Congress is pressing ahead with a US$2-trillion economic rescue package aimed at easing the financial fallout from the coronavirus pandemic, the largest single piece of stimulus legislation in U.S. history.
The sweeping bill, negotiated between the Trump administration and congressional leaders, would bail out big businesses, expand employment insurance benefits, send one-time cash payments to most Americans, and pump money into hospitals and state governments battling the outbreak.
Tense negotiations largely centred on Republican desires to quickly shore up corporations, and Democratic demands that the legislation avoid the criticisms of the 2008 Wall Street bailout, when Washington rescued major banks while ordinary Americans bore the brunt of the recession.
The legislation also contains provisions meant to bar President Donald Trump’s business empire from receiving funds.
The bill unanimously passed the Senate late Wednesday night, despite last-minute clashes over employment insurance and oversight of the corporate bailout. Leaders of both parties hoped the legislation would pass the House of Representatives in time to be on Mr. Trump’s desk by the end of the week.
“Today, the Senate will act to help the people of this country weather this storm,” Republican Senate Leader Mitch McConnell said Wednesday morning. “This is not even a stimulus package, it is emergency relief.”
The United States has the third-most coronavirus cases in the world – nearly 65,000, and more than 900 deaths.
The legislation’s price tag dwarfs both the US$700-billion Troubled Asset Relief Program that rescued big banks in 2008 and the US$831-billion 2009 Recovery Act, then-president Barack Obama’s signature stimulus package.
The single largest component of the current bill is US$500-billion to bail out big businesses hit by the pandemic, including airlines and hotels. The fund will have an oversight board appointed by Congress to hand out the money, rather than leaving it to the Treasury Department, and prohibit companies from using the bailout for stock buybacks.
One provision also bars businesses owned by the President, Vice-President, members of Congress and White House staff from applying for funds. This would bar Mr. Trump’s hotels from seeking a bailout.
A separate US$360-billion fund will offer loans to small businesses, such as the bars and restaurants forced to close amid the pandemic. A US$150-billion pool of money will go to state and local governments, while hospitals will receive US$130-billion.
Other measures include US$1,200 cheques to all Americans earning US$75,000 annually or less; and larger employment insurance benefits for four months that will include gig-economy workers such as Uber drivers who would not normally qualify.
“The policy is both well-targeted and broad,” said Marina Gorzig, an economist at St. Catherine University in Minnesota. “Their approach is absolutely right: They’re targeting the people who are most affected.”
Four Republican senators threatened to stall the bill because they said the EI benefits were so generous they would encourage people to quit their jobs. However, EI is available only to people who are involuntarily laid off.
“Under this proposal … on unemployment, you would be making US$24.07 in South Carolina. There are a lot of jobs in South Carolina that do not pay US$24.07,” South Carolina Senator Lindsey Graham said.
Leftist Senator Bernie Sanders said that unless the four Republicans dropped their opposition, he would also stall the legislation by demanding guarantees that the US$500-billion in bailout money would not go to any corporation that laid people off.
“It would be an outrage to prevent working-class Americans to receive the emergency unemployment assistance included in this legislation,” he said.
In the end, the four Republicans failed to get the bill amended to cap EI payments and it sailed through the Senate unanimously.
It was not immediately clear how quickly the standoff could be resolved, or if Congress would try to pass the bill without the holdout senators.
Michael Graetz, a former treasury department official who teaches at Columbia University in New York, said the legislation casts a spotlight on the U.S.'s patchy social safety net, with employment insurance largely left to the states and only about a quarter of unemployed Americans covered.
“If we had a solid, robust system of unemployment insurance that covered most workers, we could have built on that,” said Prof. Graetz, co-author of The Wolf at the Door, a book about economic insecurity. “Instead, the only realistic option to get money out quickly is to send out a lot of cash, so some people will get cash who don’t necessarily need it and other people will get less than they need."