• Allon Advocacy

The Ink Isn’t Dry on the Phase Three Stimulus, But D.C. Is Already Planning Phase Four

House leaders from both parties -- Speaker Nancy Pelosi (D-Calif.), Minority Leader Kevin McCarthy (R-Calif.) and Majority Leader Steny Hoyer (D-Md.) celebrate the enrollment of the phase three COVID-19 stimulus bill at the U.S. Capitol last week.

Washington policymakers have approved three COVID-19-related spending packages totaling well over $2 trillion over the last several weeks. While there was the typical Beltway drama as the finishing touches were being put on the most recent – and most expensive – package, both chambers of Congress approved the bill unanimously in a rare showing of bipartisan unity.  But given where the two parties are starting, negotiating a fourth piece of legislation – already something leaders in both parties are signaling will be necessary – might not be as easy and could produce some real fireworks.

House Speaker Nancy Pelosi (D-Calif.) has so far taken the lead on phase four for Democrats, outlining what the party’s lawmakers expect to see in a fourth bill and how those provisions would differ from what already has been signed into law. Speaker Pelosi last weekend said, “Action so far has been about mitigation … Next, we’ll go from emergency mitigation to recovery … to grow the economy and create more jobs.”

What the Speaker has proposed so far has not been particularly well received with the GOP. The main point of contention—at this moment at least—is the Speaker’s desire to repeal the cap on state and local tax (SALT) deductions that was included in the 2017 Tax Cuts and Jobs Act (TCJA). (The TJCA limited SALT deductions to $10,000 per household per year, resulting, according to the New York Times, in “net tax increases for a slice of high-earning residents of areas with high income or property taxes, which tend to be concentrated in large metropolitan areas like New York City and high-tax states like New Jersey and California.” In other words: a lot of Speaker Pelosi’s constituents.)

The Democratic-led U.S. House already has passed legislation temporarily repealing the SALT limitation. Last December, lower chamber lawmakers voted largely along party lines for the Restoring Tax Fairness for States and Localities Act, which would have suspended the $10,000 cap for 2020 and 2021. The Republican Senate has not – and will not – take that bill up for consideration.

But now, with a pandemic spreading quickly throughout the country, not only does Speaker Pelosi want to repeal the SALT limitation for future tax years, she wants to make the repeal retroactive. That would mean taxpayers in high-tax jurisdictions could get refunds from previous years.  

Republicans are having none of it—again, since this idea would benefit taxpayers in traditionally-Democratic jurisdictions more than those in “red” states.

A spokesperson for Senate Finance Committee Chair Charles Grassley (R-Iowa), whose panel oversees all tax-related legislation, told the reporters this week that the idea is “a nonstarter.” According to Politico, economists and tax analysts from “across the political spectrum” also do not like the Speaker’s SALT plan because they don’t believe it would provide much of an economic boost.

Other provisions on Speaker Pelosi’s phase four wish list also could run into some opposition, at least at the outset of negotiations. She also wants more direct cash payments to taxpayers in the next bill, and in an interview with The New York Times, said a fourth bill should “bolster pensions and medical leave provisions” and “ensure that other aspects of treatment for the coronavirus, beyond the initial test, would be covered by the government.” Republicans, on the other hand, think the unemployment and medical leave provisions that Congress passed just last week should be given time to work.

Democrats also want additional funding to secure more equipment for health workers on the front lines and ventilators for hospitals—a proposal that likely will win broad bipartisan support, particularly after President Trump recently endorsed the notion of giving nurses hazard pay during the pandemic.

Speaker Pelosi also likely will go back to many of the priorities House Democrats outlined when lawmakers were debating the third stimulus bill. Those provisions include everything from eliminating U.S. Postal Service debt and new environmental regulations for the airline industry to increased aid for the renewable energy industry and temporary reprieves for consumers from paying mortgages, car payments, and credit card bills.

The House leader is not the only lawmaker with ideas, of course. CNBC reports that Alaska’s Republican senators “want to clarify cruise lines’ eligibility for government aid” while other lawmakers want “to include funding for the oversight functions of the $2 trillion plan” that was “erroneously excluded from the original proposal.” Sen. Joni Ernst (R-Iowa) wants more money to develop vaccines. And, according to Newsweek, Rep. Madeleine Dean (D-Penn.) wants more student loan debt to be forgiven while Sen. Marsha Blackburn (R-Tenn.) wants more funding to increase the U.S. production of active pharmaceutical ingredients.

Speaker Pelosi and the White House do agree on at least one item: infrastructure spending. On Tuesday, President Donald Trump tweeted, “With interest rates for the United States being at ZERO, this is the time to do our decades long-awaited Infrastructure Bill.” According to The Hill, Speaker Pelosi on Monday told reporters, “There are infrastructure needs that our country has that directly relate to how we are proceeding with the coronavirus … And we would like to see in what comes next something that has always been nonpartisan, bipartisan, and that is an infrastructure piece that takes us into the future.”

The president might be the only one in the White House seriously thinking about infrastructure, however. As MarketWatch reported, Beacon Policy Advisors “warned” that while infrastructure is “naturally a policy area of interest” for the president there are “no clear infrastructure proponents as of now” who have his ear on this topic. Indeed, Treasury Secretary Steve Mnuchin, who negotiated the third stimulus bill with Senate Minority Leader Chuck Schumer (D-N.Y.), has not yet said much about a fourth piece of legislation except that it could include hazard pay for first responders and that he is prepared to ask Congress for additional funding to assist small businesses if the first tranche of funding provided in the phase three bill proves to be insufficient based on demand.

As far as timing of a fourth bill, Speaker Pelosi said this week that she wants lawmakers to vote on the legislation as soon as they come back from recess on April 20. The House Democratic caucus is meeting virtually this Friday and throughout the recess to discuss exactly what should be in the legislation.

Whatever the House wants will have to go through the upper chamber, of course, and Senate Majority Leader Mitch McConnell (R-Ky.) has so far been noncommittal about a fourth spending package. In an interview this week, he said lawmakers should wait to see how the third stimulus is working. He also said that when (or if) the Senate reconvenes in April the chamber “will go back to judges … My motto for the rest of the year is leave no vacancy behind.”

And then there is the White House. Despite the president’s calls for infrastructure spending, according to CNBC, top presidential aides have said “the White House is not currently planning for a fourth emergency coronavirus response proposal” since it is focused on implementing the unprecedented $2 trillion relief package passed last week.”

Not every member of the Republican caucus is denying the possibility of a fourth stimulus, however. In an ironic twist, Sen. Ted Cruz (R-Texas), architect of the October 2013 16-day government shutdown aimed at reducing government spending, has told Bloomberg Television, “If the crisis continues for substantially longer I have no doubt that the Congress will have to act again.”

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