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COVID-19 Phase 4 Update: Senate to vote on skinny bill with prospects for a pre-election deal fading.

The Senate will vote on a revised version of Republicans’ “targeted relief package” (aka “skinny bill”).

The bill is formatted as an amendment to Majority Leader McConnell’s (R-KY) shell vehicle and entitled Delivering Immediate Relief to America’s Families, Schools, and Small Businesses Act (text | summary). This version is broadly similar to the “skinny bill” first released on August 17, but we have highlighted some key changes in our summary below.

The bill is largely a messaging exercise, as the measure needs 60 votes to advance, and we expect it will be blocked by Democrats. We do think Republicans will manage to muster over 50 votes, however, which theoretically enhances their leverage in negotiations. At a minimum, the vote intends to inoculate in-cycle members from the risk of backlash should no deal materialize.

While White House Chief of Staff Meadows was signaling renewed optimism at the start of the week that they can get to a deal, our view is more pessimistic. The key development of the last week is a tentative agreement that Mnuchin and congressional leaders have reached to avoid a government shutdown at the end of the month by passing a clean continuing resolution (CR)—likely to mid-December, though the exact date is still undetermined. This leaves negotiators without their most powerful, “cliff”-type action-forcing event. We still see the possibility that, if Republicans are unanimous and look confident, Democrats cave on some of their key asks; however, both sides seem to be tentatively concluding that they are prepared to head to the polls with no deal.

The one remaining “cliff” on the horizon is the September 30 expiration of airline employee protections under the CARES Act Payroll Support Program. Airline unions might move the needle with Minority Leader Schumer (D-NY) and other Democrats, but it’s not clear that will be enough to motivate action. The one other wildcard is the President himself, who could pivot at any time and embrace a larger bill closer to the $2 trillion that Democrats have laid down as a marker. But on the whole, we see less than a 30% chance of a deal at this stage.

Failure to reach a deal in Congress on additional fiscal measures may put renewed focus on monetary policy and Fed programs set up under CARES Act Section 4003, where Treasury still has considerable dry powder to deploy should credit conditions worsen materially.

Our high-level summary of the content of today’s bill follows below. For additional background on how we got here, see our archive of recent notes capturing major developments in “Phase 4” negotiations since early August.

Our summary.

At a high-level the bill includes:

  • Offsets. The bill includes a provision to provide $204 billion in offsets by reducing from $500 billion to $296 billion in the CARES Act Section 4003(a) and from $454 billion to $250 billion in Section 4003(b)(4). The provision would terminate the emergency authority and clawback any unused funds beginning next year. This title also repurposes $146 billion in unspent CARES Act small business funding.
  • Liability Protections. The provisions mirror the SAFE TO WORK Act included in the Senate HEALS Act, with just a few technical corrections.
  • Unemployment Insurance. Extension of Federal Pandemic Unemployment Compensation program at $300/week through December 27, 2020. This is an increase from the HEALS Act, which would have provided for $200/week through September 30 with a transition to 70% wage replacement thereafter through year-end.
  • Small Businesses Recovery(Estimated cost of $257.7 billion). Partially mirrors the Senate HEALS Act provisions with respect to Paycheck Protection Program changes and the establishment of the Second Draw Loan program. However, there are a number of updates:
    • With respect to streamlined PPP loan forgiveness for loans under $150,000, the skinny bill reduces the amount of time a loan recipient must retain records on good faith attestation from 3 years to 1 year.
    • With respect to the Second Draw Loan program eligibility
    • Reduces the revenue decline threshold from 50% to 35% from last year.
    • Removes a provision stating that businesses in NAICS Code 72 will be considered eligible if no single location employs more than 300 employees.
    • Provides for a maximum loan amount equal to 2.5X monthly payroll costs with a maximum loan value of $2 million.
    • With respect to additional appropriations:
      • Appropriates $257.64 billion for PPP and Second Draw loans.
      • Provides $10 million for the Minority Business Development Agency.
      • Does not include appropriations for the SBIC or 7(a) Recovery Sector Loans.
  • Postal Service. Provides $10 billion in funding for the Postal Service by amending the terms of the CARES Act so as not to require repayment, but that such funds can only be used if USPS has less than $8 billion in cash on hand.
  • Education. 
    • Authorizes emergency appropriations for scholarship-granting organizations (SGOs) in each state.
    • Provides two years of tax credits for contributions to SGOs based on legislation introduced by Senators Scott, Alexander, and Cruz (School Choice).
    • Would allow parents of K-12 students at public, private, or religious schools to use 520 plan funds for expenses like books, online materials, and tutoring as well as for educational expenses for parents who home school.
    • Authorizes short-term assistance to help childcare providers reopen.
  • Pandemic Preparation. 
    • Authorizes improvements and support for sustained onshore manufacturing surge capacity and capabilities to respond to public health threats.
    • Authorizes grants for the establishment of state stockpiles of medical products and supplies needed during a public health emergency.
    • Makes improvements to the Strategic National Stockpile by encouraging partnerships with those in the medical product supply chain to increase capacity.
  • CRF Extension. Extends the deadline to September 30, 2021, for state spending of already appropriated Coronavirus Relief Fund monies. Does >not provide additional flexibility or funding.
  • Charitable Giving. Increases the CARES Act above-the-line deduction for charitable contributions to $600 for individuals and $1,200 for joint filers.
  • Critical Minerals.Implements Senate Energy and Natural Resources Committee recommendations to reduce dependence on China for critical minerals.
  • Additional Appropriations.
    • HHS. Provides $31 billion for the Public Health and Social Services Emergency Fund for vaccine, therapeutic, and diagnostic development, and an additional $16 billion for testing.
    • Education. Provides $105 billion for the Education Stabilization Fund.
    • Farm Assistance. Provides $20 billion for additional farm assistance.
    • Fishers. $500 million to direct federal assistance to all manner of fishers, fishery participants, and communities affected by COVID-19.
    • Childcare. Provides $5 billion for the Child Care and Development Block Grant and $10 billion for Back to Work Child Care Grants.

Mindful is a publication from Mindset, a bipartisan public policy firm that blends advice, analysis, and advocacy to address the challenges and opportunities our partners encounter in Washington. Interested in working with Mindset? Get in touch.

Jeb Mason


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