WASHINGTON ― It’s starting to look like a classic standoff between Capitol Hill and the White House: Speaker Nancy Pelosi (D-Calif.) and Democrats insist that a Coronavirus stimulus bill primarily address paid sick leave while President Donald Trump and some Republicans hold strong for a payroll tax cut.
On Tuesday, Trump came to the Capitol to sell Senate Republicans on his plan to temporarily suspend or reduce the payroll tax ― a 12.4% levy evenly split between employees and employers. Some Republicans have floated the idea of eliminating the payroll tax for 90 days to help the economy deal with the fallout of the coronavirus outbreak. Trump has proposed suspending it until Election Day.
Coming out of the meeting, Senate Majority Whip John Cornyn (R-Texas) suggested Democrats ought to like the payroll tax idea, noting that Democrats and the Obama administration supported a temporary 2-percentage-point reduction in the tax from 2011 through 2012.
“If we don’t get ahead of this threat, you’re going to see unemployment rise as the economy dips, and so I think it’s not time to wave partisan flags,” Cornyn said. “Got to pull together. This is kind of an economic 9/11 that we need to address.”
Cornyn and other Republican senators said the president and his team laid out a range of possible economic policies, but neither the administration officials nor GOP senators coalesced around any particular proposal.
The ranking GOP member of the Ways and Means Committee, Rep. Kevin Brady of Texas, told HuffPost that Trump’s economic team would be meeting with the panel’s Republicans on Wednesday to review various proposals, with an eye toward the payroll tax holiday, direct assistance for “certain industries,” and help for businesses and individuals who need to quarantine as COVID-19 spreads.
But Democrats are showing some real opposition to a payroll tax cut.
Essentially, they argue, a payroll tax holiday would do little to address the outbreak and it would do nothing for the workers who need paid sick leave or are unemployed.
Their plan is to pass a bill offering paid leave for employees who need to self-quarantine or are sick with the virus. On top of that, Democrats say they want unspecified expansions of unemployment insurance and federal nutrition assistance programs.
“We ought to be dealing with the immediate needs of people who are directly impacted,” House Budget Committee Chairman John Yarmuth (D-Ky.) told HuffPost. “That’s people who are going to be quarantined, lose wages, and so forth.”
Yarmuth said Democrats would be more open to addressing larger economic stimulus issues down the road, if necessary. But with lawmakers not in session next week, he said it seems a greater priority to pass legislation in the coming days that would ensure that workers who need to stay home would get paid and still have jobs when they return.
That was a consistent theme from other Democrats.
Any immediate legislation “needs to be focused on things targeted for those who are most at risk of economic damage,” Rep. Earl Blumenauer (D-Ore.) told HuffPost. “The payroll tax [cut] is very slow to have economic impact. We’ve done it before. It’s not the most effective.”
Veterans Affairs Committee Chairman Mark Takano (D-Calif.) told HuffPost he ailed to “see how a payroll tax cut is going to really help people who are low-income, who depend on wages, and who don’t have paid sick leave to go home and comply with a quarantine,”
Takano said the government needed to promote policies that would encourage some people to stay home and slow the spread of the illness, which a guarantee of paid sick leave would accomplish.
He also said he was resistant to a payroll tax cut because it would undermine Social Security and Medicare, two programs that the levy helps fund. “It’s a cynical tactic in my view to carry through on ― you know, the president said in his budget he wants to cut Medicare and Social Security,” Takano said.
Republicans were generally supportive of the president’s idea of suspending the payroll tax. They also didn’t sound overly enthusiastic about issues like paid sick leave, but they didn’t seem unalterably opposed to that.
Rep. Scott Perry (R-Pa.), a staunch conservative, said a payroll tax cut “might be a good thing,” adding that he always likes it when people get to keep more of their money.
But he also didn’t rule out a more finely tuned bill, like one that would address paid sick leave. “I got to look at the whole proposal,” he said.
He expressed concern about families who rely on schools as a form of child care if wholesale school district shutdowns began multiplying.
Rep. Jeff Van Drew (R-N.J.), who recently switched parties during the Trump impeachment proceedings, showed that he still has some Democratic beliefs ― he told HuffPost that, while he has backed a cut to the payroll tax, he also wanted any coronavirus stimulus bill to address paid family leave and how to provide food for children relying on the school lunch programs.
“I just don’t want to see people, when we were in the greatest of economies that I can remember, now have to go through hell just to survive here,” he said.
If you think that people who are scared to go out to eat, or shop, or whatever ― go to a concert ― are going to do it because you give them a couple hundred dollars, they’re not going to do it House Budget Committee Chairman John Yarmuth (D-Ky.), on President Donald Trump's push for a payroll tax cut to lessen the economic impact of the coronavirus outbreak.
Rep. Brian Fitzpatrick (R-Pa.), a moderate, went further, expressing support for ideas like paid sick leave while showing some potential discomfort with a tax cut.
“I’d rather see a more balanced approach that deals with paid family medical ― that’s what I’d like to see,” Fitzpatrick said, adding that “the math has to work” on a tax cut.
The math appears tricky on a payroll tax cut. While the average American would see 6% more in their paychecks, that would only amount to a few hundred dollars a month for most people. Meanwhile, around a quarter of federal revenue comes from the payroll tax.
In short, the result would be a significant hit for tax receipts and provide only a little more money for individuals. And Democrats don’t believe it would do much to solve the economic issues related to the COVID-19 outbreak.
“If you think that people who are scared to go out to eat, or shop, or whatever ― go to a concert ― are going to do it because you give them a couple hundred dollars, they’re not going to do it,” Yarmuth said.
Democrats say they would like to pass legislation addressing immediate economic challenges posed by the outbreak by the end of this week, before lawmakers go on a spring recess. But with the two parties seemingly far apart on the specifics ― as well as the overarching aim of a stimulus effort ― a bill could easily slip to the end of March.
Unemployment insurance and food benefits are automatically available for laid-off workers and people with low incomes, and it’s unclear what additional assistance would look like.
Most states provide up to 26 weeks of unemployment insurance for people laid off through no fault of their own, and in past recessions Congress has added additional weeks of benefits. But that extra assistance wouldn’t kick in for six months. Rep. David Cicilline (D-R.I.) said Democrats might favor looser eligibility standards for people on temporary layoffs or even just extra money to help states pay claims.
Democrats said the U.S. Department of Agriculture should make sure kids won’t miss out on free lunches if their schools are closed. And Democrats have said the USDA should suspend its plans to start trimming food benefit eligibility next month. Agriculture Secretary Sonny Perdue has said the cuts will still happen, but he announced Tuesday that the department would allow schools shuttered by the outbreak to hand out meals to children in their surrounding neighborhoods.
If Pelosi doesn’t reach a deal with Trump withing the next day or two, the House may move forward with a bill focused on providing paid sick leave, expanded unemployment insurance and some greater food assistance ― essentially daring vulnerable Republicans to oppose it and the president to veto it.
It’s doubtful, though, that the Senate would take up House-passed legislation without Trump’s blessing.