcement was canceled in a head-spinning series of events.

Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows emerged from a meeting with McConnell to insist that there was “fundamental agreement” on the overall deal—but simultaneously suggested breaking up the effort into smaller pieces of legislation and trying to move forward on an extension of enhanced unemployment benefits that are about to expire.

Meanwhile, it appeared that several parts of the GOP package remained unresolved, and that Republicans had not begun negotiating with Democrats.

Complicating matters, the White House renewed its push for language related to the location of the Federal Bureau of Investigation building in downtown Washington, which is kitty-corner from Trump International Hotel. Trump has expressed interest in the location of the FBI’s headquarters for some time, according to two people with knowledge of the talks who spoke on the condition of anonymity to discuss them.

The details were unclear, but the Trump administration previously scrapped a plan to move the FBI headquarters to the suburbs, instead seeking to rebuild a new FBI building in its current location. It was unclear what this had to do with the coronavirus. A White House spokesman declined to comment.

If the bill is not released Thursday, it probably will slip to Monday, giving lawmakers just a few days to reach an agreement before enhanced unemployment benefits will expire for more than 20 million Americans.

A Senate GOP leadership aide said Senate Republicans opposed the White House’s new piecemeal approach, and House Speaker Nancy Pelosi, D-Calif., immediately shot it down.

“No, No, No,” Pelosi said. “This is a package. We cannot piecemeal this.” Democrats passed a $3 trillion package in May that they want to use as the starting point for their negotiations.

The GOP aide spoke on the condition of anonymity to describe internal deliberations.

GOP leaders had aimed for a unified proposal that would include a new round of stimulus checks, aid for schools, money for testing, changes to unemployment assistance rules, and more money for small businesses. But Senate Republicans did not agree on how to structure these changes, prompting the White House to try a new strategy Thursday morning.

“We’d like to do everything, but if we can’t do everything the priority is we’d like to address [unemployment insurance], schools and liability quickly,” Mnuchin said after meeting with McConnell.

“Liability” refers to a key White House and Republican demand to set up legal protections that would make it difficult to for workers to win lawsuits against their employers if employees become sick at work. Democrats have rejected this idea as a nonstarter.

One of the few things agreed upon was to jettison any payroll tax cut from the final deal. Trump had insisted that such a measure be included, but Senate Republicans refused and the White House acknowledged defeat Thursday. Trump attempted to blame Democrats, but it was Republicans who shot the idea down.

If finalized, the GOP proposal would greatly reduce enhanced unemployment benefits for millions of workers—even as the Labor Department reported Thursday that weekly unemployment claims had risen for the first time in four months, to 1.4 million last week. In March, Congress approved an additional $600 weekly benefit for unemployed Americans; it is set to expire next week.

Democrats want to extend the $600 payment through January, but the White House and Republicans want to greatly reduce the figure, alleging that it has reduced the incentive for people to return to work.

The retreat on the payroll-tax idea marked a big setback for the White House. In recent days, Trump had insisted that he might not sign an eventual bill if it did not include the payroll tax cut, but the plan was extremely unpopular with Republicans. Mnuchin said the White House still liked the idea and could pursue it in potential future legislation — though McConnell has repeatedly indicated that the legislation taking shape now will be Congress’s last major coronavirus relief bill.

“The president is very focused on getting money quickly to workers right now, and the payroll tax takes time, so we’ll come back and look at that later,” Mnuchin told reporters at the Capitol.

He said leaders instead will focus on sending another round of stimulus checks to Americans because that approach would put money in people’s pockets more quickly.

Stephen Moore, a conservative economist who advised Trump’s 2016 campaign, said he was “very discouraged” that the GOP package would leave out the payroll tax cut but include the $1,200 stimulus payments, arguing that the president risked alienating his conservative base over the move.

“We’ve gone in less than 10 days from Trump saying that he won’t sign a bill without a payroll tax cut to the bill they’re drafting not having a payroll tax cut,” Moore said. “There is no benefit from dumping money from helicopters into people’s laps.”

Democrats and Republicans had already supported sending another round of stimulus checks, and now that idea appears to be one of a few areas where there is bipartisan support. White House officials and Democrats had hoped to have a deal completed by next week, before the enhanced unemployment benefits expire, though that timeline could be difficult to meet.

Republicans have struggled to unite behind a single plan, with some arguing for spending cuts and others arguing for more substantive economic stimulus in the face of the pandemic’s disruptive impact. The number of coronavirus-related deaths has also risen markedly in recent days, and thousands of Americans are in the hospital, fighting the coronavirus-caused disease COVID-19.

Trump said Wednesday that the economy was making a remarkable recovery, but economic data has not supported this assertion. The stock market does remain high, in part because of enormous interventions by the Federal Reserve, but the labor market is in bad shape, with 20 million to 30 million people unemployed. And the situation appears to be worsening.

The increase in weekly unemployment claims reported Thursday was the first weekly uptick since April and a sign that expiring stimulus programs could leave parts of the economy adrift.

Mnuchin said Thursday that the GOP plan would include 70% wage replacement, which could reduce the $600-per-week payment to closer to $200 per week, though the precise details were unclear.

“We don’t want this to expire next Friday,” Mnuchin said. “It’s not a difficult concept. You don’t get paid to stay more to stay home than you do when you have a job.”

Democrats slammed Republicans for the delay in releasing their legislation.

“Our Republican colleagues have been so divided, so disorganized and so unprepared that they have to struggle to draft even a partisan proposal within their own conference, before they talk to a single Democrat,” Senate Minority Leader Chuck Schumer, D-N.Y., said on the Senate floor. “It appears the Republican legislative response to COVID is un-unified, unserious and unsatisfactory.”

The emerging GOP bill also was expected to include $70 billion for elementary and secondary schools, with half of that money connected to schools physically reopening their classrooms. No new money for state and local governments was expected, but instead the legislation would allow local leaders more flexibility in spending $150 billion allocated in the Cares Act in March. Tax credits were expected to encourage businesses to retain workers and help them enact safety protections in workplaces. Another round of funding for the small-business Paycheck Protection Program was also expected.

Election-year politics have complicated the talks as a handful of vulnerable senators up for reelection push for more generous spending, while fiscal conservatives in the Senate GOP conference oppose spending any more money after Congress already pumped about $3 trillion into the economy in March and April.