(Bloomberg) — The U.S. Senate approved a historic $2 trillion rescue plan to respond to the economic and health crisis caused by the coronavirus pandemic, putting pressure on the Democratic-led House to pass the bill quickly and send it to President Donald Trump for his signature.
The massive legislation passed on a 96-0 vote just before midnight Wednesday after days of intense negotiations between Senate Republicans and Democrats, who demanded changes to the bill introduced last week by Senate Majority Leader Mitch McConnell.
The package includes an unprecedented injection of loans, tax breaks and direct payments for major corporations and individual taxpayers to help the U.S. economy get through an abrupt shutdown as people avoid social interaction and businesses close to keep from spreading the coronavirus. More than 68,000 people in the U.S. have been infected with the deadly respiratory disease, and some economists warn that unemployment could hit 30%.
The House is scheduled to vote on the legislation Friday. Trump urged Congress to act “without delay” and said he would sign the legislation immediately.
The package provides about $500 billion in loans and assistance for big companies, including struggling airlines, as well as states and cities. There is a separate pot of about $350 billion for small businesses. For individuals the package provides direct payments to lower- and middle-income Americans of $1,200 for each adult and $500 for each child. Unemployment insurance would be vastly expanded. There also is money for hospitals, some of which are on the verge of being overwhelmed.
The size of the stimulus package dwarfs the approximately $800 billion Obama stimulus that passed five months after the 2008 financial crash. Together with Federal Reserve actions, the legislation will amount to a $6 trillion economic stimulus, according to White House economic adviser Larry Kudlow, or about 30% of annual gross domestic product.
Yet it may not be enough to prevent a big short-term hit to the economy and a dramatic rise in unemployment. Economists and lawmakers say they expect more stimulus will be needed. Congress is already discussing the next round.
“I’ve never seen Congress move so fast to do something so large. Unfortunately, the problem may be larger and faster,” said Jason Furman, a member of Barack Obama’s economic team during the 2008 recession.
House Speaker Nancy Pelosi praised the deal after changes negotiated between Senate Democratic leader Chuck Schumer and Treasury Secretary Steven Mnuchin over several days of marathon talks.
“This is a classic way you write legislation in a democracy,” McConnell said after passage was assured.
Mnuchin on Thursday tweeted congratulations to McConnell and Schumer and urged House leaders to pass the bill. “This will support American workers and American workers in the war against #coronavirus !!” he wrote.
Majority Leader Steny Hoyer announced late Wednesday that the House will attempt to pass the coronavirus bill on Friday through a voice vote, in a process that would not require all members to return to Washington. House GOP leaders said they also support this strategy.
“In order to protect the safety of members and staff and prevent further spread of COVID-19 through Members’ travel, the Republican Leader and I expect that the House vote on final passage will be done by voice vote,” Hoyer wrote in a letter to colleagues.
However, any House member could demand a recorded, roll-call vote, which has potential to drag out the process.
The outbreak has touched directly on Congress, where three lawmakers have tested positive for the coronavirus and several others are in self-quarantine.
McConnell said the Senate won’t return until April 20. That’s a week after the date that Trump suggested the country may begin getting back to work. Health officials have warned that the virus could still be spreading in the U.S.
The expectation of a Senate vote helped propel the S&P 500 Index to its biggest two-day advance since November 2008. But stocks receded from the day’s highs late in the afternoon as four Republican senators objected to expanded unemployment benefits for low wage workers. Independent Senator Bernie Sanders countered with a threat to hold up the legislation because of the provisions for big companies.
The Senate blocked an amendment offered by Nebraska Republican Senator Ben Sasse to modify the unemployment benefits provision.
Another delay was happening behind the scenes. According to a Democratic aide, a Republican draft left out agreed-upon language that requires the Treasury and Federal Reserve to publish every seven days which companies and entities get loans from the $500 billion fund.
Democrats had been demanding transparency on that financing and Schumer held up the bill until Republicans changed the text, the aide said.
Within the $500 billion chunk of aid for companies and state and local governments, airlines will be eligible to receive a combined $62 billion in federal loans and cash assistance to meet their payrolls, including $25 billion in direct aid for passenger carriers, $3 billion for airline contractors providing ground staff such as caterers, and $4 billion to cargo haulers.
The deal also includes $17 billion in loans earmarked for companies deemed critical to national security, which is intended to assist Boeing Co., though the legislation doesn’t mention the company by name.
The assistance comes with conditions — another key point for Democrats. Mnuchin would be empowered to require equity or other securities in return for the cash assistance.
Any company receiving a government loan also would be subject to a ban on stock buybacks through the term of the loan plus one additional year. They would have to limit executive bonuses, and borrowers would have to make a “good faith certification” that they will stay neutral in any union organizing effort by workers during the term of the loan.
Notably, Democrats also won language that would bar aid to businesses in which Trump, Vice President Mike Pence, heads of executive departments or members of Congress hold 20% or more ownership. The exclusion also applies to businesses owned by members of their family, including sons-in-law and daughters-in-law.
Unemployment insurance would be expanded to provide an extra $600 a week for four months on top of state benefits, which currently vary in length and amount. Eligibility would be expanded to cover workers in the gig economy such as Uber drivers. It also contains a funding provision to encourage states to waive a waiting period for payment of unemployment benefits.
The bill includes several incentives for companies to keep their workforce employed. It provides a tax credit for companies that retain employees even if they’ve been mandated to close or seen a significant drop-off in business. Companies can also defer some employer-side payroll tax payments until 2022.
The legislation has more generous write-offs for restaurants and retailers, as well as expanded deductions for companies with debt. Businesses with losses can use those more liberally to offset income.
The bill expands tax deductions for charitable donations. Student loan borrowers who get assistance from their employers to pay those back won’t owe income tax on the aid.
Many U.S. homeowners and businesses hit hard by coronavirus could get relief from making their monthly mortgage payments. Borrowers with loans insured by government agencies such as the Federal Housing Administration and the Department of Veterans Affairs would be eligible for forbearance. Consumers whose mortgages are backed by Fannie Mae and Freddie Mac would also be eligible to skip payments.
Aid for Hospitals
Those affected by the virus would be allowed to take up to $100,000 out of their employer-sponsored retirement funds without penalty. It also would let older retirees avoid having to sell retirement investments in a down market by waiving minimum distribution requirements for Individual Retirement Accounts.
The package also contains $340 billion in emergency supplemental funding for the government’s battle to stem the outbreak, the bulk of it going to state and local governments.
That portion includes $117 billion for hospitals and veterans’ health care; $11 billion for vaccines, therapeutics, diagnostics, and other preparedness needs; $4.3 billion for the Centers for Disease Control; $16 billion for the Strategic National Stockpile; and $45 billion for the Federal Emergency Management Agency’s disaster relief fund. Airports would get $10 billion and Amtrak $1 billion. The funding adds to the $8 billion boost provided three weeks ago.
There also is a separate $150 billion Coronavirus Relief Fund for state, territorial and local governments. Of that, $8 billion is earmarked for tribal governments.
(Updates with Mnuchin tweet in 11th paragraph)
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