WASHINGTON — President Donald Trump and lawmakers raced on Tuesday to negotiate an emergency relief package to bolster an economy battered by the coronavirus crisis, with lawmakers and administration officials expressing optimism for a deal despite partisan divisions about what should be included.
Trump, reaching for a huge response after weeks of playing down the potential effects of the virus, called for a temporary elimination of payroll taxes that could cost nearly $700 billion, rivaling both the financial bailout of 2008 and the economic stimulus measure that followed. That proposal faced bipartisan opposition on Capitol Hill, but some lawmakers believe paring back payroll taxes could ultimately be included in a broader package focused on sick pay, unemployment benefits and food assistance.
Financial markets rallied on news of the talks, even as the number of Americans infected with the coronavirus was on track to exceed 1,000. On the presidential campaign trail, Sen. Bernie Sanders and former Vice President Joe Biden both called off campaign events on Tuesday night as they awaited the results of primary voting in six states.
At the White House, Vice President Mike Pence, who is leading the government’s coronavirus response team, and top health officials tried to reassure the public while warning that the threat was real and would require Americans to take precautions.
Amid concern about a severe shortage of diagnostic kits, they said 4 million tests would be available by the end of the week. The nation’s top infectious disease expert, Dr. Anthony S. Fauci, said the days for minimizing the threat were over.
“As a nation, we can’t be doing the kinds of things we were doing a few months ago,” Fauci told reporters. He said Americans, even those in communities not yet affected, “have to start taking seriously what you can do now” to prepare for the day “when the infections will come, and they will come — sorry to say, sad to say — they will.”
But the briefing reflected the wide gulf between the sober assessments and advice of Trump’s top health officials and the president himself. As Fauci and others showed off posters advising the public not to shake hands, Pence was at pains to explain why the president himself continued to do so.
“I’ve been shaking hands, too,” said Pence, who has been greeting other officials in public with elbow bumps in recent days. “As the president has said, in our line of work, you shake hands when someone wants to shake your hand.”
Earlier, as Trump emerged from lunchtime talks with Senate Republicans on Capitol Hill, his upbeat appraisal bore no resemblance to Fauci’s.
“Just stay calm — it will go away,” he said, citing no scientific assessment to back that up. Trump conceded that there was no consensus yet on how to proceed with the economic rescue package.
“The consumer is ready, and the consumer is so powerful in our country with what we’ve done with tax cuts and regulation cuts and all of those things,” he said. “The consumer has never been in a better position than they are right now. So a lot of good things are going to happen.”
The mood inside the closed-door luncheon, though, was more serious. Several Senate Republicans who attended described Trump’s presentation and demeanor as direct and subdued, a contrast with past gatherings where he has devoted much of his time to meandering soliloquies featuring attacks on his political adversaries and boasts about his popularity.
The president floated a range of economic ideas during the meeting, including targeted assistance for hard-hit businesses like the cruise and airline industries. But his primary mission appeared to be selling Republicans on a temporary suspension of all payroll taxes through the end of the year — an idea that Larry Kudlow, the head of the president’s National Economic Council, later described as “probably the most important, powerful piece” of Trump’s proposal.
Later, Speaker Nancy Pelosi of California and Steven Mnuchin, the Treasury secretary, who will lead the talks toward an agreement, met privately in the speaker’s Capitol office suite to discuss the package.
If the payroll tax cut were to extend from April through the end of the year, it could cost close to $700 billion, according to estimates from the Penn Wharton Budget Model at the University of Pennsylvania. Asked how such a measure would be financed, Kudlow told reporters at the White House that he did not yet have an answer.
“I think over time, we’ll make it up with much better economic growth,” he said.
Both Republicans and Democrats were cool to the idea. Sen. Lindsey Graham, R-S.C., usually a staunch ally of Trump’s, said the reaction among Republican senators had been “mixed,” adding, “I have to think about that.”
Sen. Lisa Murkowski, R-Alaska, said she and other Republicans had questions about how a payroll tax would be paid for and how long it would last. She also raised concerns over the fiscal solvency of the Social Security Trust Fund, which is supported by payroll taxes.
“While it might have great stimulative effect,” Murkowski said, “I think we need to be looking at the overall impact.”
And Democrats argued that rather than approving costly proposals intended to provide broad-based economic stimulus, Congress should instead focus on narrowly tailored measures that could be delivered quickly.
“We asked the economists what really can stimulate the economy fast, and there were things like food stamps — because people would spend that fast — unemployment insurance, refundable tax credits,” Pelosi said. “What we are doing has to be related to the coronavirus crisis.”
Trump administration officials, congressional aides, lawmakers and lobbyists involved in the stimulus discussions suggested on Tuesday that the negotiated package would be built from an area of bipartisan agreement: protecting Americans who lose their jobs or are unable to work as a result of the coronavirus.
Those efforts could include government-paid sick leave for workers who are quarantined or forced to care for children whose schools are canceled; additional unemployment benefits for workers laid off by companies that lose business amid the outbreak; and food assistance for children who would otherwise rely on free lunch programs at school to eat.
Democrats could move as early as Wednesday to introduce a bill to provide the help and speed it to a vote on Thursday before leaving Washington for a weeklong recess. But it was unclear whether they could complete the proposal in time.
Congress moved quickly last week to approve an $8.3 billion emergency aid package to respond to the virus, which Trump signed into law on Friday. On Monday, the president said he would seek a much larger bill — though he did not specify its contents or cost — in order to boost growth against what he called the unexpected shock of the virus.
Lawmakers in both parties said a sweeping bipartisan deal was possible. During the luncheon at the Capitol, three Republican senators floated the prospect of an infrastructure bill — a priority for Trump and Democrats — as a stimulus measure.
But with both the House and Senate scheduled to be in recess next week, it is unclear how quickly a package could be passed. The rules in both chambers require lawmakers to vote in person, and Pelosi has resisted any calls to allow members to vote remotely — even as the Capitol physician, who met with Democrats behind closed doors on Tuesday, advised them to make plans for their staffs to work from home.
“We are the captains of the ship,” Pelosi told House Democrats during the private meeting, according to one person in the room who spoke the on condition of anonymity to describe it. “We are the last to leave.”
But some in her rank and file were unconvinced.
“We need to quickly figure out how we vote electronically and how we conduct business from outside D.C.,” said Rep. Pramila Jayapal, whose Seattle-area district has been hit hard by the epidemic. “I know all the problems with that, but I really think that having us come back and forth is not a particularly good idea.”
Lobbyists suggested that several ideas were under consideration for stimulating the economy, including tax credits for companies that retain employees who are unable to work because of quarantines and the possibility of allowing firms to delay paying a portion of their estimated quarterly corporate tax bills until the spread of the virus — and its economic effects — subside.
Other possibilities included temporarily suspending some excise taxes, like the 7.5% tax airlines pay to the Federal Aviation Administration; increasing community development block grants; and fixing an error in the 2017 Republican tax overhaul that makes it more expensive for restaurant owners to do renovations.
Trump and his advisers are also considering using the Federal Emergency Management Agency as a vehicle to deliver funds to stimulate the economy, a move that could allow the administration to begin bolstering growth without waiting for Congress. The president could approve major disaster declarations in a growing number of states that have seen coronavirus outbreaks, according to officials in the administration and in Congress.
Such approvals would allow FEMA to begin distributing aid, like emergency food stamps, to affected individuals. They would also allow for aid to be sent to states and local governments for efforts including “emergency protective measures.”
While Democrats expressed deep skepticism about Trump’s emphasis on broad-based economic stimulus and especially a payroll tax cut, the mood on Capitol Hill was not nearly as rancorous as during previous fiscal battles, like when Democrats refused to fund the president’s plan for a wall at the southwestern border.
“I think there’s tremendous reluctance to accept a proposal that we don’t think will meaningfully respond to the current challenge,” said Rep. David Cicilline of Rhode Island, a member of the Democratic leadership, adding that “it would take a lot to convince me that a payroll tax is responsive to it in a meaningful way.”
But he refused to rule it out entirely, saying Democrats would “continue to monitor it and continue to talk about what are the best strategies.”
Two Republicans, Sens. John Hoeven of North Dakota and James Lankford of Oklahoma, also raised the idea of bailing out the shale oil industry. An administration official said Monday that Trump and his aides were considering proposing some sort of aid to oil companies, which have been slammed by an abrupt drop in oil prices caused by Saudi Arabia’s decision to ramp up production from its wells.