News & Media

Coronavirus May 7 Update: New Health Fund Proposed to Manage Future Pandemics, New Bill Offers States More Flexibility, and the Latest From the EU on Economic Recovery

Thursday, May 7, 2020

New health fund proposed to respond to future pandemics 

As the federal cost of the COVID-19 pandemic approaches $3 trillion, lawmakers are mulling the idea of creating a new mandatory spending account for disease outbreaks and other emergencies. 

Oklahoma Rep. Tom Cole, R-Okla., the top Republican on the House Labor-HHS-Education Appropriations Subcommittee, said he was interested in setting up a "health defense" fund that would operate like the Pentagon's Overseas Contingency Operations account. That means the funding would be exempt from discretionary spending caps imposed by Congress. 

"I think it's a very good idea," Cole said, adding he has discussed a similar idea with Subcommittee Chairwoman Rosa DeLauro, D-Conn. 

Former Centers for Disease Control and Prevention Director Tom Frieden proposed the fund during a subcommittee hearing Wednesday on the federal response to the pandemic. 

Frieden, now president and CEO of the health care organization Resolve to Save Lives, said such a fund would ensure that the United States would be better prepared for viral or biological events without crippling other parts of the budget. 

"What we've seen is if it's in discretionary, no matter how well intentioned everyone is, there are going to be problems. If it's in mandatory, no matter how fixed we think it is, it isn't," Frieden said. "What we've suggested is something similar to the Overseas Contingency account that allows for a professional judgment of what's needed." 

The creation of such a fund would not come without risks, as the history of the Pentagon's overseas account has shown. Since 2001, the war account has averaged about 20 percent of total Pentagon spending each year, up from 2 percent from 1970 through 2000, according to a 2018 report from the Congressional Budget Office. 

And from 2006 to 2018, more than $50 billion of the fund, on average, has been spent each year on "enduring activities" instead of temporary overseas operations, as intended, the CBO said. In effect, the war account has served in part as a slush fund that allows the Pentagon to boost military spending beyond the discretionary limits of budget laws. 

In any event, the federal response to the coronavirus pandemic has not been financed by cutting other programs. Congress is simply borrowing the money and driving up deficits. Mary Ellen McIntire has more on the appropriations hearing here

The bottom line: The fate of a proposed "health defense" fund could be a wild card. 

Many obstacles to agreement on another relief package 

The number of sticking points threatening to tie up a new coronavirus relief package deal is multiplying fast. 

Difficult decisions await on issues championed almost solely by one party: President Donald Trump wants to cut payroll taxes and block funding for so-called sanctuary cities, which refuse to cooperate with federal authorities to enforce immigration laws. 

Republican lawmakers insist on liability protections for businesses as they reopen and some want to restrict unemployment benefits. Democrats are pushing relief for undocumented immigrants and to require states to conduct the presidential election with mail-in ballots. 

And the issue of how and whether to aid state and local governments continues to divide the parties (See item 3). All of which sets the stage for difficult negotiations in coming weeks as businesses, unemployed workers and families plead for help. Lindsey McPherson has the rundown of major sticking points here

New bill could offer flexibility for states’ use of aid

Some Senate Republicans are warming to giving states the flexibility to use federal aid to replace lost revenue as advocated by Democrats and some governors. 

Sen. John Kennedy, R-La., who introduced a bill (S 3608) offering flexibility this week, expressed confidence Wednesday that if his bill goes to the floor "it will pass." 

At issue is the $150 billion in aid to state and local governments provided in the $2 trillion economic rescue package passed in March. Under the law (PL 116-136), that aid can only be used for pandemic-related costs, not to replace state and local revenue lost due to the economic shutdown. 

Kennedy said his proposal responds to complaints from governors that "there are strings attached" to the aid. Governors say they "can't use the money to plug holes in their budget. So, the obvious answer it seems to me is to give them the authority, and my bill would do that," he said. 

Critics say allowing the aid to be used to plug revenue holes could reward states that have mismanaged their finances. Kennedy said his bill "would not allow a state to take the money and bail out a pension plan that has been mismanaged." 

And while Democrats have pushed for flexibility, they also want as much as $1 trillion in new state and local aid. Paul M. Krawzak has the full story here

Support grows to change provisions of SBA loans 

Bipartisan support is growing for a fix to the massive new small-business lending program created in March that would let recipients spend less on payroll and still qualify for debt forgiveness. 

Businesses, including many restaurants and hotels, have complained that the forgivable loans offered under the so-called Paycheck Protection Program come with too many strings attached. 

The Small Business Administration, which runs the program, has required that at least 75 percent of the loan money be spent on payroll to meet a congressional objective of keeping workers employed during the COVID-19 pandemic. 

But restaurants, which can operate with skeletal staff, often find that lease or mortgage payments make up 50 percent of their monthly costs, according to the National Restaurant Association. And lawmakers have begun to recognize the problem. 

A bipartisan group of 21 senators, led by Sens. John Cornyn, R-Texas, and Bob Menendez, D-N.J., sent a letter to the administration Wednesday seeking to raise the 25 percent limit on non-payroll expenses to at least 50 percent, as the main restaurant group has advocated. David Lerman has all the details here.