Bipartisan negotiations aimed at producing the next major federal COVID-19 response legislation – delayed by more than a week of infighting between congressional Republicans and the White House – are finally underway. The baseline for the talks: HEROES vs. HEALS, pitting the US$3.5 trillion HEROES Act passed by the US House of Representatives in May against a newly-unveiled US$1 trillion package of bills put forth by Senate Republicans, collectively dubbed the Health, Economic Assistance, Liability Protection & Schools (HEALS) Act. The Senate Republican Policy Committee (RPC) is “working on a one-stop shop summary” document of HEALS “that will be sent out [Tuesday],” a McConnell aide said Monday night.

Topics covered today:

• US and EU policy updates with respect to the governments’ COVID-19 pandemic response
• Updates on US issues, including the FY 2021 appropriations process, the National Defense Authorization Act (NDAA), tax and economic development, health, trade, pandemic response oversight and investigations, and developments at the state level. 

Publication Note: Following a modified schedule, the next briefing will be published on Thursday, July 30.

The HEALS Act is in many ways the proposal Washington has long expected Senate Majority Leader Mitch McConnell (R-KY) to put forth as Republicans’ starting marker in the bipartisan COVID-19 talks. The package has a price tag of US$1 trillion, conforming to the cap the Kentucky Republican has favored for months, and features a liability shield to limit the exposure of businesses, schools and other institutions to lawsuits as they reopen in a nation still struggling to emerge from the global pandemic. HEALS is “a tailored and targeted draft that will cut right to the heart of three distinct crises facing our country — getting kids back in school, getting workers back to work, and winning the healthcare fight against the virus,” McConnell said Monday.

The Senate GOP proposal, which was introduced as a series of individual bills authored by Republican committee and subject matter leaders, departs sharply from the Democratic HEROES Act on issues such as unemployment relief and federal aid for states, territories and local governments. The package offers hundreds of billions of dollars for US schools, but the aid is conditioned on institutions complying with requirements that congressional Democrats call a nonstarter. State and local governments would receive new flexibility to access federal aid that is already in the pipeline via the March 27 CARES Act, but no new infusion of federal cash is proposed. A draft of the HEALS Act that circulated widely in Washington last week all but conceded Republicans will have to agree to some amount of new money for states, territories and local governments in order to forge a bipartisan agreement with Pelosi and Schumer.

Republicans are represented in the negotiations by White House chief of staff Mark Meadows and Treasury Secretary Steven Mnuchin, along with McConnell and House Minority Leader Kevin McCarthy (R-CA). House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) have the lead for the Democrats, and also currently appear to have the upper hand. Republicans have been bruised by their awkward start, which saw the Senate Republican leadership team lose more than a week as they tried to get on the same page as President Donald Trump and establish the GOP’s opening bid in the talks. The Senate Republican Conference is also deeply divided on its priorities for the eventual bipartisan bill, weakening McConnell’s hand at the negotiating table. Meadows – a former House Republican congressman and leader of the House Freedom Caucus – will recognize this dynamic, having worked as a Member of Congress to sow dissent against governing deals of the sort he is now charged with helping to broker as the president’s co-negotiator on Capitol Hill.

The path to Congress’ traditional August recess will be a rocky one. The bipartisan discussions that are now underway have a far different complexion than the negotiations that produced the CARES Act this spring. Republicans were largely unified in the March discussions, and there was general agreement at the time among legislators on both sides about the fundamental objectives. This time around, the GOP is beset by internal tensions, with the added pressure of President Trump’s sagging poll numbers and the looming threat of the November national elections that some believe could result in a Republican wipeout. Against this backdrop, enactment of a significant bipartisan sequel to CARES in the weeks ahead is far from a certainty.

Appropriations Updates

When Senate Republicans released their priorities for the next COVID-19 relief bill last night, it marked the Senate’s opening gambit and the beginning of negotiations with Speaker Pelosi and the Democratic House over the next phase of emergency legislation addressing the pandemic. This process will play out over the coming weeks, with every move of each political party closely scrutinized, and the legislative outcome shaping impressions of voters heading into the November elections.

On the other side of the Capitol, House Democrats this week will inch closer toward fulfilling their goal of completing consideration and passage of fiscal year 2021 spending bills during the month of July. Passage of most of the appropriations measures will similarly serve as the House’s opening bid in future negotiations with the GOP-controlled Senate over federal spending for the fiscal year that begins on October 1.

On a largely party-line 224-189 vote, the House last Friday passed H.R. 7608, a US$259.5 billion funding package consisting of four appropriations measures – State-Foreign Operations, Agriculture, Interior and Environment, and Military Construction-Veterans Affairs. Seven Democratic lawmakers opposed the legislation on final passage and no Republicans voted in favor.

The House Rules Committee will meet virtually later this morning to review more than 540 floor amendments submitted for consideration to a second, US$1.367 trillion funding proposal (H.R. 7617) which the House will consider in the coming days. As presently comprised, this seven-bill package will include Defense; Commerce, Justice, Science; Energy and Water Development; Financial Services and General Government; Homeland Security; Labor, Health and Human Services, Education; and Transportation, Housing, and Urban Development Appropriations bills. First votes on amendments to these bills will be delayed until Thursday evening in order for the country and the Congress to appropriately honor the life and legacy of the late Congressman John Lewis (D-GA).

This second measure is also expected to pass largely along party lines. House Republicans have continued to voice their objection to the inclusion of more than US$245 billion in emergency spending across the spending bills, which violate statutory budget caps, as well as numerous policy provisions opposed by the GOP-controlled Senate and President Trump.

It’s notable, but not unprecedented, that to date the Senate has not yet marked up any of its versions of the twelve spending bills that fund the entire US government. Last year, the Senate delayed Appropriations Committee deliberations until after a bipartisan, two-year agreement establishing spending levels for fiscal years 2020 and 2021 was enacted. The Bipartisan Budget Act of 2019 (Public Law 116-37), which established statutory limits for discretionary spending, was signed into law last August. Beginning in September, the Senate proceeded to mark up 10 of its 12 spending bills, setting the stage for ultimately successful negotiations with the House. Following intense bipartisan and bicameral negotiations, the House and Senate approved 12 final negotiated bills which were signed into law on December 20, 2019.

This year, the Senate appropriations process has been delayed by ongoing partisan and philosophical differences over the need for additional funding to address the pandemic, as well as divisions over social justice policy issues. Senate Democrats favor using the committee amendment process to debate issues they believe will resonate with voters in the upcoming elections. Senate Republicans, who maintain a slim three-seat majority in the upper body, counter that committee Democrats are attempting to weaponize the appropriations process, and force endangered GOP senators into taking amendment votes in committee that could be used against them by their general election opponents. The Senate majority party is thus left in the position of having to choose between advancing its spending bills or protecting vulnerable senators from politically perilous votes in committee.

Given that final spending bills will not be negotiated and signed into law prior to November, some congressional observers believe that Senate Majority Leader Mitch McConnell (R-KY) and Senate Appropriations Committee Chairman Richard Shelby (R-AL) may not mark up any appropriations bills year. That would be an extraordinary outcome – and the first occasion this has occurred in more than 35 years – for a committee that prides itself upon overcoming seemingly impossible odds each year and getting its work done.

With November elections on the horizon and a narrow Senate majority to preserve, the Senate Republican leadership’s immediate legislative priority remains negotiating the next phase of COVID-19 relief legislation. Upon its completion and enactment – likely to occur during August – the House and Senate will retreat from Washington, DC for the traditional summer recess. Congress will return following Labor Day in September, and immediately turn to passing a Continuing Resolution, to ensure continuity of government funding and to prevent a government shutdown at the end of the current fiscal year on September 30.

Defense Updates

The National Defense Authorization Act (NDAA) provides annual authorization of appropriations for the Department of Defense (DOD) and defense-related activities at other federal agencies. Congressional appropriations committees are responsible for providing the actual funding from the Treasury, while the NDAA provides authority, direction and sometimes restriction on how appropriated funds can be used. It also establishes national security law, policies and limitations and creates or continues national security programs such as the construction of a new class of naval vessels. Viewed as “must-pass” legislation, the NDAA routinely carries a range of policy and programmatic matters not directly related to national defense.

On July 21, the House passed H.R. 6395 – the William M. (Mac) Thornberry [NDAA] for FY 2021 by a vote of 295-125. During House Armed Services Committee (HASC) markup, Chairman Adam Smith (D-WA) offered the final amendment to name the legislation in honor of HASC Ranking Member Mac Thornberry (R-TX), who is retiring this year. The committee adopted the amendment with a standing ovation, signaling HASC appreciation for the bipartisan efforts to advance the legislation.

On July 23, the Senate passed its version (S. 4049) of the annual defense authorization measure by a vote of 86-14, with overwhelming bipartisan support. The House legislation would authorize US$733.7 billion while the Senate’s bill increases authorized funding by US$6.8 billion, to total US$740.5 billion. If signed by the President, the fiscal year 2021 NDAA will mark the 60^th consecutive fiscal year for NDAA enactment.

For fiscal year 2021, Congress collectively considered over 1,500 floor amendments ranging from requirements regarding forever chemicals (PFAS), across the board cuts to the Pentagon’s budget, renaming military bases named after Confederate generals, country-specific sanctions and limitations on the president’s ability to withdraw American troops from Germany and Afghanistan.

Notable House and Senate provisions include limitations on the transfer of DOD property for law enforcement activities, incentives to restore American leadership in semiconductor manufacturing, reports regarding the federal government’s collective response to the COVID-19 pandemic and language to rename military installations named after leaders who served in the Confederacy.

Hours before House passage, the Trump administration issued a Statement of Administration Policy opposing 33 provisions and threatening to veto the legislation. However, with two-thirds affirmative vote in the House and Senate, Congress could, in theory, override a presidential veto.

Looking ahead, the House and Senate will publish final versions of the legislation to include all amendments adopted, and each chamber will select members to serve on the fiscal year 2021 NDAA conference committee. The US Constitution requires the House and Senate to approve the same bill, in the same form, before presenting to the president for signature. Typically, the conference committee includes a majority of House and all the Senate Armed Services Committee (SASC) members. In conference, only SASC members can be conferees. In the House, if a provision in the House-passed bill includes matters under the jurisdiction of another committee, (e.g., environmental or foreign policy) those committees can appoint a conferee from both sides. For the fiscal year 2020 conference, the House had outside conferees representing 15 committees.

The conference committee will negotiate the two bills, resolve differences, and develop a compromise agreement in the form of a conference bill. When referred to as a Joint Explanatory Statement that means one body, usually the Senate, did not assist the bill off the floor. Therefore, a true conference cannot be called. Next, the conference committee will submit the conference bill and report, which is not amendable on the floor, for a vote in each chamber. Upon approval by the House and Senate, the report serves as the Enrolled Bill and is sent to the president for signature.

Adoption of the conference report is not on a specified timeline, but many of the authorities provided by the NDAA expire at the end of the fiscal year (September 30). In 2019, the Senate approved the fiscal year 2020 NDAA Conference Report December 17, 2019. Nonetheless, Congress will place considerable effort on completing the fiscal year 2021 NDAA conference prior to October 1, 2020.

Tax and Economic Development Updates

After much anticipation, Senate Republicans yesterday released their response to House Democrats’ HEROES Act – the HEALS Act, which includes a number of tax and economic development provisions in response to Congress’ ongoing response to COVID-19. One of the key issues addressed in the HEALS Act, which differs significantly from Democrats’ approach in the HEROES Act, is how to address the US$600 per week expanded unemployment benefits provided by the CARES Act. While the HEROES Act would extend these benefits, which are currently set to expire at the end of July, through the end of the year, Senate Republicans are proposing to continue supplemental unemployment benefits of US$200 per week through September. Then, beginning in October, the legislation would provide benefits of up to US$500 per week that, when combined with the state unemployment benefits, would replace 70% of lost wages; however, these additional payments would then count as income for purposes of determining eligibility for federal low-income programs. Additionally, the HEALS Act would require states within 30 days of enactment to notify individuals of their return to work requirements, individuals’ rights to refuse to return to work or to refuse suitable work, and how individuals can contest the denial of a claim as a result of these requirements. Separately, the HEALS Act provides for a second round of “recovery rebates” of up to US$1,200 for individual taxpayers with adjusted gross income (AGI) up to US$75,000 (or US$2,400 for joint filers with AGI of up to US$150,000). The amount of the rebate would phase-out completely for individual taxpayers with AGI over US$99,000 (US$198,000 for joint filers). Taxpayers would also be eligible for an additional US$500 rebated for dependents, regardless of their age.

The HEALS Act also provides US$190 billion of “committed and appropriated funds” (i.e., an additional US$60 billion added to the US$130 billion in previously appropriated, unspent funding) to support the Paycheck Protection Program (PPP) – including PPP Second Draw Loans. In order to be eligible for a PPP Second Draw Loans, a business must meet the applicable Small Business Administration (SBA) revenue size standard, have 300 or fewer employees, and have experienced at least a 50% reduction in gross revenues. The maximum loan size of PPP Second Draw Loans is 2.5 times monthly payroll costs, up to US$2million; however, businesses that have already received a PPP loan may not receive a PPP Second Draw Loan that would put their aggregate total of PPP loans over US$10 million. For purposes of loan forgiveness, businesses are still permitted to use up to 40% of their PPP Second Draw Loan for non-payroll expenses. The HEALS Act also sets aside US$25 billion for businesses with 10 or fewer employees and US$10 billion for loans made by community financial institutions. Additionally, the legislation would make several improvements to the program, including: (1) expanding forgivable expenses to include covered supplier costs, covered worker protection expenditures, and covered operations expenditures; (2) allowing borrowers to select a preferred 8-week period through 2020 to use the forgivable loan proceeds; (3) simplifying the forgiveness application process for smaller loans; (4) expanding PPP eligibility to include certain 501(c)(6) organizations, including Chambers of Commerce and Destination Marketing Organizations with 300 or fewer employees; and (5) establishing a specific PPP loan calculation for farmers and ranchers.

Senate Republicans are also proposing a number of tax incentives to help with America’s economic recovery, including:

• Employee Retention Tax Credit (ERTC): The HEALS Act makes several modifications to the CARES Act’s ERTC (i.e., a refundable payroll tax credit equal to 50% of certain wages paid by employers to employees during the COVID-19 crisis), including:
  • increasing the applicable percentage of qualified wages reimbursed through the credit to 65%;
  • lowering the amount of the reduction in gross receipts required to qualify as an eligible employer from a 50% decline to a 25% decline compared to the same calendar quarter in the previous year;
  • increasing the limitation on qualified wages taken into account per employee to US$10,000 per quarter (limited to US$30,000 for the calendar year);
  • increasing from 100 employees to 500 employees the threshold for which the credit begins to be based only on the portion of an employee’s wages that compensate the employee for not performing services (i.e., employers with 500 or fewer full-time employees would receive the credit based on all wages paid to an employee); and
  • allowing employers, subject to certain limitations, to be eligible for both the ERTC and PPP
• Work Opportunity Tax Credit (WOTC): The legislation would add a new WOTC targeted group – 2020 qualified COVID-19 unemployment recipients (i.e., an individual who is certified by the designated local agency as having received (or approved to receive) unemployment compensation under state or federal law for the week of or immediately preceding the hiring date and who begins work after the date of enactment and prior to January 1, 2021) – as an eligible targeted group for this elective tax credit to employers hiring individuals who are in one or more of the targeted groups. For those employers hiring 2020 qualified COVID-19 unemployment recipients, the maximum credit per employee is 50% of the first US$10,000 of qualified first-year wages.
• Safe and Healthy Workplace Tax Credit: The HEALS Act would establish a refundable payroll tax credit of 50% of an employer’s “qualified employee protection expenses” (e.g., testing for COVID-19, personal protective equipment, and cleaning supplies), “qualified workplace reconfiguration expenses” (e.g., modifications to workspaces for the purpose of protecting employees and customers from the spread of COVID-19), and “qualified workplace technology expenses” (e.g., contactless point-of-sale systems and other technology to track employee interactions with customers). For each calendar quarter, an employer’s qualified expenses cannot exceed a cap based on the average number of employees, which is equal to US$1,000 for each of the first 500 employees, plus US$750 for each employee between 500 and 1000, plus US$500 for each employee that exceeds 1,000.
• Tax Deduction for Business Meals: Senate Republicans are also proposing to temporarily expand the tax deduction for businesses providing meals to clients – a proposal intended to provide assistance to restaurants and entertainment venues that have been negatively impacted by COVID-19 and which reverses course from the Republicans’ 2017 tax reform bill.
• State Tax Certainty: The HEALS Act would create uniform procedures for assessing state and local income taxes on remote and mobile workers affected by government shutdown orders due to the COVID-19 pandemic. Specifically, through 2024, employees who perform employment duties in multiple states would be subject to income tax only in their state of residence and any states in which they are present and performing employment duties for more than a limited time during the calendar year.

While the HEALS Act does not provide any additional funding for state and local governments – an issue that is a priority for Congressional Democrats – the legislation does provide “additional flexibility and accountability” for Coronavirus Relief Fund (CRF) payments, including by providing a longer period over which CRF resources can be used to cover expenditures, expanding allowable uses of CRF funds to cover revenue shortfalls, and prohibiting the use of CRF funds for pensions, postemployment benefits, or replenishing “rainy day funds.” Separately, the HEALS Act would create a process “to rescue each of the major endangered trust funds” (i.e., Social Security, Medicare, and Highway Trust Funds). Under this proposal, Congressional leadership would appoint Members to serve on “Rescue Committees” charged with forging a bipartisan consensus on a solution and reporting legislation for consideration by Congress. If legislation is agreed to and reported, the legislation would be considered under expedited procedure in both Chambers of Congress – though it would still need 60 votes in the Senate for final passage.

Health Updates

While the Senate Republican HEALS Act focuses on many similar health priorities of the House-passed HEROES Act, the amount of funding is far less. Under the emergency appropriations legislation, the Department of Health and Human Services (HHS) will receive US$118 billion. As in previous COVID-19 legislation, the bulk of the funding is directed towards the Public Health and Social Services Emergency Fund. The legislation allocates US$25 billion to the Provider Relief Fund, which is far short of the nearly US$100 billion provider associations like the American Hospital Association, American Medical Association and American Nurses Association have called for.

The appropriations title would provide an additional US$16 billion for testing, contact tracing and surveillance in states, and US$20 billion is set-aside for the Biomedical Advanced Research and Development Authority (BARDA) for vaccine, therapeutic and diagnostic development. US$2 billion is allocated for the national stockpile and US$7.6 billion is provided for community health centers. The National Institutes of Health would receive US$15.5 billion for continued research and support of clinical trials, and the Centers for Disease Control and Prevention (CDC) would receive US$6 billion to develop a vaccine distribution plan.

The Senate Finance Committee provisions include the extension of numerous telehealth flexibilities through the duration of the public health emergency, or December 31, 2021, whichever is longer. Similar to the House-passed HEROES Act, the bill supports nursing home “strike teams” to respond to crises, and augments testing and infection control in these facilities.

Healthcare providers would not have to begin repayment of any loans made under the Medicare Accelerated and Advance Payment Program until January 1, 2021, and would be allowed 270 days to repay them in full prior to incurring interest. Current law requires reimbursement within 120 days. These provisions were met with resistance from some providers. Federation of American Hospitals President Chip Kahn said in a statement, “while recognizing that hospitals and caregivers require further assistance, unfortunately, the package does not sufficiently ease the burden of the Medicare Accelerated and Advance Payment Programs loan repayment. It is critical that truly sustainable terms for loan repayment are provided by Congress.”

A separate liability bill offers a safe harbor for “health care providers, including hospitals, doctors and nurses as well as nursing homes and other care facilities” from “liability claims arising out of the provision of care for coronavirus or services provided as a result of coronavirus.” These provisions immediately received criticism from Senate Democrats. In contrast to the HEROES Act, the bill does not include funding for state and local governments, and omits hazard pay for frontline workers.

Over the weekend, another COVID-19 vaccine candidate received a boost. HHS announced it would be providing the drug manufacturer Moderna US$472 million to develop its messenger RNA vaccine. The funding is to help support Moderna’s Phase 3 trial, which began on Monday and has enrolled 30,000 individuals across 100 research sites across the country. National Institute for Allergy and Infectious Diseases Director Anthony Fauci said of the trial, “we are going to get a good sampling of the activity of virus transmission that’s currently going on in the country” but warned that the vaccine won’t be widely available to individuals in the US until “several months” into 2021.

President Trump toured the Fujifilm Diosynth Biotechnologies vaccine development plant in Morrisville, NC, on Monday. The company is a subcontractor of Novavax, a vaccine manufacturer that received a US$1.6 billion investment from HHS as part of the administration’s “Operation Warp Speed” earlier this month. During the visit, the president stated, “America will develop a vaccine very soon and we will defeat the virus. We will have it delivered in record time.” Meanwhile, late last night, President Trump retweeted numerous entries that praised the use of the anti-malaria drug hydroxychloroquine. Although the administration has repeatedly touted its effectiveness, the World Health Organization and other public health entities have concluded the drug has no impact on reducing deaths from COVID-19. Its Emergency Use Authorization was revoked by the Food and Drug Administration on June 15.

Trade Updates

Senate Republicans’ HEALS Act includes the “Restoring Critical Supply Chains and Intellectual Property Act.” Introduced by Senator Lindsey Graham (R-SC), this measure provides tax credits and incentives to shift Personal Protective Equipment (PPE) supply chains back to the United States. It would require that any HHS purchases of PPE and clothing, sanitizing supplies and ancillary medical supplies and any other textile medical supplies and textile equipment for the Strategic National Stockpile be manufactured domestically and from components grown, reprocessed, reused or produced in the United States, similar to the Berry Amendment applicable to certain Defense Department purchases. The measure would also establish a new investment credit for certain medical PPE manufacturing projects, aimed at incentivizing the expansion of domestic manufacturing.

Title II, the Safeguarding American Innovation Act, contains a number of provisions aimed at protecting US intellectual property, including by establishing a new Federal Research Security Council tasked with standardizing and securing the federal grant-making process; criminalizing federal grant application fraud; denying visas to certain individuals believed to be traveling to the US to access export controlled technologies; and establishing new restrictions on educational and cultural exchange programs. Title III includes provisions of the Creating Helpful Incentives to Produce Semiconductors for America Act, legislation originally introduced by Senator John Cornyn (R-TX) and provisions of which are also folded into the fiscal year 2021 NDAA. The HEALS Act establishes new semiconductor incentive grants but with limits on funds available to entities with links to certain foreign powers. Finally, the HEALS Act contains provisions aimed at promoting and expanding domestic supply chains for critical minerals.

This week, the Senate Finance Committee will hold two hearings on protecting US medical and PPE supply chains. Today, the panel will hear from Homeland Security Department officials, with a second panel of private sector representatives to testify on Thursday.

European Policy Updates

After a marathon EU Summit, the EU27 Heads of State reached a deal on 21 July on the 7-year EU budget, the Multiannual Financial Framework (MFF) and the Next Generation EU (NGEU) Recovery Fund, which aims to support the recovery and resilience of the Member States economies in the fallout of the COVID-19 pandemic. The MFF was agreed to at a slightly lower amount than originally proposed by the European Commission (EC), from EUR€1.1 trillion (US$1.28 trillion) down to EUR€1,074.3 billion (US$1.25 trillion).

As agreed in the original proposal, the NGEU Instrument will amount to EUR€750 billion (US$874.2 billion). The EC will borrow these funds on the capital markets. Nevertheless, the attribution of the funds has been altered from the original EC proposal, with EUR€360 billion (US$419.6 billion) allocated to loans and EUR€390 billion (US$454.5 billion) to grants. These will be disbursed to Member States via the EU’s existing instruments and programs. The borrowing activity would last until the end of 2026 and the repayment would be scheduled until the end of 2058.

According to the deal achieved, the money raised for the NGEU Instrument will be invested across three pillars previously identified in the 27 May EC proposal: (1) supporting Member States with investments and reforms; (2) rebooting the EU economy by incentivizing private investments; and (3) addressing the lessons of the crisis and preparing for future crises. In more detail, the deal has adapted funding through the following instruments:

• A ‘Recovery and Resilience Facility’ of EUR€672.5 billion (US$733.5 billion), an increase from the EUR€560 billion originally proposed by the EC, aiming to support investments and reforms (including in green and digital transitions) and to strengthen the resilience of national economies. This will be a grant-based facility of EUR€312.5 billion (US$365.4 billion) and loans of EUR€360 billion (US$420.9 billion). According to the deal 70% of the grants will be committed in the years 2021 and 2022 and the remaining 30% will be fully committed by the end of 2023;
• The ‘REACT-EU’ initiative which would provide an additional EUR€47.5 billion (US$55.5 billion) versus EUR€55 billion originally proposed by the EC, to the current cohesion policy programs between now and 2022;
• An additional EUR€10 billion (US$11.6 billion), versus EUR€40 billion originally proposed by the EC, to the Just Transition Fund, to assist the faster transition of Member States towards climate neutrality;
• An additional EUR€7.5 billion (US$8.7 billion), versus EUR€15 billion originally proposed by the EC, to reinforce the ‘European Agricultural Fund for Rural Development’ to support rural areas;
• Upgrading the EU’s investment program, ‘InvestEU’, with an additional EUR€5.6 billion (US$6.5 billion), versus EUR€15.3 billion originally proposed by the EC, to mobilise private investment in projects across the EU;
• Reinforcing the EU’s Civil Protection Mechanism, ‘rescEU’ with an additional EUR€1.9 billion (US$2.2 billion), versus the EUR€2 billion originally proposed by the EC; and
• Reinforcing the EU’s Research & Innovation program, ‘Horizon Europe’ with an additional budget of EUR€5 billion (US$5.8 billion), bringing the total budget to EUR€75.9 billion (US$88.7 billion) versus the EUR€4 billion originally proposed by the EC.

The NGEU would also be repaid through the Own Resources system (an EU system that ensures a continuous flow of EU revenues which finance the EU budget), which would in part be developed in the coming years. According to the deal, a new own resource based on the weight of non-recycled plastic packaging waste will be introduced on January 1, 2021 as a revenue source from national contribution on a quota of EUR€0.80/kg, which is in line with the legislative proposal under negotiation. Next, the EC plans to propose a carbon border adjustment mechanism and a digital levy, to be introduced by January 1, 2023 at the latest. Additional initiatives that would contribute to the repayment of the Next Generation EU are a revised Emission Trading Scheme extended to the maritime and aviation sectors, and an own resource on a Financial Transaction Tax.

The Heads of State deal would now need to be negotiated between the European Parliament (EP) and Council of the EU, to finalize the separate legal acts linked to the NGEU Instrument and the EU Budget. Similarly, the Council of the EU will aim to approve the Own Resources Decision, which provides the underlying technical requirements of this EU system, as swiftly as possible.

The EP held an extraordinary plenary on July 23, where it approved a negotiating mandate based on the respective Heads of State deal. While it welcomed the NGEU Instrument as a positive step to recovery, the EP criticized the outcome of negotiations regarding the MFF. The EP stands ready to withhold its consent on the long-term EU Budget until a satisfactory agreement is reached in the forthcoming negotiations. However, high-ranking officials urge Members of the EP to swiftly approve the budget deal.

Oversight Updates

Yesterday, House Committee on Oversight and Reform Select Subcommittee on the Coronavirus Crisis Chairman James Clyburn (D-SC) sent letters to Hugh Frater, Chief Executive Officer of Fannie Mae, and David Brickman, Chief Executive Officer of Freddie Mac, urging these government-sponsored enterprises to take steps to help homeowners and renters in homes with federally-backed mortgages avoid foreclosure and eviction. The CARES Act contains an eviction moratorium provision covering tenants living in properties with federally-backed mortgages, but that moratorium expired last week. Without additional protections, as many as 23 million people may be evicted by September.

Last Friday, Chairman Clyburn and Representatives Bill Foster (D-IL) and Mark Green (R-TN) called on the Government Accountability Office (GAO) to conduct ongoing oversight of Operation Warp Speed and other vaccine development initiatives funded by the CARES Act and other laws. Operation Warp Speed was established in May 2020 as a partnership among multiple executive branch agencies and private corporations for, among other things, the purpose of developing, manufacturing and distributing a safe and effective vaccine for the coronavirus by January 2021. They requested that the GAO provide the subcommittee and the relevant departments with monthly bipartisan staff briefings beginning in August and written reports every three months beginning in September, until Operation Warp Speed is disbanded.

Also last week, Senator Elizabeth Warren (D-MA) and 14 other Democratic Senators sent a letter to HHS, urging the department to strengthen its efforts to protect pregnant women during the pandemic. The senators encouraged HHS to focus on racial and ethnic disparities, which are driving both COVID-19 outcomes and maternal health outcomes in the US. They pointed out that black and indigenous women are much more likely to die from pregnancy-related complications than white women, and rates of infection and death from COVID-19 are significantly higher among communities of color. The senators urged HHS to improve data collection and public health communication, expand tracing efforts, ensure the proper inclusion of pregnant women in COVID-19 clinical trials, and address racial disparities in health care outcomes. They requested an update on these efforts by July 31, 2020.

Additionally:

• The Project On Government Oversight and the Anti-Corruption Data Collective report that between US$2.4 million and US$6 million in PPP loans went to two tech companies owned by Chinese state-controlled private equity firms.
• A Florida man was arrested and charged with fraudulently obtaining US$3.9 million in PPP loans and using those funds, in part, to buy a Lamborghini sports car and make purchases at luxury retailers and resorts in Miami Beach.
• Senators Warren and Cory Booker (D-NJ) released new information from their investigation into Tyson Foods, JBS USA, Cargill and Smithfield Foods. The senators said that the companies “evaded” most of their questions, but the companies’ “behavior speaks for itself.” First, the Senators noted that new data show that meat processing companies continue to export record quantities of meat to China, despite warning of shortages here at home. Second, while the companies claim that they “meet or exceed” CDC safety guidelines, the number of COVID-19 cases in meatpacking plants continues to grow and now exceeds 36,000.

State Updates

In just under 100 days Americans will cast their ballots for president, Congress and 11 gubernatorial races. These elections will be unlike any other and could be the most consequential in US history, thanks to a pandemic that has spread so rapidly around the world. According to the Brookings Institution, “the safest and most secure way to vote in a pandemic is vote-by-mail.”

The presidential race will likely be determined by a handful of swing states, including Wisconsin, North Carolina, and Pennsylvania, which typically do not see large numbers of voters by mail. As cases continue to rise, other swing states, like Florida and Ohio, have more experience with widespread vote-by-mail, but are also facing unprecedented challenges, like recruiting poll workers and finding polling locations willing to host voters.

Currently more than 180 million Americans who are eligible to vote would be able to cast a ballot by mail. Of those, 24 million live in states that will accept fear of the coronavirus as an excuse to vote absentee, or have switched to become “no excuse” states. For voters in eight states, in-person voting remains the only option unless votes can provide an approved excuse not related to fear of the coronavirus. Traditional absentee excuses include military deployments or illness.

Brookings compiled a state-by-state scorecard with analysis of what states are doing to expand access and improve the process of voting by absentee ballot or via a universal vote-by-mail system, helping to improve voting in a pandemic.

Both President Trump and former Vice President Joe Biden have set the table for Americans to question the upcoming election results well before they even take place. The president, who votes by mail, has claimed that absentee voting will lead to “massive fraud and abuse” and that mail-in ballots will be stolen from mailboxes. When asked on Fox News Sunday recently whether he would accept the results of the election, the president remarked “I have to see. No, I’m not going to just say yes. I’m not going to say no.”

Former Vice President Biden last week at a virtual fundraiser said he was putting Russia and other foreign governments on notice about meddling in the 2020 election saying, “Russia, China, Iran and other foreign actors are working to interfere in our democracy and undermine our faith in our electoral process. We can’t let that happen.”

Analysis by The Washington Post last month found only 372 cases of potential fraud out of roughly 14.6 million ballots cast by mail in 2016 and 2018.

This post was written by  Mara Sheldon, Meg Gilley, Christina Economides, Austin M. Harrison and Genevieve Bresnahan.