Stimulus negotiations: Republicans to release their opening offer Thursday without the payroll tax cut

Coronavirus

WASHINGTON, DC – APRIL 29: U.S. President Donald Trump’s name appears on the coronavirus economic assistance checks that were sent to citizens across the country April 29, 2020 in Washington, DC. The initial 88 million payments totaling nearly $158 billion were sent by the Treasury Department last week as most of the country remains under stay-at-home orders due to the COVID-19 pandemic. (Photo by Chip Somodevilla/Getty Images)

  (CNN) — Senate Majority Leader Mitch McConnell, after days of intraparty disputes and splits spilling into public view, will move Thursday to unify Republicans behind their initial $1 trillion coronavirus relief proposal.

There is now an agreement on funds for testing which marks a compromise between the Senate GOP and White House, and the payroll tax cut, a key priority for President Donald Trump, is officially out of the Republican draft. That marks a victory for Republicans, who had been public about their coolness to the idea.

Over the course of Thursday, the proposal will be rolled out in pieces by the key Senate Republicans on each section, finally setting the stage for long awaited negotiations just days before the expiration of crucial federal unemployment benefits.

Bottom line: The reality is, while progress has been made and a significant portion of Senate Republicans will line up behind the GOP draft, the Republican-on-Republican disputes are still very much alive — and are likely to carry into GOP negotiations with Democrats in the days ahead.

Senior GOP aides predict those splits will dissipate, though not disappear, when Democrats get involved in the talks, but it remains an open question, particularly as one GOP senator told me on Wednesday, “you never really know where the President is going to be on these things.”

What to watch

  • Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows come back to Capitol Hill to meet with McConnell, 9:30 a.m.
  • McConnell and Senate GOP committee chairs are expected to come to the Senate floor and roll out the proposal, piece by piece, at some point Thursday, timing TBD
  • What the White House says about the GOP effort when it is released

The deal

Key Senate Republicans and White House negotiators locked in an agreement on a key piece of their proposal last night, after hours of closed-door meetings over funding for schools and coronavirus testing priorities.

Notably, it wasn’t an agreement on the entire proposal — as of late last night staff were still working through several open items on the broader proposal, leaving open the possibility there may still be disputes between Senate Republicans and the White House today.

But the progress on Tuesday night was considered a big step forward for Republicans beset by discord over the past few days.

McConnell’s process

If you were paying attention to how McConnell rolled out the initial draft of what would become the $2.2 trillion CARES Act, you’ll recognize what’s about to happen. McConnell will talk about the proposal on the floor, followed by each of his committee chairs who led the drafting of specific pieces of the proposal.

Republican Sen. Roy Blunt of Missouri, a member of leadership, told reporters Wednesday night the proposal wouldn’t come out as a single bill, but instead as individual packages from the committees of jurisdiction. This is different than the CARES Act.

But there are a few reasons for the route McConnell is taking — first, these chairs and committee staff have, indeed, been drafting and working through these proposals for several weeks so this is their work (with tweaks and final decisions made at points by leadership and the White House).

Second, and probably most importantly, this signals buy-in from the most senior and powerful members of McConnell’s conference, with the goal being the members of the committees follow their chairmen in lining up behind the bill.

The dynamics are very different from what they were the first time around, but it was an effective strategy in unifying the whole conference in March. There’s some effort to replicate that here as lawmakers prepare to head into the brawl of negotiations that will be the weeks ahead.

Reality check: This is not March. The splits in the GOP conference over a new package are real — and have been present for weeks. McConnell will get a strong majority behind his proposal and, most importantly, will be aligned with his frontline senators up for reelection. But there are more than a handful of Republicans who will oppose the bill right out of the gate, including some who are opposed to any new spending at all in the wake of the initial $2.2 emergency economic relief package. McConnell knows that and has planned for it. The real challenge will be to ensure the opposition doesn’t spread, undercutting the talks with Democrats.

Of note: Democratic senators and senior aides have quietly been watching the last several days with a mix of glee, astonishment and concern. Glee because they all appreciate divides in the Republican conference and see it as an opportunity to cut a more beneficial deal with Treasury Secretary Steven Mnuchin, they say. Astonishment because it has been two months since Democrats passed their own proposal and Republicans are just getting around to theirs. Concern because if the GOP chasm becomes too wide, thee is concern a bill might not come together at all.

“The Republican Party is so disorganized, chaotic and unprepared that they can barely cobble together a partisan bill in their own conference,” Senate Democratic Leader Chuck Schumer said Wednesday.

To be clear, that is very unlikely at this point — the incentives for reaching an agreement are simply too high, aides and senators in both parties say. But it’s out there.

What’s outstanding

There is an agreement on direct payments, or stimulus checks, but the exact details haven’t been briefed to members and staff yet. The expectation is the second round of checks will be more targeted toward a lower income threshold, but the mechanics of that have been subject to negotiation the last few days.

Federal unemployment insurance enhancement. Aides were told last night in a conference call with leadership that the $600 weekly federal unemployment insurance benefit would be reduced, and extended at a flat rate for two months. That would give states the time to implement a system that could multiply the state benefit to factor in the federal enhancement, but have it capped at 100% of income. The specific flat rate, and how states with already overwhelmed unemployment systems could implement that, remains up in the air. Mnuchin, on CNBC, said the proposal would target “approximately 70% wage replacement.”

What isn’t:

The payroll tax cut. Mnuchin, on CNBC, said the proposal which had been a top priority for Trump, would not be in the Senate GOP draft, a direct reflection of Senate Republican opposition to the idea. The push from Senate Republicans has been that the payroll tax cut, due to its cost, would squeeze out other priorities, most notably a second round of direct payments to individuals and families. The White House, after days of saying it would be in the proposal and fighting for its survival, has acquiesced to that position.

What isn’t

The payroll tax cut. Mnuchin, on CNBC, said the proposal which had been a top priority for Trump, would not be in the Senate GOP draft, a direct reflection of Senate Republican opposition to the idea. The push from Senate Republicans has been that the payroll tax cut, due to its cost, would squeeze out other priorities, most notably a second round of direct payments to individuals and families. The White House, after days of saying it would be in the proposal and fighting for its survival, has acquiesced to that position.

The Unemployment Insurance trial balloon

There was a brief spurt of action on Wednesday around the idea of a short-term extension of the current federal unemployment insurance enhancement. To put it plainly, it was never real. The White House, cognizant that a deal likely won’t occur until after the July 31 expiration of the program, floated the idea to Senate Republicans GOP leadership rejected it.

There’s a somewhat cold reality on Capitol Hill: deadlines make deals. Remove the deadline, remove the urgency lose the deal. The idea of taking the most urgent deadline off the table was never going to fly.

Topline rundown of what is in the proposal

According people briefed on it:

  • Second round of direct payments
  • Some form of an extension, at a reduced rate, to the federal enhanced unemployment benefit
  • Second round of Paycheck Protection Program loans, targeted toward the hardest hit small businesses based on lost revenue and expanded to include more flexibility to forgive money used for operational and supplier costs
  • $105 billion in education funds, split as $70 billion for K-12, $30 billion for colleges/universities, $5 billion for governors to utilize
  • $16 billion in new funds for state testing grants, plus an administration commitment to designate $9 billion in unused funds from the CARES Act (making the total $25 billion)
  • $26 billion for vaccine research and distribution
  • $15.5 billion for NIH
  • Increased flexibility and time window for states to utilize initial CARES Act funds, but no explicit new funds
  • Liability protections to create a safe harbor for businesses, schools, health care providers and non-profits
  • Enhanced employee retention tax credit
  • Deductions for employer purchases of testing, personal protective equipment and other supplies
  • Increase in business meal deduction to 100%, from 50%

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