America’s top monetary policy official, Federal Reserve Board Chairman Jerome Powell, is urging the US Congress to extend the enhanced unemployment benefits approved this spring that are set to expire at the end of July, intensifying a policy debate that will be pivotal to the negotiations next month that will determine the next phase in the federal government’s legislative response to the COVID-19 pandemic. Both chambers of Congress are working in the interim to advance police reform legislation in response to a surge of national outrage over racial inequality and brutality by law enforcement entities, while developing bills in committee that could emerge as building blocks for the eventual coronavirus response package.

The bipartisan, US$2.7 trillion CARES Act, signed by President Donald Trump on March 27, established a program that provides an extra US$600 in unemployment benefits to individuals who were put out of work by government-mandate lockdowns imposed last spring as the pandemic surged. Congressional Republicans and advisors to the president, concerned that the enhanced unemployment benefits are now creating a disincentive for individuals to return to the workforce as the American economy is reopening, have vowed to let the program expire and replace it with measures that would provide bonus payments to those who return to their jobs.

Topics covered today include: tax, economic development, health, international trade, government oversight and US states developments. 

“[I]t probably is going to be important that [the enhanced benefits] be continued in some form,” Powell told Congress Wednesday. “You wouldn’t want to go all the way to zero on that.”

Powell’s comments, made Wednesday in response to questions during a hearing of the House Committee on Financial Services, complicate the GOP strategy, and may boost the position articulated by leading Democrats such as House Committee on Ways and Means Chairman Richard Neal (D-MA). Neal, in an interview weeks ago with Law360, suggested Congress may compromise by adopting new measures to encourage re-employment while also leaving some form of the enhanced unemployment benefits in place past the end of July.

The approaching expiration of the CARES Act’s expanded unemployment benefits creates an action-forcing deadline of the sort that is often needed in Washington to compel Republicans and Democrats to come to the negotiating table and produce a consensus agreement that is needed for governing. Members of Congress in both parties plan to be away from Washington during August, when Congress traditionally observes a month-long district work period. Neither party can afford to go into recess mode in August with the unemployment question unresolved. This dynamic will be the primary impetus for bipartisan talks that are expected to formally begin after the July 4 holiday with the goal of forging an agreement on a sweeping COVID-19 response package that establishes the path forward on unemployment programs and an array of additional measures designed to support individuals and enterprises impacted by the pandemic-related lockdown.

The House Committee on Transportation and Infrastructure, led by Chairman Peter DeFazio (D-OR), today will continue work on a nearly US$500 billion surface transportation bill, portions of which could become candidates for inclusion in the upcoming bipartisan agreement. The committee began work on the measure Wednesday, but bipartisan collaboration has thus far been in short supply, making it difficult for legislators to get traction on amendments they are seeking to add to the base bill.

House Ways and Means Committee Democrats are crafting a tax bill that will be merged with Chairman DeFazio’s surface transportation bill as it goes to the House floor at the end of June. The tax measure may include “pay-fors” to offset some of the costs of the transportation bill, and will likely feature an array of additional tax code-related components intended to provide further COVID-19 relief to the economy.

Tax and Economic Development Updates

As highlighted in yesterday’s report might be the case, Federal Reserve Chairman Jerome Powell leveraged his testimony before the House Committee on Financial Services to “look at ways to continue to support both people who are out of work, and also smaller businesses that may not have vast resources for a continued period of time.” With regard to the debate over extending the expanded unemployment benefits included in the CARES Act, Chairman Powell noted: “It probably is going to be important that it be continued in some form. I wouldn’t say what form, but you wouldn’t want to go all the way to [zero] on that.” Recall that House Democrats’ preferred approach as included in the HEROES Act would extend the US$600 per week expanded unemployment benefit through the end of the year. However, Senate Republicans have indicated that this is a “red line,” and a proposal by Senator Rob Portman (R-OH) that would provide a US$450 per week “return to work bonus” proposal for up to six weeks in lieu of the US$600 per week expanded unemployment payments appears to be a leading alternative solution.

Yesterday, the Federal Housing Administration (FHA) announced a two-month extension of its foreclosure and eviction moratorium through August 31, 2020, for homeowners with FHA-insured Single Family mortgages. Specifically, FHA is directing mortgage servicers to: (1) halt all new foreclosure actions and suspend all foreclosure actions currently in process, excluding legally vacant or abandoned properties; and (2) cease all evictions of persons from FHA-insured Single Family properties, excluding actions to evict occupants of legally vacant or abandoned properties.

There also continues to be a number of tax policy ideas being discussed in the context of ongoing economic recovery efforts. For example, the Aspen Institute’s Economic Strategy Group has released a whitepaper titled “Promoting Economic Recovery After COVID-19,” which contains various proposals to consider implementing in 2021 – including a pandemic Earned Income Tax Credit, which is being promoted as “temporary, targeted employment subsidies for workers to reward and incentivize employment and compensate workers who have continued to work during the pandemic.” Additionally, nearly two dozen conservative tax advocacy groups, led by the National Taxpayers Union Foundation, yesterday sent a letter to Treasury Secretary Steven Mnuchin urging him to “use [his] authority under the law to defer [] tax payment deadlines into 2021.” And, according to POLITICO, “Senate Majority Whip John Thune [R-(SD)] and Sen. Sherrod Brown (D-Ohio) today are rolling out their legislative solution to the state tax issues caused by Covid-19…. The two have worked together on mobile workforce issues for years, and their latest effort essentially updates their previous legislation to add some relief to workers affected by coronavirus — including health care workers who left home to help out in hot spots, and commuters who are currently working at home but normally cross state lines going to the office. Thune has been working to build broad bipartisan support for the measure, and also has a new Wall Street Journal op-ed on the topic.”

Health Updates

As the divide between Members of Congress over the need for preventative measures during routine work becomes more apparent, the Office of the Attending Physician issued guidelines for wearing masks and social distancing in the Capitol complex. The memo reads, “for U.S. House of Representatives meetings in a limited enclosed space, such as a committee hearing room, for greater than 15 minutes, face coverings are REQUIRED. Face covers will be provided by the meeting sponsor to individuals arriving without face covers.” House Speaker Nancy Pelosi (D-CA) has asked committee leaders to invoke “rules of decorum,” such as not allowing a member to speak, when the new rules are not followed. Additionally, the Sergeant-at-Arms is allowed to deny entry to those not wearing face coverings. A letter from eight members representing the capital region went a step further and requested Speaker Pelosi and Minority Leader Kevin McCarthy (R-CA) “issue strong, explicit directives to Members of the House regarding proper face coverings, social distancing, and other public health precautions recommended by the Centers for Disease Control and local public health departments with all possible haste.” They add, “such measures will help protect Members of Congress and those whose work requires close contact with them.”

The extension of policies allowing flexibility in the way telehealth is provided and reimbursed continues to gain steam. The Centers for Medicare and Medicaid Services (CMS) has granted numerous telehealth waivers that are set to expire once the public health emergency declaration ends, and many in Congress are advocating for these modifications to be made permanent. On Wednesday, the Senate Committee on Health, Education, Labor and Pensions (HELP) held a hearing on “Telehealth: Lessons Learned from the COVID-19 Pandemic.” Chairman Lamar Alexander (R-TN) officially endorsed making permanent two major policy changes – eliminating the originating site requirement and expanding the types of providers who may be reimbursed by Medicare and Medicaid. A bipartisan letter sent to Speaker Pelosi and Minority Leader McCarthy signed by 66 representatives requested an extension of CMS’ Section 1135 for 22 months in any future pandemic-related legislation. As previously reported, a group of 29 bipartisan senators, led by Brian Schatz (D-HI) and Roger Wicker (R-MS), sent a letter to Majority Leader Mitch McConnell (R-KY) and Minority Leader Chuck Schumer (D-NY) asking to make many telehealth policies permanent. Additionally, the National Committee for Quality Assurance, Alliance for Connected Care, and the American Telemedicine Association announced a task force that will meet throughout the summer to draft long-term recommendations for the use of telehealth.

On Wednesday, the US Equal Employment Opportunity Commission (EEOC) updated its COVID-19 guidance document to clarify that requiring an employee to take an antibody test before returning to work is a violation of the Americans with Disabilities Act (ADA). The guidance explains, “an antibody test at this time does not meet the ADA’s ‘job related and consistent with business necessity’ standard for medical examinations or inquiries for current employees.” The EEOC has previously clarified that employer testing for the COVID-19 virus is allowed, but had not yet addressed the issue of antibody testing, which is known to produce many false positives.

Trade Updates

Yesterday, US Trade Representative Robert Lighthizer appeared before the congressional trade committees on the president’s 2020 trade agenda. The discussions with the House Committee on Ways and Means and the Senate Committee on Finance touched on a wide range of topics, including the World Trade Organization, implementation of the US-Mexico-Canada Agreement (USMCA) and US-China trade relations. During the hearings, Ambassador Lighthizer reaffirmed the United States’ commitment to strong enforcement of USMCA’s labor provisions and pushed back on suggestions that China is not meeting its purchasing commitments under the Phase One deal. Ambassador Lighthizer also confirmed that the Trump Administration had withdrawn from multilateral talks aimed at securing an agreement on digital services taxes, as US officials proceed with Section 301 trade investigations analyzing whether such taxes contemplated or enacted around the world are unfairly targeting American companies. He pledged to examine alleged surges of steel and aluminum imports from Canada and Mexico, emphasizing that he would be acting within the parameters of the May 2019 deal suspending Section 232 tariffs on the two countries, including agreement by Mexico and Canada that they would retaliate against any reinstated US tariffs within the aluminum and steel sectors, rather than targeting other US goods like agricultural products.

Oversight Updates

The Pandemic Response Accountability Committee (PRAC), the new CARES Act-created council of 21 existing inspectors general (IGs), issued its first report yesterday, highlighting top challenges facing federal agencies related to COVID-19 emergency relief and response efforts. The 92-page report is based on PRAC’s review of submissions by 37 IGs overseeing agencies involved in the pandemic response. Overlapping areas of concern include financial management, information technology security and management and protecting employee health and safety while maintaining effective operations. The report also discusses best practices to mitigate and otherwise address the IGs’ concerns. For example, with regard to the Paycheck Protection Program (PPP), the report calls on the Small Business Administration (SBA) to, among other things: (1) issue clear guidance to borrowers and lending partners; (2) establish and monitor outcome-oriented performance measures; (3) establish proper controls in the loan approval phase to ensure eligibility of participants; (4) establish a quality assurance plan to prevent and detect improper payments; (5) provide proper oversight over the program to ensure that it is implemented as intended; and (6) modify existing systems to track stimulus program data to support accurate program measurement and reporting.

Yesterday, Senator Chuck Grassley (R-IA), chair of the Senate Committee on Finance, requested the Department of Labor’s IG conduct an expanded review of problems in state unemployment systems, broadening a previous request by other lawmakers that focused on Florida. While Florida’s claim processing rate of less than one third of all claims during the pandemic is concerning, Senator Grassley sees this as “a systemic issue that needs to be addressed more broadly than looking into one state.” Today, Senator Grassley plans to introduce bipartisan legislation that will require presidents to provide “substantive rationale, including detailed and case-specific reasons” for IG firings. In an op-ed in The Washington Post, the senator also wrote that the bill would seek to address conflicts of interest that may stem from temporarily replacing IGs with political appointees by requiring acting IGs to be selected from within the watchdog community. Both issues—insufficient reasons for firings and dual-hat arrangements—have been the subject of Senator Grassley’s recent letters to the White House. On June 4, the senator also blocked two of President Trump’s nominees from advancing further in the confirmation process, as leverage in order to obtain answers from the president as to his recent firing of federal watchdogs.

Also yesterday, the House Committee on Oversight and Reform Chair Carolyn Maloney (D-NY), Select Subcommittee on the Coronavirus Crisis Chair James Clyburn (D-SC), Small Business Committee Chair Nydia Velázquez (D-NY) and two other lawmakers sent a letter to the SBA, demanding that it comply with information requests from the Government Accountability Office (GAO). The GAO has an obligation to monitor the distribution of CARES Act funds, including PPP proceeds, and “SBA’s withholding of information is in violation of the law,” the lawmakers wrote.

Representatives Bill Pascrell, Jr. (D-NJ), Katie Porter (D-CA) and Rosa DeLauro (D-CT) wrote to the Health and Human Services Secretary Alex Azar demanding to know why the CMS is providing at least US$1.5 billion in interest-free loans to health-care companies owned by multi-billion dollar private equity firms, while community hospitals “desperately clamor for support.”

Additionally,

• Today, the House Committee on Oversight and Reform’s Select Subcommittee on the Coronavirus Crisis will hold a hearing on the “Unemployment Pandemic.” Topics will include the role of federal and state unemployment support, whether additional support is needed and the disparate impact of the crisis on lower-wage workers, women and communities of color.
• Senators Elizabeth Warren (D-MA) and Richard Blumenthal (D-CT) and Representative Pramila Jayapal (D-WA) sent letters to HHS Secretary Azar and the White House’s designated ethics official raising concerns about the potential conflicts of interest surrounding two people involved in the Administration’s coronavirus response. The senators urged Secretary Azar to require Dr. Moncef Slaoui (appointed to head Operation Warp Speed, the administration’s COVID-19 vaccine response) to follow federal conflict of interest laws, especially related to his financial holdings. They drew attention to the “unusual arrangement,” whereby Dr. Slaoui, a former pharmaceutical executive, was hired on a contract, receiving one dollar for his service, which the senators view as a “blatant attempt to skirt federal ethics law.” In a separate letter, the senators asked the White House ethics official for more information about compliance by Marc Short, Vice President Mike Pence’s Chief of Staff, with federal criminal conflicts of interest law. Mr. Short owns up to US$1.64 million worth of individual stocks in companies doing work related to the administration’s coronavirus response.
• POLITICO reports that the Senate Ethics Committee has ended its investigation into Senator Kelly Loeffler’s (R-GA) stock trades, finding no violations of federal law, Senate rules or its standards of conduct. The Department of Justice (DOJ) has also dropped its investigation into the senator’s stock trades. Like Senator Richard Burr (R-NC), Senator Loeffler came under scrutiny for stock trades she made when COVID-19 first struck the US and as Congress was receiving private COVID-19 briefings. Senator Burr has temporarily stepped down as chair of the Senate Intelligence Committee following the FBI’s seizure of his cell phone as part of the DOJ’s investigation into his stock trades.
• Forbes reports that a second court, this one in California has blocked Education Secretary Betsy DeVos from enforcing guidance that makes undocumented and international students ineligible for emergency grants under the CARES Act.

State Updates

In early June, Alaska began “AK CARES”, a state-funded COVID-19 crisis related aid program that distributed grants to Alaska businesses in amounts between US$5,000 and US$100,000; the money could be used to cover expenses such as rent and utilities. However, the law that controls eligibility for the program stated any business that received federal aid, like money from the PPP or an Economic Injury Disaster Loan “do not qualify.” But yesterday, citing legislative intent, lawyers in the office of Attorney General Kevin Clarkson (R) issued an opinion that allows businesses in the state to qualify for the program in certain circumstances. It is unclear if the opinion from the Alaska Department of Law will expand eligibility and reliance on state assistance or add to the confusion, frustration and insecurity of businesses as they attempt to reopen.

Utah Governor Gary Herbert (R) released new updates yesterday to his state’s plan for navigating the pandemic, focused on “full-blown” economic recovery. This fourth version of “Utah Leads Together” adds detail to strategies for repairing the state’s economy, getting thousands of Utahans back on the job and investing in large public projects — while also addressing deep social inequities exposed by the crisis. The plan lays out strategies for three economic phases, to be implemented over the next 100, 250 and 500 days. Critical to phase one is getting the estimated 61,000 Utah workers who have been temporarily furloughed back to work. The plan was announced as coronavirus continues to spread in the state, with rising numbers in active cases and hospitalizations.

California Governor Gavin Newsom (D) said this week that the state’s growing coronavirus case count is inevitable as the state’s economy begins to reopen. New data shows more than 80% of Americans are relatively concerned about a second wave of outbreaks that will lead to another round of mandated shutdowns. Despite the increase in positive cases in his state, the governor is continuing to reopen in phases much like other governors across the country, including governors in Florida, Texas and Arizona whose states’ numbers have also recently seen jumps in newly reported positive cases.