An arcane battle over emergency Federal Reserve powers is frustrating efforts to lock down an agreement on an almost $1 trillion COVID-19 economic relief package. Saturday's impasse is just the latest stumble in a partisan, monthslong fight, and feelings hardened as the Senate congregated for a weekend session.
Lawmakers on both sides said a provision by Sen. Pat Toomey, R-Pa., that would curb emergency Federal Reserve powers was the sticking point. Republicans are insisting on the Toomey plan, while Democrats are adamantly against it. A compromise was proving elusive, and the two sides seem stuck for the time being.
“That has to be resolved. And then everything will fall into place," said House Speaker Nancy Pelosi, D-Calif. “It's a very significant difference."
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Toomey defended his controversial provision in a floor speech, saying the emergency powers were designed to stabilize capital markets at the height of the COVID panic this spring and are expiring at the end of the month anyway. The language would block the Biden administration from restarting them.
Even Toomey said this week that his provision “could be seen as redundant," but neither he nor his Democratic adversaries were backing down from the fight, though compromise language was being shuttled back and forth.
At issue are Fed programs that provided loans to small and mid-sized businesses and bought state and local government bonds, making it easier for those governments to borrow, at a time when their finances are under pressure from the pandemic.
The Fed would need the support of the Treasury Department to restart the programs, which Biden’s Treasury secretary nominee, Janet Yellen, a former Fed chair, probably would provide. The Treasury could also provide funds to backstop those programs without congressional approval and could ease the lending requirements. That could encourage more lending under the programs, which have seen only limited use so far.
“I don’t think this is going to be resolved anytime soon," said Sen. John Kennedy, R-La. “This is now the Republican position."
“This is about existing authorities that the Fed has had for a very long time, to be able to use in an emergency," said Sen. Elizabeth Warren, D-Mass. “It’s about a lending authority for helping small businesses, state government, local government in the middle of a crisis."
Democrats said Toomey’s stand on the Fed would deprive President-elect Joe Biden of crucial tools to manage the economy.
A new deadline of midnight Sunday for a government shutdown served as a backstop for the tortuous negotiations, which were being conducted in secret largely among the top four leaders in Congress.
“We need to conclude our talks, draft legislation, and land this plane," said Senate Majority Leader Mitch McConnell.
A spokesman for Pelosi said she told Democratic colleagues on a Saturday conference call that “we're right within reach."
The massive package would wrap much of Capitol Hill's unfinished 2020 business into a take-it-or-leave-it measure that promises to be a foot thick or more. House lawmakers will probably have only a few hours to study it before voting as early as Sunday afternoon. A Senate vote would follow, probably on Monday. One more short-term funding bill probably would be needed to avoid the looming deadline.
An agreement in principle Saturday would be a precursor to more hours of translating compromises into detailed legislation. Lawmakers are eager to exit Washington and close out a tumultuous year.
The $900 billion package comes as the pandemic is delivering its most fearsome surge yet, killing more than 3,000 victims per day and straining the health care system. While vaccines are on the way, most people won't get them for months. Jobless claims are on the rise.
The emerging agreement would deliver more than $300 billion in aid to businesses and provide the jobless a $300-per-week bonus federal unemployment benefit and renewal of state benefits that would otherwise expire right after Christmas. It includes $600 direct payments to individuals; vaccine distribution funds and money for renters, schools, the Postal Service and people needing food aid.
It would be the first significant legislative response to the pandemic since the landmark CARES Act passed virtually unanimously in March, delivering $1.8 trillion in aid, more generous $600 per week bonus jobless benefits and $1,200 direct payments to individuals.
The new relief aid would be added to a $1.4 trillion governmentwide appropriations bill that would fund agencies through next September. That measure is likely to provide a last $1.4 billion installment for Trump's U.S.-Mexico border wall as a condition of winning his signature.
For Republicans, the most important COVID-19 aid provision was a long-sought second round of “paycheck protection” payments to especially hard-hit businesses and renewal of soon-to-expire state jobless benefits for the long-term unemployed.
Democrats have been denied direct fiscal relief for states and local governments, and they got a supplemental COVID-19 unemployment benefit that was only half the size of what the CARES Act delivered. Democrats also won $25 billion to help struggling renters with their payments and $45 billion for airlines and transit systems, but some critics on the left said Democratic negotiators were getting outmaneuvered. Biden is pressing for an agreement, fearing a weakening economy will await him on Inauguration Day.
Biden is promising another bill next year, but if Democrats lose Georgia Senate runoff elections next month and fail to win the Senate majority, they may have little leverage. GOP leaders say privately that delivering an aid bill may help their incumbent candidates in the January runoffs, GOP Sen. Kelly Loeffler and David Perdue.
Most economists, including Federal Reserve Board Chairman Jerome Powell, strongly support additional economic stimulus as necessary to keep businesses and households afloat through what is widely anticipated to be a tough winter. Many forecast the economy could shrink in the first three months of 2021 without more help. Standard & Poor’s said in a report Tuesday that the economy would be 1.5 percentage points smaller in 2021 without more aid.