Politics Delay COVID Relief

RealClearPolitics 2020 Electoral College Map, as of 10/15/20

A global pandemic, a record-setting recession, and rising racial tensions have increased social unrest and exposed deep divisions in our country. In times of crisis, leaders bridge divisions. This year, Washington is aggravating them.

In our November 2018 post-election report, we wrote, “On election day, voters put a big constitutional check on a President Trump and a Republican-controlled federal government. They also gave newly-elected Democrats and Republicans little incentive to compromise on budget and policy matters.”

That remained true for 22 of the past 24 months. Since then, we witnessed a record-setting partial government shutdown, House impeachment of President Trump, and Senate acquittal on all charges. The notable exception occurred in March and April with the unprecedented bipartisan $2.8 trillion legislative response to the COVID-19 pandemic. Since May, compromise has become increasingly difficult.

After a bizarre string of Trump tweets, COVID relief talks ground to a halt this week. In an October 13th letter to House Democrats, Speaker Pelosi (D-CA) wrote, “[L]ast week, the President suspended negotiations that had been proceeding on our Heroes Act. As you further know, following his tweet, the stock market went down and so did he in the polls. Subsequently, Secretary Mnuchin came back to the negotiating table, and this weekend, the Administration issued a proposal that amounted to one step forward, two steps back.” Pelosi added, “The President’s attitude is shameful, when the need for immediate and meaningful act could not be more urgent.”

That same day, Senate Majority Leader McConnell (R-KY) stated, “There is no excuse for Democrats to keep blocking job-saving funding for the Paycheck Protection Program while other conversations continue…. Speaker Pelosi frequently says she feels ‘nothing’ is better than ‘something.’ And she has worked hard to ensure that nothing is what American families get.”

At this point, getting something done before the election and executing on that will be difficult.

Treasury Secretary Mnuchin,
October 14th

The COVID-19 pandemic is a global health crisis with devastating economic consequences. It has been particularly disruptive for the transportation, tourism, and hospitality industries, small Main Street businesses, and developing countries. The revenue base for state and local governments has hemorrhaged. Millions of additional lay-offs loom. Without a robust testing and contact-tracing system, as well as FDA-approved therapeutics and vaccines, how can schools, businesses, and other institutions confidently reopen? Recovery could be measured in years not months. Last week, Federal Reserve Chairman Powell stated, “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses…. By contrast, the risks of overdoing it seem, for now, to be smaller.” By any metric that matters, we aren’t overdoing it.

Both Pelosi and McConnell have refused to budge. It’s possible that a White House trailing in the polls and desperate for some good economic news caves and pressures Senate Republicans to accept a major COVID-19 relief deal, but the more likely scenario is that the next major COVID relief bill occurs after the elections.

Election Outlook

With November 3rd less than three weeks away, the 2020 elections are well under way in most states (largely because of the pandemic). With record early voting projections in most states (particularly by mail), expect a combination of count delays, challenges, and recounts to delay certified results in federal, state, and local elections around the country. If past elections are any indication, the make-up of the House and Senate for the 117th Congress won’t be finalized before December.

Regardless of the outcome, voter turnout appears to be on track to shatter the 57% record set in the 2008 election. That is a hopeful sign.

In the Electoral College (EC) race (the one that matters), results in individual states ultimately determine the winner of Presidential elections. With 270 EC votes needed to win the keys to the White House, the 2020 race appears to be Biden’s to lose (see Electoral College map). Based on October 15th RealClearPolitics polling data, Biden has a clear lead in states representing 216 EC votes. Trump leads in states with 125 EC votes. That leaves 12 states representing 197 Electoral College votes in the RealClearPolitics toss-up column. Biden has multiple paths to the 270 total needed for an Electoral College win. The easiest appears to be winning the battleground states where he currently leads Trump by 6% or more—MI (16), MN (10), PA (20), and WI (10). That pushes Biden’s total to 272. Trump must win Texas (38), Florida (29), everything else in the toss-up column and pull an upset in at least one of those Biden states. That’s a tall order.

What are the political consequences of this impasse?

It increases the importance of House races.

Because Republicans must win 94% of the 34 contested House races to regain control of the House, Pelosi’s Democratic majority appears safe. But the 2020 election will alter the make-up of her majority. Since May, a group of moderate House Democrats have urged Pelosi to compromise on COVID relief. Until this week, Progressive leaders in the House urged her to stand firm. Gaining House seats in this election may validate that hardline stance and make bipartisan compromise more difficult in the 117th Congress.

Legislatively, it increases the importance of reconciliation.

A Democrat filibuster has prevented the Senate from passing additional COVID relief and a host of other matters.

With a Biden win, Democrats need to pick up three seats to control the Senate in 2021. Republicans currently hold six of the seven 2020 toss-up seats: (GA1) Perdue, (IA) Ernst, (ME) Collins, (MI) Peters, (MT) Daines, (NC) Tillis, and (SC) Graham. Biden currently leads Trump in five of those states. Even a toss-up race sweep leaves Democrats seven votes short of the 60 needed to limit filibusters and move legislation through the Senate. Unless a blue wave election puts seven additional Senate races in play, expect a Democrat-controlled Senate to rely on reconciliation (a procedure that avoids Senate filibusters for budget-related matters) to move key parts of their legislative agenda. We also expect a push from Democrats to eliminate the filibuster.

What are the practical consequences of this impasse?

Don’t expect much from lame ducks.

When Pelosi and Secretary Mnuchin reached a continuing resolution (CR) deal that avoided a pre-election government shutdown, she signaled her intention to complete action on FY21 appropriations before the end of December. Government managers shouldn’t bet on that. A relatively clean CR through February that defers controversial decisions to the 117th Congress is far more likely. It is possible that some targeted COVID relief measures are attached to that legislation. Federal agencies and programs will, in most cases, be required to operate at FY20 funding levels with new starts delayed to the second half of FY21.

Expect the President’s 2021 inauguration speech and his 100-day agenda to feature a COVID relief/economic stimulus plan.

A big deal now would clear the legislative tracks for the President-elect’s agenda. If Biden wins, he’s likely to follow the 2008-9 precedent. The $787 billion American Reinvestment and Recovery Act (ARRA) moved swiftly through the House and Senate early in 2009 because President-elect Obama (with advice from Biden) didn’t wait until Inauguration Day to get started. The ARRA was largely written and vetted during the Presidential transition.

Regardless of who wins, the state of the global pandemic will impact the cost of the plan. A conservative estimate of its 10-year cost is triple the initial cost of ARRA. If Biden wins, we expect it to be combined with a “Build Back Better” infrastructure-focused spending stimulus. That package is likely to exceed the $3 trillion House-passed Heroes Act. Like ARRA, most of those dollars will flow from Washington to state and local government, targeted economic sectors, and individuals. The package will also likely include entitlement and tax changes.

We live in a divided country. The 2020 election is unlikely to change that. But hopefully America emerges from this tumultuous year, as Biden has stated, “prepared to lead again–not just with the example of our power but also with the power of our example.” A worthy goal whatever your politics.