On Tuesday, Senate Leader Mitch McConnell (R-KY) said that he was “prepared to support” federal unemployment benefits back at $600 per week. This overcomes one of the biggest hurdles getting in the way of consensus on the next stimulus package.
He also reminded us that there would not be a “total consensus among Republican Senators” and it would have to be a “bipartisan proposal” because so many Republican Senators are not in favor of any additional stimulus.
One of the fascinating parts about this entire process is how Senator McConnell seems to be on the outside looking in. In his remarks today, he said the process was that Democratic leaders would negotiate with Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows first.
Then, Secretary Mnuchin and Meadows would meet with Senator McConnell. There was no direct discussion between Senator McConnell and either Senator Chuck Schumer (D-NY) or Speaker Nancy Pelosi (D-CA).
This might have to do with the fact that up to 20 Republican Senators are against any bill. If a stimulus package is to pass the Senate, it will have to be bipartisan because it lacks the necessary Republican votes – it must have the vote of many Senate Democrats.
Before Senator McConnell released the HEALS Act last Monday, we identified three significant differences between Republican priorities and what House Democrats passed in the Heroes Act:
- Enhanced unemployment benefits
- Additional aid to states
- 5-Year liability shield for businesses
These aren’t the only differences but they represent a few of the largest ones.
With Senator McConnell’s words today, we can scratch the first one off the list because federal enhanced unemployment benefits of less than $600 per week was a “red line” for Speaker Pelosi.
By agreeing to support a bill with $600 per week, Senator McConnell removes one of the major items standing in the way of an agreement.
What about the other two items?
Additional Aid to States
Many Republicans are not in favor of additional aid to states because they see it as a bailout of past financial mismanagement. There’s no denying that state and local governments are feeling the pinch from being closed down and reduced tax revenue.
But many have financial problems that predate the pandemic. Many states have a massive pension funding gap and the sum total across all fifty states was $1.24 trillion as of 2018.
In a draft proposal circulated by the New York Times, which was released before the HEALS Act, there was a line on state/local government assistance: “No additional money for state/local governments (certainly expect to get some added in negotiations with the Dems)” (emphasis mine)
There was no additional funding included in the HEALS Act but the draft seemed to hint that there was room for negotiation.
More on this in a moment.
5-Year Liability Shield
If the $600 per week unemployment benefit was Speaker Pelosi’s “red line,” then the liability shield is Senator McConnell’s. He has, on numerous occasions, said that the next stimulus package will not pass without a liability shield.
The liability shield would protect businesses, non-profits, medical providers and professionals from lawsuits associated with Covid-19. A plaintiff would have to show that a defendant was “grossly negligent or engaged in willful misconduct” while also violating state and local public health guidelines at the time.
As far back as May, the Wall Street Journal identified the liability shield as the “next Coronavirus aid battle” and suggested that a deal could be made regarding a liability shield and additional aid to states.
Could we see a deal made on a liability shield in return for additional aid to states?
After three months, it’s possible that their suggestion could prove to be a prediction.
What About Stimulus Checks?
In those same remarks on Tuesday, he reiterated his support for “$1,200 checks,” referring to the stimulus checks proposed in HEALS Act. Stimulus checks are the one part of the next stimulus package where there is agreement.
The HEALS Act created an advance on a refundable tax credit of $1,200 for single filers earning less than $75,000 and $2,400 for joint filers earning less than $150,000. It added an additional $500 per dependent. If you earn more than those income limits, your stimulus check would be reduced by 5% of your adjusted gross income above those limits.
The Heroes Act created a similarly structured stimulus check though the amount for dependents was increased to $1,200 with a limit of three.
It’s unclear which of these stimulus checks will be included in the final bill.
The Senate is scheduled to go to recess on Friday, August 7th, but it’s extremely unlikely to happen if we are on the verge of a deal. In March, ahead of the Cares Act, Senator McConnell delayed the Senate recess to complete work on the bill.
It’s a positive sign that the White House and Democratic leaders have set the timeline for an agreement but that is no guarantee one will be reached. If there is a deal, Secretary Mnuchin said to expect a bill to be signed into law next week.
If a bill were to be signed next week, on Friday, August 14th, you could get a stimulus check as soon as September 2nd. After the Cares Act, it took 13 business days before the first checks were sent. It’s possible that the process could be faster but it’s unlikely to be slower – so 13 days is a safe estimate.
That, however, requires a deal to be made this Friday so a bill can be drafted, passed, and signed into law next Friday.
The next few days will tell us a lot about the prospects and timeline of the next stimulus package.