GOP’s $2 Trillion Bill Adds Cash for Bailouts, States, Transit

08:53PM Mar 22, 2020
Mitch McConnell
Senate Majority Leader Mitch McConnell
( Mitch McConnell/Facebook/MGN )

(Bloomberg) -- Senate Majority Leader Mitch McConnell unveiled a $2 trillion economic rescue package Sunday with money for middle-class taxpayers, the unemployed and even local governments.

Republicans continued to negotiate the deal after Democrats blocked the first effort to advance the measure because they said it gave too much discretion to the Treasury Department and didn’t do enough for workers. Talks will likely continue as Speaker Nancy Pelosi said the Democratic-led House would write its own bill.

Here are highlights of McConnell’s plan:

Bigger checks to the poor, unemployed

The plan includes payments of $1,200 to many middle-class individuals or $2,400 for married couples, plus $500 per child. The payments start to phase out for people making more than $75,000 or couples making $150,000.

Democrats were able to secure a change from a previous version that allows low-income taxpayers to get the full $1,200 payment. The initial plan would have given smaller checks, or in some cases, no money at all, to very-low income people.

Unemployment insurance payments would be boosted under the draft and recipients would be eligible to receive those funds for longer. Democrats have insisted throughout the negotiations that any bill include much more generous payments to those who find themselves without a job during the pandemic.

Loans become grants if workers kept on payroll

The pot of money for loans that could go to corporations and state and local government grew to some $500 billion available for as many as five years. Of that, $50 billion would be available for loans to passenger airlines and $8 billion for cargo carriers. Another $17 billion would be available to “businesses critical to maintaining national security.” The draft text doesn’t offer more detail on the types of companies that would be eligible.

Separately, the draft includes about $350 billion in loans for small businesses that would convert to grants if the companies retain their employees.

The aid includes restrictions. Corporations getting money would be prohibited from share buybacks and would be required to maintain their employment levels as of March 13, 2020.

The companies also would have to freeze compensation for employees earning more than $425,000 for two years, and they’d be prohibited from offering departing executives so-called golden parachutes, or payments worth more than twice their annual salary.

The government would be able to take equity stakes in businesses, without voting rights.

Fed could amplify loan support

The bill would authorize the Treasury to use $425 billion of the $500 billion “to make loans, loan guarantees, and other investments in support of programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, states or municipalities.”

Senate Banking Committee Chairman Mike Crapo told Bloomberg News that the legislation would expand the Fed’s authority to include state and local governments as entities it can lend to, and buy debt from, to assist them.

Millions for private-plane airports

The nation’s airports would receive $10 billion. Of that, $3.7 billion would be split between commercial airports based on how many passengers boarded planes there in 2018, with another $3.7 billion allocated to airports based on their debt. Airports that serve private, small, and charter planes would receive $100 million.

Restaurants can deduct cost of renovations

This version retains a sizable tax perk for restaurants and retailers, and a big political win for Republicans. Businesses would temporarily be able to have more flexibility to use losses to offset their tax bills. They could also write off more of the interest they pay on debt during the crisis. Restaurants and retailers would be able to deduct the entire cost of renovating their stores in a single year. A mistake in the 2017 tax law meant they had to spread those costs over several years.

Taxpayers who take the standard deduction could write off up to $300 charitable donations in 2020. Typically that benefit is only available to those who itemize. The bill would also temporarily lift some limits on the charitable tax break for those who itemize.

Businesses can defer paying employer-side payroll taxes during 2020. They have to pay half of those taxes by the end of 2021 and the second half in 2022.

Railroads get grants if they recognize unions

Passenger railroads and public transit agencies would receive a direct infusion of federal aid under the draft bill. The aid wasn’t part of the original bill introduced by McConnell.

Amtrak would receive about $1 billion, with roughly half earmarked for the Northeast Corridor, according to the draft bill released Sunday. To receive a grant, the passenger rail system would be required to recognize unions, maintain worker benefits, and provide unemployment assistance. States would also not have to pay their full share of operating and capital costs for rail service.

Transit systems would receive $20 billion in grants, with $4 billion of that marked for rural areas only, according to the draft bill.

Relief for oil industry, not renewable energy

The draft legislation includes $3 billion for the acquisition of oil for the nation’s Strategic Petroleum Reserve. The funding for the emergency stockpiles had been requested by the Trump administration for the purchase of up to 77 million barrels of crude oil to support the domestic industry and boost reserves at cheap prices.

The bill would also apparently permit the government to buy commercial crude inventories without stashing the oil in the strategic petroleum reserve sites along the Gulf Coast.

Companies that refine oil into gasoline could also benefit from a large pool of funds in the bill reserved for loans and loan guarantees for businesses that are deemed “critical to maintaining national security.”

Attempts by the renewable energy and Democrats to add billions in tax credits for wind, solar, batteries, and electric vehicles were left out of the bill.

Additional money for U.S. farmers beyond trade aid

The legislation as written would make available up to $50 billion to farmers, funded through borrowing authority for the Commodity Credit Corp., the same vehicle used for the Trump administration’s trade aid to U.S. agriculture.

The legislation replenishes $30 billion in depleted borrowing authority for the CCC and adds an additional $20 billion, according to North Dakota Republican Senator John Hoeven, who claimed credit for the provision. The stimulus package also authorized the entity to provide aid to livestock producers, an important agricultural industry in Hoeven’s home state.

The added borrowing authority doesn’t require the administration to give more aid to farmers, but it replenishes borrowing authority and gives Trump the option of providing more funding. The administration has authorized $28 billion in aid to farmers over the past two years to deal with the president’s trade war with China.

Student loan payments suspended

The new draft language released Sunday would suspend payments on federal student loans without interest for six months. A previous version would suspend payments for three months and give the secretary discretion to extend non-payment for another three months. The bill also would suspend payments for both federal Direct Loans and federally guaranteed student loans. Previous language included only Direct Loans.

The legislation also includes a $20 billion education stabilization fund for K-12 schools and public colleges and universities.

©2020 Bloomberg L.P.