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By embracing a $908 billion bipartisan pandemic relief plan, congressional Democratic leaders may have jump-started long-dormant talks over short-term economic aid. A nudge by President-elect Joe Biden may further enhance the prospects for a bill by the end of the month. After so many false starts, a bill might...might... be in sight.
In dollar terms, the bipartisan plan roughly splits the difference between the $2.2 trillion House-passed bill backed by Democrats and Senate Majority Leader Mitch McConnell’s $500 billion proposal.
Both parties have strong incentives to pass a bill over the next few weeks. Most important, several key provisions of earlier COVID-19 relief measures expire in less than a month. They include a 13-week extension of unemployment benefits and the expansion of benefits to the self-employed, gig workers, and others not normally covered by state jobless assistance.
In addition, firms will lose their ability to use paycheck protection program (PPP) funds. State and local governments will have to return what remains of $150 billion in federal assistance Congress provided in the spring just when they will need money to distribute COVID-19 vaccines that could be available in a matter of weeks.
A federal moratorium against evictions and federal student loan relief are due to end. And several tax provisions expire in less than a month, including an above-the-line deduction for charitable donations, a waiver of minimum distribution rules for retirement accounts, and an exemption from tax penalties for early withdrawals of up to $100,000 in retirement savings. A complete list of expiring provisions is here.
A deadline and a vehicle
This is happening at the same time the pandemic itself appears to be exploding throughout the country. Hospitalizations and deaths are approaching record levels, even before a feared post-Thanksgiving rise. And early private surveys suggest that hiring slowed sharply in November. It is not hard to imagine that lawmakers heard an earful about all this when they were home for Thanksgiving.
In addition to a deadline—always a prerequisite for congressional action—lawmakers also have a convenient legislative vehicle: A temporary spending bill to keep the federal government open ends on December 11.
It is not hard to imagine Congress sticking a COVID-19 relief bill on to that broader funding measure. And keep in mind, if lawmakers are closing in on a pandemic relief deal, they always can pass another temporary bill to keep the government operating for another week or two.
Finally, the pre-electoral politics that poisoned COVID-19 relief talks for months have shifted. Republicans know that Joe Biden will become president on January 20 and that a relief bill is likely his top priority. Some likely are asking their leaders why they should delay until next year, when Biden would get much of the credit for getting a bill passed.
At the same time, control of the Senate remains uncertain and won’t be resolved until after two Georgia runoffs are held on January 5, an outcome neither Democrats nor Republicans can predict.
Cracking the red and blue walls
Senate Majority Leader Mitch McConnell (R-KY) knows that his red wall against any meaningful relief bill is cracking. Three GOP senators have publicly endorsed the bipartisan plan, and others likely are quietly backing the idea.
Similarly, Democrats are wavering in their demands for a $2 trillion bill or nothing. In both the House and Senate, lawmakers have been increasingly vocal about passing something now, even if it is modest and means coming back in January with a follow-up measure.
If public health projections are correct, a large number of Americans will be vaccinated by summer. That should help pave the way for a solid economic recovery. The problem, of course, is what happens over the next 6-9 months, and a relief bill now could provide an essential lifeline for millions.
The framework of a deal has been clear for months. It likely will follow the outlines of the CARES Act that Congress passed in March. It probably will extend unemployment benefits, provide additional relief for renters and those paying off student loans, fund another round of business loans, provide assistance for state and local governments, and extend some of the CARES Act’s business and individual tax breaks. It also may include some liability protections for firms faced with pandemic-related lawsuits. The big unknown: another round of stimulus checks.
As policy, some of these ideas are better than others. But lawmakers are unlikely to do much sorting based on merit.
An agreement is no sure thing. President Trump has shown little interest in giving congressional Republicans the cover they need to back a bill that they’ve insisted for months is unnecessary. And many GOP lawmakers may fear their support for such a measure could earn them a negative tweet from the mercurial lame-duck president.
At the same time, some Democrats may be reluctant to accept half a loaf after they insisted for months that nothing less than $2 trillion would materially help the economy.
Still, prospects for an agreement are better than they have been for a long time.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Chip Somodevilla/AP Photo