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The half-loaf agreement that Democratic and Republican negotiators reached on Tuesday to replenish the the government’s emptied-out small-business rescue offered nothing on one of Democrats’ top negotiating demands: additional grants for cash-strapped state, local, and tribal governments, which have seen expenditures soar and revenues plummet during the coronavirus pandemic. Republicans would not negotiate on the aid in this “interim” bill to reup the Payroll Protection Program, and with restaurants and bookstores collapsing by the day, Democrats agreed to defer it to the next relief bill. And that next one, Democratic leaders say, will be substantial, in line with the multitrillion-dollar CARES Act that passed in late March.
“In the weeks ahead, Congress must prepare another major bill, similar in size and ambition to the CARES Act,” Minority Leader Chuck Schumer said on the Senate floor Tuesday. Among the items this bill would need to include, he said, was additional state, local, and tribal government assistance, rent assistance, hazard pay for front-line workers, Postal Service relief, a boost to food assistance programs, and resources for November election integrity (i.e., making sure people can vote). He promised that the administration and his negotiating partner, Treasury Secretary Steve Mnuchin, were seeking another big bill, too.
Around the same time, though, Senate Majority Leader Mitch McConnell—who had just secured more money for PPP, and a month ago had secured all the money that large corporations would ever need—suggested it might be time for Congress to declare victory and call it a day.
“I think it’s also time to think about the amount of debt that we’re adding to our country and the future impact of that,” McConnell said at a press conference Tuesday. “And I think we’ve also seen, with this catastrophic damage to the economy, that until we can begin to open up the economy we can’t spend enough money to solve the problem.” While he said he understood that state and local governments were “suffering,” he felt that “we’ve gone so far on the national debt here that the next time we address this issue, the Senate should be back in session, fully up and running, with everybody involved in the discussion.” The Senate is scheduled to return May 4.
It had been difficult to get a straight answer during negotiations over the most recent bill about why Republicans had drawn such a red line around additional state and local assistance. Was it the logistical issue that McConnell had offered, believing it was a matter for the full Senate to debate in person? That it wasn’t as immediate a concern as replenishing the flat-broke PPP? In remarks McConnell made on Hugh Hewitt’s radio show Wednesday morning, though, we got a little closer to the dirty truth: It’s about good ol’ ideology.
“I said yesterday we’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” McConnell told Hewitt. “You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs. There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”
McConnell’s office excerpted this quote in a press release under the subtitle, “On Stopping Blue State Bailouts.” He added—at Hewitt’s prompting, sure—that he would favor changing bankruptcy laws to allow states to declare bankruptcy instead of using federal funds to rescue them. Cue the Democratic panic.
In short: It doesn’t seem that Mitch McConnell is particularly interested in granting anywhere near the $500 billion in additional relief that the bipartisan chair and vice chairs of the National Governors Association has been requesting, and is suggesting that bloated blue states want to exploit the crisis to cover for poor fiscal management predating the crisis. More cynical yet are murmurs that Republicans are intentionally starving governors of resources as a lever to get them to end stay-at-home orders, and resume revenue-generating economic activity, sooner than public health guidelines would recommend.
The question of whether McConnell is shutting the doors on congressional relief, though, leans too credulously into the myth of Mitch McConnell’s omnipotence. The more important question is whether McConnell can shut the doors on congressional relief at a time when there’s no question that additional congressional relief is needed.
Regardless of how quickly state governments act to lift restrictions on economic activity, there will need to be at least one more major relief bill. PPP will run out of money again. Hospitals will need more money. Human beings will need more money! At least 22 million jobs have been lost in the past few weeks—and we have no idea how long it will take for them to come back. The damage is incalculable. It is untenable for a legislator or president to say their hands are tied because of the deficit, because that legislator or president will risk blame for a worsening economic depression in an election year.
The position that the pleas for federal aid are simply a trick Democratic governors and mayors are playing to cover for their years of bloated pensions, mass-distributed free condoms, and mandatory abortions is also not tenable. Gaping state and local budget deficits will cause mass layoffs of police, firefighters, and teachers, and the austerity that state and local officials are forced to impose to balance their budgets would dramatically slow the pace of economic recovery even when restrictions are lifted. The situation will be dreary in any state that’s had a run on its unemployment insurance and health systems while revenues have collapsed—in other words, they’ll be dreary in any state. Ohio and Louisiana, a reddish state and a red state, for example, have been hit hard by coronavirus outbreaks. That’s why Ohio Republican Sen. Rob Portman, for example, is calling for additional state and local assistance, while Louisiana Republican Sen. Bill Cassidy has joined with New Jersey Democratic Sen. Bob Menendez to propose their own $500 billion fund for state and local help. There will be Republican pressure to get something done—both from within Congress and from the president, who’s already compiling his own wish list.
The need for additional action is undeniable, and Democrats are drawing up a long list of items they intend to compile in a House bill. McConnell is setting a marker on the other end. After a few weeks of theatrics, Pelosi, Schumer, and Mnuchin will cut a deal somewhere in the middle. McConnell may be hitting the brakes, but even he can’t bring Congress to a complete stop.
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