Momentum for Covid-Relief Bill Fizzles

By Yuval Rosenberg

Congress Buys More Time for Covid-Relief Deal, but Talks Are
Going ‘Nowhere’

The House voted 343 to 67 Wednesday to approve a one-week
measure that would keep the government funded until December 18,
providing Congress with a bit more time to hash out a full-year
funding bill and perhaps finalize an elusive Covid-relief
package.

The Senate is expected to vote on the spending bill as soon ass
Thursday.

The path toward a coronavirus package remains far less certain,
clouded by competing proposals and continuing disagreement over key
provisions.

Treasury Secretary Steven Mnuchin jumped back into the
negotiations late Tuesday, with a $916 billion proposal that is
slightly larger than the $908 billion one currently under
discussion by a bipartisan group of centrist lawmakers.

Mnuchin said the proposal has the support of Republican leaders
including Senate Majority Leader Mitch McConnell (R-KY), who had
previously offered a smaller package worth about $500 billion.

Democratic leaders said unified GOP support for a larger
proposal was a sign of progress but were quick to criticize the
details — especially the absence of any money for supplemental
federal unemployment benefits, which in the centrist package are
provided at $300 per week for four months. Instead, the White House
proposes to send one-time payments of up to $600 to most Americans,
at a cost of $164 billion, while spending $140 billion less on
unemployment aid relative to the bipartisan proposal.

House Speaker Nancy Pelosi (D-CA) and Senate Democratic Leader
Chuck Schumer (D-NY) said in a joint
statement that they were concerned that White House
involvement could undermine negotiations.

“While it is progress that Leader McConnell has signed off on a
$916 billion offer that is based off of the bipartisan framework,
the President’s proposal must not be allowed to obstruct the
bipartisan Congressional talks that are underway,” they said.
“Members of the House and Senate have been engaged in good-faith
negotiations and continue to make progress. The bipartisan talks
are the best hope for a bipartisan solution.”

The Democratic leaders also made clear that they rejected the
White House proposal to spend less on unemployment aid: “The
President’s proposal starts by cutting the unemployment insurance
proposal being discussed by bipartisan Members of the House and
Senate from $180 billion to $40 billion. That is unacceptable.”

Major issues still unresolved: Mnuchin’s proposal
includes provisions on issues that have stymied negotiators so far
— liability protections for businesses, schools and hospitals that
Republicans says are essential and funds for state and local
governments that Democrats insist are needed to avoid layoffs and
help pay for vaccinations. But there’s no sign that either side is
willing to give way on their demands, or their opposition to the
other side’s requirements.

More details on the bipartisan $908 billion plan: The
release Wednesday of more details from the $908 billion centrist
proposal did little to change the picture. Under that
still-developing plan, state and local governments would receive
$160 billion, and businesses would receive liability protections. A
document outlining the details refers to agreements in principle on
the issues, but only insofar as they allow “good faith
negotiations” to continue, according to
The Hill.

McConnell’s offer on Tuesday to drop both issues from the
negotiations — no liability shield and no state and local money —
was quickly rejected and seen by at least one lawmaker as a sign
that the Senate leader isn’t really interested in reaching an
agreement. “Mitch doesn’t want a deal,” Sen. Joe Manchin (D-WV)
told reporters. “You have to have both.”

McConnell blamed Democrats for the lack of progress. “At every
turn they’ve delayed, deflected, moved the goalpost and made the
huge number of places where Congress agrees into a hostage ... for
the few places where we do not agree,” he said on the Senate
floor.

The bottom line: Taking stock of where
negotiations stood Wednesday afternoon, Politico’s Playbook team
said talks were going “nowhere.” Just nine days before Congress is
scheduled to leave town, “there’s no bill, no sense of who is in
charge, no breakthroughs on any long-held policy disputes,” they

said.

Quote of the Day

“We essentially are going to make a choice over the next two
weeks over whether we want to have a double-dip recession or
not.”

– Joe Brusuelas, chief economist at audit and
tax firm RSM, as quoted by
The Hill.

CBO Report Lists 83 Options for Reducing the Deficit

The federal budget deficit in October and November, the first
two months of fiscal year 2021, totaled $430 billion, an increase
of $87 billion, or 25%, over the same period last year, the
Congressional Budget Office estimated
on Tuesday. Spending rose by 9% while revenues fell by 3%.
Individual income tax and payroll tax receipts dropped by 4% while
corporate income taxes decreased 13%.

Deficits have risen dramatically under President Trump, climbing
from $585 billion in fiscal year 2016 to nearly $1 trillion in
2019. Emergency coronavirus relief in fiscal year 2020 lifted a
deficit that was already projected to top $1 trillion to a record
$3.13 trillion.

While deficit reduction has become less of a priority as the
nation grapples with the pandemic and its economic toll, CBO on
Wednesday issued the latest edition of a periodic report laying out
dozens of options — 83 in all
this time — for reducing the deficit over the coming decade.

Some of the options would save relatively little, such as
limiting enrollment in the Department of Agriculture’s conservation
programs, which is projected to save between $3 billion and $8
billion over the decade. Others would save or raise hundreds of
billions of dollars:

  • Reducing funding for international affairs programs ($117
    billion)
  • Setting caps on federal spending for Medicaid ($353
    billion to $959 billion)
  • Cutting the Defense Department’s budget ($317 billion to
    $607 billion)
  • Increasing the payroll tax cap for Social Security ($647
    billion to $1.024 trillion)
  • Eliminating itemized deductions ($1.718
    trillion)
  • Imposing a 5% Value-Added Tax ($1.82 trillion to $2.83
    trillion)

Most of the options in the report would save $10 billion or more
over 10 years.

In a statement accompanying the report, CBO Direct Phillip
Swagel warns that lawmakers will need to make significant policy
changes to put the federal budget on a sustainable long-term path.
“Beyond the coming decade, the fiscal outlook is daunting,” he
says.

CBO notes that the options “are intended to reflect a
range of possibilities rather than to rank priorities or present a
comprehensive list” and it says that the inclusion or exclusion of
an idea does not represent an endorsement or rejection. CBO’s
website includes a search tool
that allows users to choose options based on potential savings or
budget category.

Bezos and Musk, World’s Richest Men, Qualify for Anti-Poverty
Tax Break: Report

David Kocieniewski of Bloomberg News reports that the world’s
two richest men, Amazon founder Jeff Bezos and Tesla founder Elon
Musk, are eligible for a tax break intended to help poor
communities. That’s because the sites of their privately owned
space companies, Blue Origin and SpaceX, were designated as
Qualified Opportunity Zones as part of a much-criticized program
that was part of the 2017 tax cuts:

“The billionaires’ qualification for the federal benefit,
which hasn’t been previously reported, enables them to avoid
capital gains taxes on money they steer into opportunity zone
operations. Those investments can then grow tax-free, and if the
billionaires keep their investments in place for a decade, any
appreciation can be shielded from federal capital gains taxes
forever.”

Another billionaire, Richard Branson, also stands to benefit
from the program, Kocieniewski says. Brett Theodos, a community
development expert who has studied the opportunity zone program for
the Urban Institute, tells Bloomberg: “It would be a gross misuse
of scarce resources to be subsidizing billionaires to go out into
space when there are people struggling with real problems here on
earth.”


Read the full story at Bloomberg News.

A terrible year just got even
worse: The Campbell Soup company
warned that it’s facing "supply constraints" in
its cookie division, meaning holiday-season shortages of Pepperidge
Farm cookies.

Send your tips and feedback to yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis