The most recent stimulus talks stalled in the Senate, resulting in a stalemate between both houses of Congress. The Senate and the House both broke for their August sessions without an agreement in hand and are scheduled to return to their respective sessions in early September.
However, it looks like we will soon see a new stimulus proposal come out of the Senate. The “skinny” stimulus plan, as it is being referred to, is a pared-down version of the HEALS Act that was rejected outright by the Democrat-led House in favor of a larger, more unified plan.
The skinny plan, which is expected to be released this week, is notable not only for what it includes, but for what it excludes.
The Skinny Bill is Expected to Include Funding for Unemployment Benefits, PPP Loans, Liability Protections, Education Funding, & Funding for the USPS
The next proposal is expected to include extended unemployment benefits that would be in line with President Trump’s presidential memorandum which provided an additional $300 per week to unemployed workers. This is an increase from the $200 unemployment benefit that was included in the HEALS Act, but only half of what was previously included in the CARES Act. The Democrats want the $600 weekly benefit to be continued under the same rules as the CARES Act, but have indicated there may be some room for negotiation on this front.
The Republicans argue the $600 weekly benefit was too rich and served as a disincentive to return to work. Extended unemployment benefits are currently one of the major hangups between the two parties.
The skinny bill is also likely to include another round of targeted Paycheck Protection Program (PPP) Loans with additional eligibility criteria, as well as coronavirus liability shield to protect schools, businesses, and other organizations from coronavirus-related lawsuits.
It is also likely to include just over $100 billion for the Education Stabilization Fund to help schools at a time when many are struggling to reopen and set up remote learning capabilities.
Finally, the proposal is expected to include $10 billion for the US Postal Service (USPS). This is significantly less than the $25 billion in emergency funding the USPS requested in April.
The House is scheduled to meet this Saturday to vote on legislation that would provide the USPS with $25 billion in emergency funding and block organizational changes prior to the upcoming general elections.
The Skinny Bill is Expected to Leave Out Another Stimulus Check and State & Local Funding
Each of the previous stimulus bill proposals has included another round of Economic Impact Payments, or stimulus checks. However, the skinny proposal leaves them out.
This is an interesting development, as both parties and the Trump administration have previously been in favor of supporting another round of direct stimulus payments.
The upcoming Senate proposal is also expected to forego any additional funding for state and local governments. In general, the Democrats have supported additional funding for state and local governments to offset declining tax revenue due to the pandemic and avoid future layoffs of government employees. To date, over 1.2 million state and local government employees have been laid off.
Republicans, on the other hand, tend to disagree with additional funding for state and local governments, likening it to a bailout to organizations that were already mismanaging their budgets.
Why Propose a Smaller Stimulus Bill?
One of the primary divisions separating the two parties is the total cost of the next stimulus bill. The Republican-led Senate wants to keep the total cost of the bill around $1 trillion. However, some members of the Republican party see $1 trillion as too much.
The Democrat-led House, on the other hand, proposed the HEROES Act in May, a sprawling $3 trillion proposal that the Senate rejected out of hand. The Democrats have offered to slash their request in half in order to make a quick stimulus deal.
The skinny bill should come in at significantly less than $1 trillion.
This is moving in the opposite direction of a compromise with the Democrats. However, it is designed to unite the Republican party and strengthen their bargaining position. Whether this will put enough pressure on the Democrats to move the needle is yet to be seen.
Will the Skinny Bill Be Passed?
We haven’t seen the full bill yet, but it will be interesting to see how the Democratic party responds. To date, the biggest holdups between the two parties have been the total cost of the next bill, extended unemployment benefits, and state and local government funding.
This proposal will again fall short on all three of these line items, though the funding for extended unemployment benefits is moving in the right direction.
The removal of a second stimulus check is another strike against this bill. Taking everything at face value, it’s hard to see the Democrats even consider passing the skinny bill. But that might not be the point. The purpose of this bill may serve to further unite the Republican party and serve as an anchor point in future negotiations, giving the Republican party a stronger negotiation stance.
Will We See Another Stimulus Check?
Earlier this week, I wrote an article in which I explained the reasons I believe there will still be another stimulus check. Things change quickly in Washington D.C. However, I still believe there is enough support for a second stimulus check that we will see positive news on that front. But it won’t come without a fight.
The skinny bill is likely to be dismissed by the Democrats, leading both parties to restart negotiations when they return to session in early September, when time will be of the essence, as the fiscal year is scheduled to end September 30th and passing next year’s budget will be high on the agenda.