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Virus Aid Deal Could Be Tough to Reach in Lame Duck

Oct. 27, 2020, 8:46 AM

As the prospects for a new round of economic aid have slowly faded, attention is increasingly turning to whether a deal might come together in a lame-duck session of Congress, after campaigning has finished.

Political pressure preventing major legislation can dissipate after an election. But months of stalled talks have left those tracking relief efforts cynical about the prospects that a large agreement can happen in most lame-duck scenarios, casting more uncertainty on an economy that has been weak. Aides, lobbyists, analysts, and members of Congress appear skeptical that a deal can come together after little progress made. Pessimism now abounds for the prospect that a stimulus deal will happen before the end of the year.

When asked if President Donald Trump would commit to trying to negotiate an aid package if he loses, White House spokesperson Brian Morgenstern reiterated Trump’s support for stimulus checks, supplemental unemployment insurance, and financial support for businesses affected by the public health crisis.

“This isn’t about politics—this is about people’s livelihoods,” said Morgenstern in an email, blaming House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) for trying to delay a deal until after the election in an effort to hurt Trump’s reelection chances.

Morgenstern also said that Trump, “will continue to block Democrats’ attempts to exploit the virus to fund a liberal wish list to bail out poorly run cities and states, and provide benefits for people in the country illegally,” a clear line of opposition to two major policies within the package proposed by House Democrats (H.R. 6800).

Pelosi spokesperson Drew Hammill didn’t respond to requests for comment. Hammill tweeted Monday that Pelosi still hoped to finalize a deal before the election. Earlier this month, the speaker suggested that nothing might be better than a partial deal because a partial deal as what Senate Republicans pushed for could be an “opportunity cost” for different Democratic priorities.

Lame-Duck Session

Republicans and Democrats closely tracking talks are now skeptical a deal would happen if Trump loses or party control of the Senate flips. Still, incentives might align for a deal in the short term if the status quo of power—Democrats in the House, Republicans in the Senate, and Trump in the White House—remains in place.

But with polling showing former Vice President Joe Biden with a substantial lead and Democrats with a significant chance to gain a majority in the Senate, both parties on Capitol Hill have begun to look towards January and February as the next likely window for major legislative action.

Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee that has a wide-ranging jurisdiction over domestic economic policy—including tax and health care, threw cold water on hopes for stimulus in a lame-duck session, laying the blame with the White House and Senate Republicans.

“The lame-duck agenda depends largely on the outcome of the election,” Wyden said in a phone interview with Bloomberg Tax. “If my choice wins—Vice President Biden—it’s hard to see Mitch McConnell supporting another penny of stimulus.”

Wyden added that mixed signals from the White House have added confusion to the situation. “Who knows exactly what their priorities are. Donald Trump can’t even tell you what his priorities are,” Wyden said.

Current and former Senate Republican aides, who asked for anonymity in order to speak freely, largely agreed with Wyden’s assessment. A change to the status quo, in which control of the White House and Senate flipped, would make the odds of a lame duck deal less likely, they said.

Republicans’ anger at Pelosi has swelled as talks dragged on and she has refused to give much ground over areas of significant disagreement, arguing that an imperfect package might be worse than nothing. The unstated calculus has been that Democrats would have a chance to shape their own major aid bill early next Congress, if voters hold Trump and Senate Republicans responsible for the lack of pre-election progress on a second package.

Much will depend on the state of the economy. If a resurgence of the virus across the country and the phase out of assistance—especially additional federal funds for unemployed workers—combine to create a situation with evictions, further job losses, and business closures, it could force Republicans and Democrats to come to an agreement before year’s end.

But even then Republican observers see the window for new aid as much smaller than what House Democrats have pushed for, if Republicans are about to relinquish control of the White House and Senate.

Next Agreement

An agreement in the lame-duck session would largely revolve around more small business aid tied to expanded unemployment insurance, as well as increased funding for virus testing.

Such a deal would be timed to carry over into the next Congress and administration, reducing the overall cost of legislation that could assuage some deficit-conscious Republicans, while allowing Democrats to own their own package in the event they take both Senate and White House.

A current Senate Republican staffer expressed skepticism, shared by many in both parties, that weeks of talks between Pelosi and the Trump administration would actually set the table for anything meaningful after the election, since the election, even if it maintains the political status quo, will dramatically change the leverage around talks.

“I feel just incredibly bearish on the lame duck,” said Isaac Boltansky, director of policy research for Compass Point Research and Trading, an investment bank headquartered in Washington, D.C. “I’m still so fearful that we are going to be in a fog of disdain and distrust in the lame duck that advancing anything will be difficult.”

There is some hope that the expiration of government funding on Dec. 11 will give all sides a chance to attach some non-controversial relief provisions to a continuing resolution. But there are also fears that overloading must-pass legislation with additional items would dramatically alter its level of support. And a shutdown over the winter could exacerbate already fragile economic conditions.

A continuing resolution deal would also have to be relatively barebones compared to what both Senate Republicans and House Democrats have wanted—likely no legal liability protection language for businesses and institutions, no or minimal aid to state and local governments. Unless economic conditions become dramatically more dire, it is unclear if leadership on either side of the aisle and the Capitol would be particularly motivated by such a deal.

Boltansky did sprinkle in a hint of counterintuitive optimism with the pessimism: Since Washington defied conventional wisdom that another aid deal would happen over the summer, maybe lawmakers will do so again.

“We’ve got to question conventional wisdom as much as we can because it proved wrong at the beginning of CARES 2,” he said.

To contact the reporter on this story: Colin Wilhelm in Washington at cwilhelm@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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