CARES, HEROES and HEALS, Oh My! Phase 5 Federal Funding Developments

COVID-19 Update

As the country continues to suffer from the health and economic effects of the COVID-19 pandemic, congressional Democrats and Republicans and the White House are still worlds apart on the next phase of much-needed relief legislation. Senate Republicans unveiled their initial offer, the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act, on Monday, July 27, while the House passed its version, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, way back in mid-May. With the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s expanded unemployment benefits that kept millions of Americans afloat already expired at the end of July and the pandemic showing no signs of abating, many believe that immediate government action is vital and that the current impasse threatens to further destabilize the U.S. economy.

Before getting into the details of the two proposals, it should be said that neither bill has much of a chance of becoming law as they stand. The Senate will never take up the House-passed bill, and its own bill has no chance of even going to the House due to opposition from every Democratic senator and at least 20 Republicans, to say nothing of the fact that the White House continues to chart its own separate course. With the three sides set to hammer each other in the press for a good long while, many in Washington are wishing we could simply press fast-forward and skip ahead seven to ten days to when Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin hammer out a deal and force it through the Senate. Keeping all that in mind, here is a summary of how the HEROES and HEALS acts stack up against each other and against the CARES Act.

There are some portions of the bills that are the same or similar, particularly the direct stimulus payments. Both bills (and the CARES Act) offer payments of $1,200 to single filers earning under $75,000 per year and $2,400 for joint filers earning under $125,000. This total is reduced by $5 per $100 of income above the limits before phasing out entirely at $99,000 for individuals and $198,000 for couples. The proposals differ in their treatments of dependents, however, as the House bill offers $1,200 per dependent up to a maximum of three while the Senate bill offers $500, the same as what was given in the CARES Act.

Both the HEALS and HEROES acts also change the Paycheck Protection Program (PPP), as both eliminate the requirement that businesses receiving the loans must use 60% on payroll to be eligible for forgiveness, giving recipients more flexibility in how they distribute the funds in hopes that it can keep more small businesses from going under. The Senate bill also injects an additional $190 billion into the PPP fund, which still has $130 billion remaining but expires on August 8. The House bill would extend the application period to December 31.

Both bills also include significant sums for both secondary and higher education ($100 billion in HEROES, $105 billion in HEALS), although in the Senate bill these funds are partly conditioned on those schools reopening for in-person learning in the fall. If schools are forced to continue distance learning, they could lose out on two-thirds of what the Senate bill ostensibly offers.

Beyond these issues, there is a mountain of differences between these two proposals that illustrates basic philosophical differences between the parties.

The House bill extends and expands the eviction moratorium included in the CARES Act. Namely, it extends the moratorium for 12 months and expands the protection to cover nearly all rental properties in the U.S. Democrats in Congress see this as a major issue due to the data indicating that at least 20 percent of the 110 million renters in the country are at risk of eviction by September 30. The House bill also includes $100 billion for emergency rental assistance to help local governments cover costs for renters and lost revenue for property owners. The Senate bill does not include any provisions on eviction protections despite the White House previously indicating that some version would be present in the bill.

Another major difference between the proposals is the treatment of the expanded unemployment insurance payments. Under the CARES Act, state unemployment checks were supplemented by $600 a week by Federal Pandemic Unemployment Compensation (FPUC) and made available for a larger pool of workers, including freelancers and the self-employed. This expanded benefit, which expired on July 31, had increased the average benefit check by 65 percent, enabling at least 30 million people to stave off some of the worst effects of the COVID-19 pandemic and, in the view of Democrats, help prop up the whole economy. Republicans have argued that the $600 increase resulted in paying some workers more than they would have earned if they had returned to work, thus slowing the economic recovery. The Democratic bill would extend FPUC through the end of the year at the same level, while the Republican Senate bill would cut that benefit down to $200 a week or 70 percent of lost wages.

Other funding provided by the House bill but not by the Senate’s includes an additional, temporary increase in the Medicaid matching rate for states, money for expanded SNAP (food stamps) benefits, funds for the U.S. Postal Service, money for elections and vote-by-mail, federal subsidies for health coverage under COBRA, and the reinstatement of state and local tax deductions.

The “redline” in the Senate bill, according to Majority Leader Mitch McConnell, is the liability shield that Senate Republicans introduced in the Safeguarding Americans From Epidemics at Work Act, a bill introduced separately from the HEALS Act but that should be considered as part of the overall proposal. This bill would shield schools, companies and healthcare providers from lawsuits related to coronavirus exposure and treatment between December 2019 and October 2024. Republicans argue that this is necessary to protect businesses from being bogged down by lawsuits during and after the pandemic, while Democrats believe that by making it essentially impossible to sue a business for being reckless and contributing to the spread of COVID-19, they would be rewarding those who do not follow best practices. This issue probably has the best chance of any single issue of derailing a possible deal. McConnell has said he will not negotiate on softening it, and Democrats contend that his stance indicates an unwillingness to pass any legislation at all. Just this week, the White House has indicated it might be willing to drop the proposal.

The topline numbers for the two bills are miles apart: The Senate HEALS Act clocks in at around $1 trillion while the House-passed HEROES Act carries a $3.4 trillion price tag. For comparison, the CARES Act is estimated to have cost $2.2 trillion.

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