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What's On Deck in Congress: COVID-19 Phase IV

07/16/2020

Congress will return to Washington, D.C. next week. Although both chambers already have items on their respective agendas before the August recess begins, another phase of COVID-19 response legislation is expected to be considered. If text exists, few have seen it. Like the previous COVID-19 responses from Congress, the process is entirely controlled by congressional leadership.

Senate Majority Leader Mitch McConnell (R-Ky.) and Speaker Nancy Pelosi (D-Calif.) have found general agreement on four different COVID-19 response bills. Congress has added $2.4 trillion dollars to the budget deficit as a result of these four bills becoming law. Additionally, there are questions about how much of the spending that Congress has already allocated that may be a permanent fixture if and when the pandemic subsides.

The fiscal impact of COVID-19, of course, isn’t limited to the response from Congress. The recession that the pandemic caused has led to lower tax revenue collections. In April, the Congressional Budget Office projected that the budget deficit for FY 2020 would be about 17.9 percent of gross domestic product (GDP), or $3.7 trillion. America hasn’t seen a deficit that large relative to GDP since the end of World War II.

The cost of the next phase of COVID-19 response legislation is expected to be north of $1 trillion. Granted, that’s not as expensive as the House Democrats’ leftist COVID-19 messaging bill, the HEROES Act, which passed the House in May, but it’s still significant considering the size of the fiscal response that Congress has already made.

Although we don’t know exactly what will be included in the next phase of COVID-19 response legislation, we’ve heard enough rumors to have a good sense of what will and will not be in the bill.

Enhanced Unemployment Benefits

The CARES Act provided an enhanced unemployment insurance benefit of $600 per week on top of the benefits provided by a state to those who lost their jobs because of COVID-19-related economic disruptions. The enhanced benefits are set to expire at the end of the month.

Congressional Republicans have criticized the enhanced unemployment benefits because, in most cases, people who receive these payments make more money on unemployment than they would working a job. Undoubtedly, this can harm the economic recovery if employers have positions they can’t fill because potential employees are collecting more money by staying at home. This was an inevitable problem with legislation that was rushed through Congress. House Democrats, though, want to extend the $600 per week subsidy for unemployment benefits through January 2021. This was a central piece of the HEROES Act.

It seems likely that Congress will continue to subsidize unemployment benefits, but not to the tune of $600 per week. The Washington Post reported that a compromise of $200 per week to $400 per week, rather than $600, is possible.

There has also been discussion of a “back to work bonus.” Sen. Rob Portman (R-Ohio) has proposed giving individuals who return to work a bonus of $450 per week. Rep. Kevin Brady (R-Texas) has introduced the Reopening America by Supporting Workers and Businesses Act, H.R. 7066, which would allow a hired worker who was on unemployment to keep two weeks of enhanced unemployment benefits ($1,200) as a hiring bonus. Although it’s possible that one of these ideas could be included in the next COVID-19 response bill, it seems unlikely considering McConnell’s goal of keeping the fiscal impact in the ballpark of $1 trillion.

Paycheck Protection Program

The Paycheck Protection Program has already received $659 billion in funding from Congress. This funding came via the CARES Act and the Paycheck Protection and Healthcare Enhancement Act. Proponents of the program, which provides forgivable loans to businesses and other entities with fewer than 500 employees, argue that the program has been a success, but the initial rollout of the program was a mess and there are questions about the reliability of the data provided by the Small Business Administration.

As of June 30, the Paycheck Protection Program had approximately $130 billion left to expend in loans. According to the Small Business Administration, banks had lent $521.5 billion in Paycheck Protection Program loans, retaining 51.1 million jobs. The data show that 86 percent of loans were for $150,000 or less. Only 1.7 percent of the loans were more than $1,000,000. Three-quarters of the jobs retained were from employers who received loans of $1,000,000 or less. Again, though, there are questions about the reliability of these data.

The authority for the Paycheck Protection Program was extended via S. 4116 through August 8, at which point loans will no longer be available. Considering that some states are slowing their reopening and, in some cases, shutting down certain sectors of their economies as new COVID-19 cases rise, it’s likely that the Paycheck Protection Program will be extended and more money will be allocated for loans.

Direct Assistance Payments

The CARES Act included direct payments to tax filers under certain income thresholds. An individual tax filer with an adjusted gross income (AGI) of up to $75,000 received $1,200. A couple filing jointly with an AGI of up to $150,000 received $2,400. An additional $500 per child under the age of 17 was also available. These direct payments will be on top of a tax refund for tax year 2020. Apart from the income thresholds, the tax filer can’t be a dependent and must have a valid Social Security number.

There wasn’t a minimum income threshold to qualify for a direct payment, but there was an income phase-out. Individual tax filers with an AGI that exceeds $75,000 and joint filers with an AGI that exceeds $150,000 saw a $5 reduction per $100 of income over the threshold. Individuals with an AGI exceeding $99,000 and joint filers with an income exceeding $198,000 didn’t receive a direct payment.

The White House has asked for another round of direct assistance to Americans, which McConnell has expressed a willingness to consider. Past examples of direct assistance payments have not boosted consumption, and in any case, economic stimulus payments cannot create lasting wealth or real economic growth. Personal consumption expenditures did rise in May, but the personal saving rate jumped to 32.2 percent in April compared to 7.9 percent in January. Although the personal savings rate declined to 23.2 percent in May, it’s still far above the pre-pandemic rate. This suggests that people tended to save the money they received rather than spend it.

Still, direct assistance payments are viewed as politically popular. A better way to boost incomes would be to provide a payroll tax holiday for the rest of 2020. This would provide a nearly 8 percent pay increase for individuals, and would let employers keep the payroll tax that they would normally pay to help rebuild their business as they try to recover to COVID-19.

State and Local Bailouts

As our friends at Americans for Prosperity have noted, Congress has already allocated $1.148 trillion to state and local governments. We should note that significant sums of this spending are programmatic, such as unemployment, Medicaid, and the Supplemental Nutrition Assistance Program (SNAP). However, the money allocated also includes the $150 billion Coronavirus Relief Fund (CRF), which provides aid to state and local governments for costs related to the pandemic.

Partial economic shutdowns mandated by governors, however, have caused revenues to decline. In April, the National Governors Association asked Congress for $500 billion in relief. House Democrats doubled that request in the HEROES Act, allocating $1 trillion for states. A bipartisan group of senators, including Bill Cassidy (R-La.) and Cindy Hyde-Smith (R-Miss.), have introduced the SMART Act, S. 3752, which would provide $500 billion federal funds to states for COVID-19-related expenditures and to make up for some lost revenue.

The vast majority of states have reserve funds, also known as “rainy day” funds, to help states get through tough economic times. Those sources are already being tapped to help with the revenue losses from partial economic shutdowns. Federal programs through the Municipal Liquidity Facility have provided another $377 billion in liquid assistance. The Federal Reserve has also made $4.5 trillion available for lending to state and local governments, in addition to corporations, as part of the CARES Act.

Governors partially shut down their economies, allowing only businesses deemed “essential” to operate. If Congress bails out state and local governments, there will be an incentive for governors to, once again, partially shut down their economies if they know that Congress will rescue them.

Business Liability Shield

A liability shield for businesses and, possibly, medical providers has been a focal point of McConnell and Republicans since before states began reopening their economies. FreedomWorks has also been broadly supportive of a liability shield for businesses and medical providers. For example, we released a letter of support for the Coronavirus Public Safety and Economic Recovery Act, H.R. 6664, introduced by Rep. Tim Burchett (R-Tenn.).

This type of policy is critical to successful reopening. There will undoubtedly be a wave of lawsuits aimed at businesses in which claims are made that a customer or employee contracted COVID-19. Such lawsuits will be costly for businesses, particularly small businesses, that are trying to get back on their feet. A liability shield would offer protection from these types of lawsuits to businesses that take certain measures to keep their employees and customers safe as they reopen.

There are questions about whether a liability shield that preempts state laws violates the Consitution and the core tenets of federalism. Sensing the need, some states, such as Georgia and Utah, have already passed liability shields. Whether McConnell is envisioning this approach or a softer approach that makes federal dollars available to states that enact a liability shield that meets specific requirements obviously remains to be seen, but it’s hard to see how another COVID-19 response bill gets done without something on this issue.

Surprise Billing

The White House and a bipartisan group of lawmakers have been trying to get language to address “surprise” medical bills in almost any legislative vehicle they can going back to the end of 2019. House Energy and Commerce Committee Chairman Frank Pallone (D-N.J.) and Ranking Member Greg Walden (R-Ore.) and Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-Tenn.) want to set regional benchmark prices for out-of-network providers, while other proposals would mandate third-party arbitration between health providers and insurance companies.

As we’ve explained before, part of the problem as it relates to “surprise billing” is that the health insurance companies responded to the so-called “Affordable Care Act,” better known as “ObamaCare,” by narrowing their provider networks to lower costs. Health insurers did this because of the costly mandates that were imposed by ObamaCare. The rate-setting proposal pushed by Alexander, Pallone, and Walden does nothing to address the underlying issue of COVID-19 and would likely cause shortages of access to medical care in the regions they are trying to help.

As FreedomWorks’ Josh Withrow explained at The Washington Times in February, “This is a classic sort of technocratic fix that entirely ignores how markets actually function.” The proposal pushed by Alexander, Pallone, and Walden “will likely lead to higher prices for hospital services, reductions in access to care or a mixture of both.”

Given the track record, we’d say it’s unlikely that language imposing rate-setting will be included in the next COVID-19 response bill. We hope it’s not included. That said, it’s still possible.

Telehealth Services

One of the features of the Coronavirus Preparedness and Response Supplemental Appropriations Act was the language that increased access to telehealth services for Medicare beneficiaries. Telehealth services allow patients to consult with their doctors from their home or other remote location. This is vital to protect vulnerable patients, especially the elderly, in a health crisis, and it is clear that the expansion of telehealth services should be made permanent.

Sens. Brian Schatz (D-Hawaii) and Roger Wicker (R-Miss.) recently led a letter to McConnell and Minority Leader Chuck Schumer (D-N.Y.), signed by a bipartisan group of 28 senators, that urges leadership to include language to make the telehealth provisions permanent in the next COVID-19 relief bill.

“Congress should expand access to telehealth services on a permanent basis so that telehealth remains an option for all Medicare beneficiaries both now and after the pandemic,” the letter states. “Doing so would assure patients that their care will not be interrupted when the pandemic ends. It would also provide certainty to health care providers that the costs to prepare for and use telehealth would be a sound long-term investment.”

FreedomWorks is supportive of this effort. A letter from 30 senators of vastly varying ideologies is hard to ignore. It’s possible that language making the expansion of telehealth services permanent for Medicare beneficiaries will be included in the next COVID-19 response bill. It may be one of the few good provisions in the legislation.