Lawmakers struggle to reach deal on new COVID relief package

President Trump and congressional leaders are struggling to ink a deal Monday that would restart a stalled emergency small-business lending program that ran out of money last week.

The two stumbling blocks are Democratic demands for a $30 billion national coronavirus testing program and $150 billion to fund state and local governments that have seen costs soar and revenues drop because of the coronavirus pandemic.

Senate Majority Leader Mitch McConnell (R-Ky.) told colleagues on a weekend conference call that the deal would not include new money for state and local governments. But that’s a bitter pill for Senate Democratic Leader Charles Schumer, whose home state of New York has been hit harder than any other by the pandemic.

New York Gov. Andrew Cuomo (D) last month ripped the state funding allocation in the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act approved by Congress as “terrible for New York.”

McConnell on Monday accused Democrats of “holding up” a deal, though he expressed optimism an agreement would be reached before a special pro forma session set up Tuesday.

“At this hour, our Democratic colleagues are still prolonging their discussions with the administration, so the Senate regretfully will not be able to pass more funding for Americans’ paychecks today,” McConnell said on the Senate floor before scheduling an emergency pro forma session for 4 p.m. Tuesday.

The GOP leader later told reporters that negotiations would continue. “We’re getting closer, and hopefully we’ll have an agreement sometime later today,” he said.

Speaker Nancy Pelosi (D-Calif.) told her Democratic colleagues in a conference call Monday afternoon that if a deal came together Monday evening, the House would vote Wednesday, according to a lawmaker familiar with the call. If an agreement didn’t emerge until Tuesday, the chamber would vote Thursday, the source said.

House Majority Leader Steny Hoyer (D-Md.) in a note sent to colleagues Sunday advised “a recorded vote on the interim legislation is likely in the House this week,” which would require a majority of the House to show up in Washington.

Schumer on Monday highlighted Democrats’ push for a national testing program but made no mention of the Democratic demands for state and local governments.

“Senate Democrats are fighting for our $30 billion plan for a comprehensive national testing strategy. Because we need major new investments to bolster the supply and manufacturing chain and significantly expand free testing for all, reporting, and contact tracing,” he wrote on Twitter.

Treasury Secretary Steven Mnuchin, who has been the point person in negotiations with Schumer, said Sunday that both sides have agreed on $300 billion in new money for the Small Business Administration’s Paycheck Protection Program as well as $50 billion for the agency’s Economic Injury Disaster Loan (EIDL) program.

The EIDL program provides direct loans to small businesses instead of having them work through community banks and credit unions.

Mnuchin said the two sides had also agreed to $75 billion in new money for hospitals, a step down from Democrats’ initial demand for $100 billion.

But the Treasury secretary said Trump wants additional money for states in “the next bill,” noting that states have received only half of the $150 billion appropriated to them through the CARES Act.

A person involved in the negotiations said Monday afternoon that both sides were still talking and that Democrats had not backed down from their demand for more state and local money.

Schumer initially predicted that negotiators could reach a deal by the early part of last week, and he and Pelosi worked directly with Mnuchin to cut a quick deal. But the Democratic leaders have been unable to drive a wedge between Trump and GOP leaders in Congress, even though the prolonged negotiations resulted in the small-business lending program running out of its $349 billion appropriation on Thursday.

By digging in, Republican leaders are convinced they have a powerful talking point to use against Democratic candidates in the fall election.

Sen. Cory Gardner (Colo.), one of the Senate’s most vulnerable Republicans, on Monday blasted Democrats for letting a popular program that encourages employers to keep workers on the payroll run dry.

“We ran out of money in a fund that was approved unanimously two, three weeks ago, and now they’re holding it up? You look at how many millions and millions of jobs have been saved by the Paycheck Protection Program, and they would rather play politics,” Gardner said of Democratic leaders Monday morning during an interview on “The Hugh Hewitt Show.” 

Schumer is betting that Republicans will bend on money to state and local governments given that some GOP governors want money for their states.

The National Governors Association, led by Republican chairman Larry Hogan, the governor of Maryland, earlier this month called on Congress to allocate an additional $500 billion to state and local governments.

On Monday, Republican Sen. Bill Cassidy (La.) and Democratic Sen. Bob Menendez (N.J.) outlined a bipartisan plan to create a $500 billion State and Municipal Aid for Recovery and Transition fund to help state and local governments.

One possible compromise on state rescue funds would be for the Federal Reserve to step in and backstop municipal loans for smaller governments, as it has for corporations now facing liquidity shortfalls.

Schumer on Monday announced that he spoke with Federal Reserve Chairman Jerome Powell to open up the Fed’s lending program to nonprofit organizations, cities and counties.

The Democratic leader said he “impressed on Fed Chair Powell that the population threshold for cities and counties to access the Municipal Liquidity Facility was way too high” and received assurance the Fed would “make the program directly accessible to more cities and counties.”

Even if Trump, Mnuchin and congressional leaders reach a deal for a $370 billion to $400 billion interim package by Monday night or Tuesday midday, it would still need unanimous consent from all 100 senators to pass legislation during Tuesday’s pro forma session.

McConnell on Monday said he would not know whether he could secure unanimous consent until he’s vetted the legislative package with his conference. GOP senators have expressed opposition to providing tens of billions of dollars in rescue funding to states, arguing they have the ability to raise taxes on their own.

“We won’t know whether we’ll be able to clear it by U.C. until we have a product,” he told reporters.

There’s also the challenge of passing it in the House, where Rep. Thomas Massie (R-Ky.) a libertarian conservative, says he will force a formal roll-call vote. 

Democratic leaders passed the CARES Act over Massie’s procedural objection on March 27 by ruling a quorum was present in the chamber and therefore the bill could pass by voice vote, even though it did not appear there were nearly enough members to do so.

This week, Pelosi plans to get around Massie’s objection by holding a recorded vote, as Hoyer indicated Sunday.

—Mike Lillis and Scott Wong contributed. Updated at 7:42 p.m.