After Holding Up Small Business Relief Funds, Democrats Go Full Throttle On Bailing Out Blue States

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by Tyler Durden
Friday, Apr 24, 2020 - 02:00 PM

While small business owners continue to die on the vine, Nancy Pelosi held up a GOP plan for emergency funding to replenish the Paycheck Protection Program (PPP) with a 'clean' (pork-free) bill.

Now, Pelosi is champing at the bit to push through a 'long and expensive wish list,' of additional stimulus - including $500 billion for mismanaged state and local governments amid the coronavirus pandemic, according to Bloomberg. Democrats also want an extension of expanded unemployment benefits, along with expanded workplace safety protections for front-line workers, and a boost in funding for food stamps.

Senate Majority Leader Mitch McConnell (R-KY), however, isn't a fan, and has indicated that he will dig his heels in for a massive fight over aid to states and local governments - a top priority for Democrats.

There is a risk that the effort to write a comprehensive rescue bill gets bogged down for months or falters given how far apart both parties are now as well as the increasingly bitter exchanges over what should come next and who will be to blame if the economy doesn’t rebound.

One of the biggest battles ahead will be over aid to state and local governments, which are seeing tax revenue plummet and expenses escalate as a result of the pandemic.

Senate Democratic leader Chuck Schumer told National Public Radio Friday that he believes “there’s enough bipartisan support” for state and local government relief legislation despite resistance from McConnell. -Bloomberg

Schumer thinks McConnell will walk back statements made earlier this week, when he said that struggling states - mostly run by Democrats - should be allowed to go bankrupt.

"We’re not interested in rescuing them from bad decisions they’ve made in the past," McConnell told Fox News on Wednesday, which his office elaborated on in a press released titled "On Preventing Blue State Bailouts."

Several governors of affected states slammed McConnell, warning that they'll have to begin slashing services without a $500 billion slush fund. Cities and counties have requested $250 billion to remain solvent and continue to pay police, firefighters, teachers, and of course - their pensions.

On Thursday, New York Governor Andrew Cuomo suggested that allowing states to go bankrupt would be "one of the really dumb ideas of all time," adding that if New York were to declare bankruptcy, "you will see a collapse of this national economy."

But what about all that debt?

Kentucky Republican Sen. Rand Paul and Rep. Andy Biggs (R-AZ), Chairman of the House Freedom Caucus, have raised alarms over a national debt crisis if Congress doesn't put a lid on the spending.

"I don’t want to see this massive accumulation of debt destroy this great country," Paul said in a Tuesday statement from the Senate floor. "My advice to the Senate and to the American people is let’s be aware of what we are doing by creating all this new debt, and let’s think before we jump to a terrible, terrible conclusion."

Nothing is getting done without bipartisan support

Treasury Secretary Steven Mnuchin told Bloomberg News on Thursday that an agreement would need to be reached on both sides of the aisle to move forward.

"For anything to get done it has to have bipartisan support in the House and the Senate and the president has to be on board with the strategy," Mnuchin told Bloomberg News on Thursday. "At the moment we’re focused on executing what is a very large amount of money that the Congress is in the process of approving."

Pelosi and Schumer are united on most of their core demands, which also include more health-sector funding and a “Heroes Fund” for federal payments of as much as $25,000 to health workers, grocery store employees and other essential workers.

Our states and local governments are feeling the pain of slashed revenue from this pandemic,” said House Ways and Means Chairman Richard Neal, a Massachusetts Democrat who will draft much of the package. “Without our support, essential workers who have been risking their lives are at risk of losing their jobs.

Republicans in both chambers want a more cautious approach on the next stimulus bill, and McConnell this week wouldn’t commit to completing it. House Minority Leader Kevin McCarthy said Congress should slow down.

We have not seen the effects of all this money going out,” McCarthy, a California Republican, told reporters on Wednesday. “The states are going to have money coming to them already. Let’s see what’s working, what needs more help. And let’s craft a bill based upon knowledge, data.” -Bloomberg

Congressional Democrats are facing enormous pressure from core constituencies - including four major unions which called for $200 billion allocated to education, expanded Medicaid funding, as well as a federal backstop to assist with higher insurance premiums. In addition, they want to boost the Defense Production Act to bolster US-based manufacturing of virus-related equipment.