Cross-partisan talks about another pandemic-relief bill are clearly bogged down. But the rhetoric, and even a lot of the journalism, around how that has happened tends to mask more than it reveals.
Republicans say the Democrats are clinging to unreasonable demands and irresponsible spending levels. Democrats say Republicans don’t want a bill and aren’t prioritizing real needs. And the headlines in recent days have been filled with disgust at the decision of both houses (and so both parties) to leave town until after Labor Day without resolving the fate of unemployment benefits, small-business assistance, aid to states, and much else.
Up to a point, all of that is true. But it reflects a set of failed calculations in both houses of Congress and at the White House. House Democrats began this process in May with an irresponsible partisan travesty of a bill—a kind of progressive wish list meant to quiet tensions within the Democratic conference that could never have become the foundation for a real legislative process. Nancy Pelosi, who has a real gift for managing her members, seemed to assume that she could separate her intra-party challenge of keeping the radical wing of House progressives calm from the inter-party challenge of negotiating a bill. It wasn’t a crazy notion, but it has not worked out, and she has found herself instead treating at least the top-line spending numbers in that bill as a foundation for negotiations. That means the Democrats have been backed into entering this process with demands for an unrealistic level of spending, and one somewhat detached from substantive policy aims.
The Democrats can try to present this as a bargaining strategy, but it looks more like a blunder that has undermined their ability to push for their key priorities in a bill and has left them talking about spending levels instead. When reporters asked Pelosi on Thursday when she thought negotiations would resume, she said “I don’t know, when they come in with $2 trillion.” Even if the final bill approaches such overall levels of spending, that wouldn’t happen by demanding a particular overall level of spending. But that is where Pelosi has been stuck for the moment.
This in turn has undermined the strategy that Senate Majority Leader Mitch McConnell had hoped to pursue. His goal, in the wake of the process that resulted in the CARES Act in March, was to avoid once again getting stuck as just an observer of negotiations between Pelosi and the administration. So he sought to have the House go first, and propose legislation that Senate Republicans could then negotiate against and work from. He did this in April and May by saying Senate Republicans saw no need for further action, and calling for a pause before any new bill.
When the Democrats used that opportunity to put forward a political sham, however, the Senate found itself in the same place as in March, compelled to start the process of actual legislative proposals. But having left things to the House by saying Senate Republicans saw no urgency in a further legislative measure, McConnell created space for more than a dozen Senate Republicans to publicly commit to opposing any further measure, and found it difficult to get his caucus moving on a new package. Senate Republicans proposed that package only at the end of July. And by that point, the administration had basically started its own process, with Treasury Secretary Mnuchin again negotiating directly with Speaker Pelosi—exactly the process McConnell had hoped to avert.
Some Senate Republicans really don’t want the process to succeed, as the Democrats suggest. Most do, though, including McConnell himself. But he seems resigned to a process that again leaves him largely locked out. One Republican senator told me last week (disapprovingly) that McConnell said to Mnuchin, in front of a group of fellow Senators, that it was imperative that Mnuchin “get a deal done at all costs.”
But meanwhile, the administration’s own attempts at tactical cleverness have also backfired. The executive actions President Trump announced in early August were constitutionally obnoxious but substantively unworkable. The memo aimed at offering tax relief would create such enormous uncertainty for employers that most seem likely to just keep their existing arrangements for payroll-tax payments. The one aimed at giving states more unemployment-insurance funds would require more state spending and an administrative system that likely couldn’t be set up for months. If they were intended to create pressure for Congress to act, they seem to have failed. Instead, they have reinforced everyone’s pre-existing positions, with some Republicans saying they make congressional action less necessary, others insisting that they create added impetus for legislation, and Democrats treating them as evidence that Republicans aren’t engaged with real needs.
Secretary Mnuchin really is trying to advance a deal and to negotiate. It’s far from clear that the president has the same aim, though, and in any case Trump has set no clear priorities and has taken no direct part in the process. He’s content to be an observer and commentator, as usual, which also makes it hard for some Republicans to know where to stand.
So at the moment, things do seem good and stuck. And yet, because decision-making is so thoroughly centralized in this process, the logjam could be broken more quickly than it seems. Congress taking its August break, for instance, strikes me as basically irrelevant to this process. If anything, it lets Pelosi reset a little and reposition for making a deal without her more radical members in her ear.
And it should be possible to reconceive of the process as stuck around a few key substantive disputes, rather than overall top-line numbers. By working from some substantive aims to a cost, rather than aiming for an overall dollar figure to begin with, the differences between the parties might at least become a little clearer.
To the extent that there has been haggling about substantive details, the Democrats have argued for a trillion dollars in relatively open-ended funding to the states and an additional several hundred billion dollars for schools, along with continuing the expanded unemployment-insurance benefits, topping up a variety of federal welfare programs, more money for the postal service, and election support. Republicans’ priorities, largely contained in the Senate package proposed last month, includes a renewal of PPP funds for small business, significant (but lesser) support for schools, liability protections for employers, and a gradual curtailment of the additional unemployment benefits.
Looked at that way, rather than in terms of top-line numbers, some prospects for compromise seem obvious. The toughest arena of contention may be aid for state and local governments, which Republicans did not include at all but for which Democrats are demanding a trillion dollars or more. On that front, to make up lost state revenue due to the shutdowns, lawmakers should consider the option of federal or federally-backed loans to state governments, offered on very easy terms (perhaps even at zero interest) and repayable over a decent interval.
Lost state revenue can be quantified against some measure of expected tax receipts, so that aid is directed to filling revenue gaps rather than addressing longstanding pension problems and the like. And Congress could have the Treasury build on the Municipal Liquidity Facility it established with the Federal Reserve in April to buy state bonds and quickly provide financing, or it could otherwise guarantee loans that could help states replace lost income. Swift support could allow the states to get through this fiscal year’s intense economic hardship without needing to cut back education, welfare, or other core services. And providing such help not as grants but as generous loans that can be slowly repaid to the Treasury as state revenues recover over time can both protect federal finances and avoid favoring higher-tax states.
If Congress offered states a total of a trillion dollars, with say three-quarters of that in the form of loans, and without additional funds allocated specifically to schools (states could decide what portion of their support should go to what essential services), legislators could offer the bulk of the aid the Democrats have in mind at much more like the cost that Republicans were envisioning.
In other areas, compromise should be easier to reach. President Trump’s reckless politicizing of the postal-service funding debate probably means that Democrats are now very likely to insist on money for the post office as a non-negotiable demand. If that’s so, Republicans should agree only in return for changes to the structure of the emergency unemployment benefit, which allow it over time to diminish the perverse incentives against work that the program enacted in March has created. Some election support to the states makes sense, and shouldn’t be outrageously expensive. It should also be tied to reforms of federal law (like the one proposed recently by Senator Rubio) that could allow states more time to count votes if election day turns out to be a complicated mess.
And lawmakers should not forget that we are still fighting the virus. This bill should not only focus on the economic hardship created by the response to the pandemic but also on strengthening the ability of the states to test, track, and respond to outbreaks, which we should expect to recur this fall. There is still a great deal of work to be done on that front (as well as in preparation for the early distribution of vaccine doses, should ongoing trials turn out well.)
This is a lot to pack into a legislative package, and the obstacles created by both Democratic and Republican miscalculations won’t help. But it is important that congress remain engaged in this effort. The needs are real, and this will almost certainly be the last major legislative measure on this front before the election so it needs to meet some of those needs. And a deal will have to be worked out before legislators turn to a government funding measure (which must be completed by the end of September).
There is a plausible path forward, both House Democrats and Senate Republicans will need to use the recess to reset their expectations some, and the administration will need to focus on a few key priorities to help a deal happen. We have seen this done several times this year. It’s not impossible. But it won’t be easy.