Gang of Eight Releases Two Bills. As has been widely reported, yesterday evening the bipartisan “Gang of Eight” Senators released two legislative proposals (text and summaries attached), the first of which includes about $748 billion in COVID-19 relief measures that have strong bipartisan consensus support, as outlined below. In a nod to the reality that nothing approaching consensus on either state aid or liability protections currently exists, the second bill splits those items off, which makes sense given that it is increasingly clear that Congressional leadership will have to address both items, or neither item, in an end of year package.
The broad framework of the $748 billion package released yesterday includes items that have been under discussion for the last 6 months, as follows:
- $300 billion 2nd round of small business payroll grants (PPP) (including clarification that forgiven loans are tax deductible)
- $180 billion Extended unemployment insurance with a $300 additional weekly payment for up to 16 weeks
- $82 billion Aid for schools (also includes forebearance on federal student loans through April 2021)
- $56 billion Healthcare provider funding; vaccine development and distribution; grants to states for testing and tracing
- $45 billion Aid for the transportation sector, including airlines, airports, and Amtrak
- $30 billion Agriculture assistance and increase in SNAP benefits for four months
- $25 billion Emergency Rental Assistance (coupled with an extension in the eviction moratorium to Jan 31)
- $10 billion Child care grants
- $10 billion Postal service
- $10 billion Broadband deployment
Covid-19 Relief Negotiations. While the aforementioned “Gang of Eight” proposals probably sets a ceiling on what COVID-19 relief measures can be agreed upon in the next few days, it is now up to the four corners of Congressional leadership – Leader McConnell, Speaker Pelosi, Leader Schumer and Leader McCarthy – to ultimately determine what the path forward is. Thorny issues remain on all sides. As mentioned, a major hurdle involves how state and local aid, along with liability protections, will be resolved; the increasing likelihood is that both will be dropped in any agreement that emerges, but live to fight another day as President-elect Biden has said any December Covid package is but a “down payment” on additional measures he will pursue upon taking office. It is also worth noting that there is money for states and localities embedded within the proposals described above (for schools; vaccine distribution; healthcare providers; rental assistance for example).
Beyond that additional challenges remain, both relating to some underlying policy differences that must be bridged (for example, on UI), as well as language carried over from the House-passed $3+ trillion HEROES Act that is disagreeable to Congressional Republicans. The latter represents the sort of issues presented in any major Congressional negotiation, and the differences are bridgeable if there’s a will to move forward on all sides, but that seldom happens quickly. There are also related bipartisan proposals (including a second round of stimulus checks) that remain in the discussion, but are less likely to be included when all is said and done. The next 48 hours will be critical as it will soon be time for cards to be laid on the table.
Omnibus Spending Bill. Congress bought itself another week of time with passage of a seven-day Continuing Resolution (CR) last Friday, meaning government funding now runs through December 18th. The single biggest challenge that remains on completing the omnibus may be larger dynamics around COVID-19 relief discussions, more on which follows below. If there is an agreement on COVID-19 measures, it is highly likely that the omnibus will carry it all. If Leadership fails to reach agreement on a meaningful COVID-19 package it remains to be determined whether an omnibus will move, or if Congress will in that instance default to a multi-month Continuing Resolution (CR) in lieu of an omnibus.
Spending Legislation. Putting that major caveat aside, Congressional Appropriators have made significant headway in resolving most of the thorniest issues that were slowing spending bill discussions down over the last few weeks, including issues related to spending caps. While a handful of outstanding differences remain, the omnibus bill, which encompasses 12 separate annual funding bills, is in pretty good shape and in the final stages of negotiation and drafting. Discretionary spending will total about $1.4 trillion, which is the previously agreed upon topline spending level for FY21. It is increasingly likely that all 12 regular funding bills will be included in any omnibus spending bill that is agreed to.
Policy Add-Ons. Should an omnibus spending bill be agreed to, a significant number of bipartisan policy measures may be attached to it, potentially including: energy legislation authored by Senators Murkowski and Manchin; healthcare provisions such as the HELP/E&C/W&M agreement on surprise medical billing/health extenders; a yet unreleased agreement between W&M and Senate Finance on tax extender legislation; and more.
NDAA. Speaker Pelosi signed the NDAA and presented the Conference Report to President Trump this past Friday. The President now has until December 23rd (ten days not counting Sundays) to sign or veto the bill. President Trump has repeatedly indicated that he intends to veto the bill, but both Houses of Congress passed the bill with strong, veto-proof majorities (335 votes in the House; 84 votes in the Senate), meaning that, for the first time during the Trump presidency, a veto override is likely (President Trump has previously issued eight vetoes, all of which have been sustained).
While the schedule remains unclear, we currently expect the House to schedule an override vote during the week of December 28th if the President does in fact veto the NDAA. While some Republicans will likely switch their position and vote to sustain the veto, we assess that there will still be enough bi-partisan votes to reach the two thirds required to override the veto. Leader McCarthy has already indicated that he will vote to sustain the veto, but House Republican Leadership is not expected to encourage Members to switch their votes. If the House overrides the veto, we expect the Senate to follow the House and schedule a vote shortly thereafter. Ultimately, we expect the NDAA to become law before the end of the 116thCongress, but the situation remains fluid. .
OUTLOOK/ANALYSIS. We remain optimistic that an end-of-year deal will ultimately be agreed to, but at this point it is still not a sure thing given competing pressures among the leaders. If Congress is to reach agreement and vote by Friday, when government funding is set to lapse, they need to move quickly to secure agreement and lock down text by tomorrow at the latest. If negotiations are moving along and Congress needs some more time to conclude them they can always buy a few more days with a short-term CR if necessary. However, any way you slice it, the next 48-72 hours are critical. One bright spot: while President Trump has in the past objected to major spending deals at the 11th hour, all signs point to his being ready and willing to sign whatever legislation Congress can agree to.