What to Know in Washington: Virus Rescue Plan Negotiations Stall

Republicans and Democrats in Congress stumbled in their attempt to engineer a quick jolt to a sinking economy with a $2 trillion stimulus despite the rising coronavirus death toll, plunging financial markets and dire predictions of a deep recession.

Negotiations to break the impasse over the stimulus legislation continued into last night after Senate Democrats voted to reject Majority Leader Mitch McConnell’s (R-Ky.) latest version of the plan, which had been the product of frenzied bipartisan negotiations a day earlier.

Senate Minority Leader Chuck Schumer (D-N.Y.) met several times last night, including at 11:45 p.m., with Treasury Secretary Steven Mnuchin, who has been conducting what amounted to shuttle diplomacy between the two sides.

While many details of the plan had been hashed out, some fundamental differences hadn’t been bridged. The recriminations began immediately after McConnell’s bid for a procedural vote failed.

An incensed McConnell cited plummeting stock futures to express the urgency to act today, and he ripped Schumer and Speaker Nancy Pelosi (D-Calif.). “We’re fiddling here. We’re fiddling with the emotions of the American people, fiddling with the markets,” McConnell said on the Senate floor. “This obstruction achieves nothing.”

Schumer complained that McConnell’s bill was partisan. He said it amounts to “a large corporate bailout” with insufficient oversight, and shortchanges the health-care response to the pandemic. He said there should be “much more money” for hospitals for equipment that is rapidly becoming in short supply.

Negotiations will continue today, with the Senate planning another procedural vote at noon. Read more from Steven T. Dennis.

Paul Tests Positive for Coronavirus: Two more U.S. senators said they’ll go into self-quarantine after Sen. Rand Paul (R-Ky.) announced yesterday that he’s tested positive for Covid-19. The moves by Sens. Mike Lee (R-Utah) and Mitt Romney (R-Utah), recommended given the time they’ve spent with Paul recently, have thrown a wrench into efforts by the Senate to pass a massive coronavirus economic stimulus package.

Two other Republicans, Sens. Cory Gardner (Colo.) and Rick Scott (Fla.), have also been in self-quarantine after possible exposure. Meanwhile, Sen. Kyrsten Sinema (D-Ariz.) responded angrily to reports that Paul had been at the congressional gym on Sunday morning, and swam in the pool there—after taking the test, but before receiving the results. Read more from Ros Krasny.

WHAT’S IN GOP’S LATEST OFFER:

McConnell unveiled a $2 trillion economic rescue package yesterday with money for middle-class taxpayers, the unemployed and even local governments. 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.

Here are some of the other highlights.

Airports See Aid in New Bill: The nation’s airports would receive $10 billion under Senate Republicans’ updated weekend proposal, the amount airports requested from lawmakers but wasn’t included in an initial proposal last week. Read more from Courtney Rozen.

Transit Agencies Added to Bill: Passenger railroads and public transit agencies would receive a direct infusion of federal aid under the draft bill Senate Republicans released Sunday to alleviate the economic impact of the new coronavirus, Courtney Rozen reports.

New GOP Student Loan Plan: Student loan borrowers would have a full six months of interest-free relief from paying federal student loans under a new draft of Senate GOP coronavirus legislation released Sunday. The bill would also include both federal Direct Loans and federally guaranteed student loans. Previously released language would have paused loan payments for three months and given the education secretary discretion to extend for another three months. It also applied only to Direct Loans. Read more from Andrew Kreighbaum.

MORE ON THE ECONOMIC RESPONSE:

Top Economists See Echoes of Depression: The U.S. undoubtedly will suffer a huge economic contraction as businesses close and Americans stay home. By some estimates, the economy is headed toward its worst quarter in records since 1947. In a Bloomberg interview on Sunday, Federal Reserve Bank of St. Louis President James Bullard predicted the unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in GDP. Read more from Rich Miller and Reade Pickert.

And the world economy is guaranteed to enter its worst recession since the financial crisis in the first half of this year with a recovery subsequent months likely but not assured, according to Bloomberg Economics. In a report released today, Chief Economist Tom Orlik said “a lot needs to go right” for global growth to rebound after the coronavirus leads to a severe first-half contraction. For now, they are predicting a 0.2% GDP decline for the whole year. Read more from Simon Kennedy.

Pentagon Raises Contractor Payments: The Pentagon, in a move to boost cash flow to large and small defense companies during the coronavirus crisis, will temporarily increase the percentages paid to contractors, known as periodic progress payments. Public interest groups called for the policy to be closely monitored.

The Pentagon’s Director of Defense Pricing and Contracting issued a “Deviation on Progress Payments” memo late Friday that increases the rate for contracts to 90% of incurred costs from 80% for large businesses, Pentagon spokesman Air Force Lt. Col. Mike Andrews said in a statement yesterday. For small businesses the rate will go to 95% from 90%. Read more from Tony Capaccio.

Testing, Treatment & Prevention Efforts

Trump to Make Decision on Measures After 15 Days: President Donald Trump said his administration will make a decision as to “which way we want to go” regarding coronavirus measures after a 15-day period. “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” Trump said in a tweet. Follow the latest updates on the virus from Bloomberg here.

Pence Vows Testing Backlog Resolved by Midweek: Vice President Mike Pence said the backlog in coronavirus testing in the U.S. should be resolved by midweek. Pence, speaking at a White House press conference yesterday, said health-care workers should prioritize in-patient testing. “We want people checked into a hospital, that are treated for what they thought was the coronavirus, to receive the test more quickly,” Pence said. Pence added that about 254,000 people in the U.S. have now been tested for coronavirus and received their results. More than 32,000 have tested positive, Josh Wingrove reports.

National Guard Ramps Up Virus Efforts: The National Guard ramped up its role in containing the coronavirus in the U.S., with 7,300 troops deployed across the country to combat the outbreak as President Donald Trump ordered new force activations to aid California, New York and Washington state. The president’s order yesterday will waive the typical cost-sharing arrangement where the federal government pays 75% of the costs and states pay the remaining 25%. The move affects the three states most impacted by the virus so far but could quickly be extended to other states, said Gen. Joseph Lengyel, the chief of the National Guard Bureau. Read more from Travis Tritten.

Small Tweaks to Ventilators Allowed to Boost Supply, FDA Says: Ventilator manufacturers are free to modify devices that have already been approved by the FDA in order to boost supply of the machines to combat the coronavirus outbreak. The Food and Drug Administration issued new guidance yesterday that allows limited modifications of previously approved models of ventilators, anesthesia gas machines, and other respiratory devices without worrying about federal enforcement. The agency still recommends using conventional respirators whenever possible to treat patients suffering from Covid-19. Read more from Andrew Childers.

GM, Ford Rush to Try to Make Ventilators: Trump caused consternation in Washington, Detroit and beyond when he tweeted yesterday that he had given automakers the “go ahead” to start producing ventilators and other equipment desperately needed in the coronavirus pandemic. No one seemed to know what this pronouncement meant.

What is clear, though, is that companies were already racing to try to determine how — or if — they could contribute. And that they recognize there will be no easy switch-over to manufacture something like a ventilator, which pumps oxygen into a Covid-19 patient’s lungs and removes carbon dioxide through a hose. Read more from Hailey Waller and Keith Naughton.

DHS Says No Plans Now for Broad Domestic Travel Ban: The Trump administration has no immediate plan to restrict domestic travel, but may consider “targeted” measures aimed at states where the coronavirus outbreak is the worst, acting Homeland Security Secretary Chad Wolf said, Josh Wingrove reports.

What Else to Know Today

Biden Pushes for On-Time Election: Joe Biden pushed back on suggestions that the November election could be postponed amid the coronavirus pandemic, saying yesterday it’s important that voting continues as it has during other crises in American history. “You know, we voted in the middle of a civil war, we voted in the middle of World War I and II,” the 2020 Democratic front-runner and former vice president said on a conference call with Atlanta-area donors. Read more from Jennifer Epstein.

Pompeo Visits Afghanistan: Secretary of State Michael Pompeo ventured abroad for the first time since the coronavirus pandemic hit the U.S. in full force, making a surprise visit to Afghanistan’s capital yesterday as part of a bid to inject new momentum into an already faltering peace process with the Taliban. Pompeo was expected to meet with Afghan President Ashraf Ghani in a push to bring the Taliban and Afghanistan’s government together for talks more than three weeks after the U.S. signed a deal to withdraw its troop in exchange for Taliban promises to keep the country from becoming a haven for terrorists. Read more from Nick Wadhams.

U.S. Is Pressured to Ease Sanctions on Iran: The devastation of the coronavirus outbreak in Iran is raising pressure on the U.S. to ease sanctions on the Islamic Republic. So far, the Trump administration isn’t budging. Iran has reported more than 1,650 deaths from the coronavirus pandemic and its leaders and some aid groups say America’s crushing “maximum pressure” campaign against it is worsening a humanitarian disaster. The U.S. says it stands ready to help Iran with the virus while simultaneously blaming the growing crisis on the regime’s mismanagement.

“U.S. sanctions are not preventing aid from getting to Iran,” Brian Hook, the State Department’s point person on Iran issues, said in an interview. “The ayatollah has vast resources at his personal disposal. We have broad exemptions that allow for the sale of medicines and medical devices by U.S. persons or from the United States to Iran.” Read more from David Wainer, Golnar Motevalli and Nick Wadhams.

Russia Halts War Games in West: The Russian military said it ended war games near its western borders as a sign of good will after NATO announced it was scaling back planned exercises due to the spread of coronavirus. “We are trying to find common ground,” Deputy Defense Minister Alexander Fomin said in an interview with Izvestia newspaper published today. “For example, we took the initiative to end military drills in the immediate vicinity of the Russian border with western states.” Russian military planes now fly missions over the Baltic Sea with transponders turned on, he said. Read more form Jake Rudnitsky.

To contact the reporter on this story: Zachary Sherwood in Washington at zsherwood@bgov.com