News & Media
Coronavirus May 4 Update: Party Leaders Clash Over State Aid, Critics Question Lending Rules for New PPP, and Calls for Broadband Aid Gain Ground
Party leaders move even further apart over state aid
Aid to state and local governments has become the biggest ideological flashpoint in negotiations over the next round of coronavirus relief.
Speaker Nancy Pelosi upped the ante last week in a Democratic push for generosity. She said states and localities could need nearly $1 trillion in additional federal funding to cope with the COVID-19 pandemic.
That rough estimate, which projects needs over the next three to four years, suggests a rapidly mounting price tag for what would be the fifth relief package since the pandemic began. It would easily dwarf the $150 billion that states and localities received last month (PL 116-136).
The California Democrat said lawmakers were still assessing state and local needs and would await updated estimates. But based on preliminary forecasts over three to four years, she said at a news conference, "I've talked about almost a trillion dollars right there."
State and local officials have been clamoring for relief from the economic shutdown as they watch their tax revenue run dry. But conservative activists are fighting back, saying Congress should oppose federal "bailouts" for poorly managed states.
"Prior to the pandemic, many states had chronic structural fiscal problems not related to COVID-19," officials from Americans for Prosperity and Concerned Veterans for America wrote in a letter to congressional leaders. "States that have spent lavishly, borrowed excessively, and ignored looming pension debt should not use the current crisis to shift the cost of those bad policy decisions onto taxpayers in other states."
Senior Republican lawmakers have echoed that concern and raised the stakes. Senate Majority Leader Mitch McConnell, R-Ky., and House Minority Leader Kevin McCarthy, R-Calif., said any new aid package must include liability protection for employers who reopen their business during the pandemic.
"We cannot let a second pandemic of opportunistic litigation enrich trial lawyers at the expense of Main Street and medical professionals," McConnell and McCarthy said in a joint statement. "Senate and House Republicans agree these protections will be absolutely essential to future discussions surrounding recovery legislation."
Democrats denounced the new condition on aid. "This idea of an absolute blanket shield from any legal responsibility for businesses is going to be a non-starter, I think, on both sides of the aisle," said Sen. Richard Blumenthal, D-Conn., in a conference call with reporters Friday. You can read more about Pelosi's push here.
The White House, meanwhile, sought to pump the brakes on a new aid package Sunday. "There's kind of a pause period right now," National Economic Council Director Larry Kudlow said on CNN's "State of the Union" program. "Let's see how it's doing as we gradually reopen the economy."
And President Donald Trump himself said last week he might push for restrictions on aid to state and local governments serving as "sanctuary" jurisdictions that refuse to cooperate with federal immigration enforcement authorities. Bringing in contentious immigration-related policy riders could be a poison pill for Democrats in any relief bill talks.
The bottom line: The widening gulf on state and local aid now stretches from zero to $1 trillion.
Lending rules for second round of PPP loans criticized
A Trump administration effort to favor small lenders over big banks in the second round of the so-called Paycheck Protection Program is triggering accusations of political gamesmanship.
The second round of the program, which offers forgivable loans to small businesses, was modified to ensure small lenders got access to about $60 billion of the $310 billion in new loans (PL 116-139). And the administration took additional steps to favor small lenders, such as by restricting access to the web portal used by banks to submit loan applications.
The moves came after criticism that richer companies with access to big banks scooped up loans they didn't really need in the first round of the program at the expense of struggling mom-and-pop businesses.
But Douglas Holtz-Eakin, president of the center-right American Action Forum and former chief economist of the Council of Economic Advisers under President George W. Bush, said the new push to shame larger companies into returning loans appeared misguided.
"I don't understand on the merits of it why that's a concern, because if the whole idea is to support employees and you have a lot of them, then that's a success," said Holtz-Eakin. "I thought it was wrong to call them out."
And Holtz-Eakin dismissed as "largely politics" the push by the Small Business Administration to give smaller lenders a leg up in PPP applications. "I think this has more to do with the administration positioning the president for his reelection than anything else," he said.
FiscalNote, parent company of CQ Roll Call, has received a loan under the Paycheck Protection Program. Jim Saksa has all the details here.
Calls for broadband aid gain ground
Expanding access to broadband is winning support from both parties as a possible addition to the next round of coronavirus relief.
House Democrats last week renewed their push for an $86 billion broadband expansion. If the coronavirus pandemic stretches into next fall, they said, students without internet access risk being left behind if schools remain closed.
"If we are going to experience ... another round of this virus, our children are apt to be out of school again next year," said House Majority Whip James E. Clyburn, D-S.C., who is chairman of the House Democratic Rural Broadband Task Force. "And if that were to happen, the only way you can have online learning is with broadband."
Clyburn, a former public school teacher, said just 34 percent of the communities in his district are tied to the internet. "And I can tell you what happens when a child falls two years behind in school; that child will never graduate high school and will never become a productive citizen as a rule," he said.
And Democrats appear likely to see support from across the aisle. McCarthy acknowledged that "broadband is a very good discussion," as part of the next pandemic relief package.
"I think broadband is an appropriate discussion for us to have regardless of whether we're doing an infrastructure bill or not," the California Republican told reporters. Jessica Wehrman and Jennifer Shutt have the full story here.
Oil industry wins lending access
The Federal Reserve on Thursday changed the terms for its Main Street Lending Program, making it easier for larger oil companies to borrow from a fund meant to help small and midsize businesses hurt by the coronavirus pandemic.
Before Thursday, eligibility for the loan program was limited to companies with no more than 10,000 employees and $2.5 billion in revenues. But the central bank announced it was revising its rules so that companies with up to 15,000 employees and $5 billion in revenues could apply for the loans.
The change comes after GOP lawmakers from oil states, such as Sens. Kevin Cramer of North Dakota, Ted Cruz of Texas, and Alaska's Lisa Murkowski, pushed the administration and central bank to aid oil companies. They wrote a letter to the Federal Reserve saying oil companies needed relief from tumbling prices and weakened demand because of the global economic slowdown.
"Assisting these companies could be the difference between maintaining our domestic energy production and workforce or shedding more U.S. jobs and returning to dependence on foreign sources of oil," the senators wrote.
The American Petroleum Institute, which represents more than 600 companies, has maintained it is not advocating for any special programs to be created for the industry. But Frank Macchiarola, a senior vice president at API, said oil companies should have the same access as other industries to the economic relief programs created by Congress.
"A return to economic growth is essential to fixing the demand decline that is negatively impacting this vital industry," Macchiarola said in a statement. Elvina Nawaguna has all the details here.