COVID 3.5, 4.0, 5.0: Proposals for Future Stimulus Legislation
COVID 3.5
In the aftermath of the largest-ever government stimulus, legislators are pushing forward and considering additional measures to address the dual health and economic crises plaguing the nation. Despite their breadth, the first three COVID-19 bills moved through Congress with uncharacteristic speed, even as they increased the scope of the federal government and stimulus spending by a scale previously unseen.
With public health and economic concerns still acute, lawmakers are aiming to pass the Paycheck Protection Program and Health Care Enhancement Act (“COVID 3.5”), an interim relief measure that builds on The Coronavirus Aid Relief, and Economic Security (CARES) Act (“COVID 3.0”). This bill includes $310 billion for small business relief, $75 billion for hospitals, and $25 billion to enhance testing capabilities. The Senate passed COVID 3.5 on Tuesday evening. The House is likely to hold a recorded vote on Thursday. President Donald Trump has indicated he will sign the bill in short order.
COVID 4.0, 5.0, and Beyond
Though COVID 3.5 has been the immediate focus, Congress has also been hard at work on additional stimulus proposals that will continue to grow the government’s role in responding to the crisis and allocate significantly more funding for both immediate and longer-term solutions. With COVID 3.5 on its way to becoming law, President Trump and congressional Democrats appear eager to proceed to the next large relief measure. “COVID 4.0” could allocate trillions of dollars more towards the COVID-19 response and economic recovery. However, Senate Majority Leader McConnell dampened enthusiasm about the potential for speedy passage of another bill, expressing concern over deficit spending and signaling that he would not allow any more attempts at remote legislating.
Following passage of the CARES Act in late March, there was some thinking policymakers might turn to infrastructure as a focal point of COVID 4.0. However, the release of stark and rapidly growing unemployment numbers led to an apparent pivot away from this emphasis in favor of more short-term relief. In yet another twist, after Senate passage of COVID 3.5, President Trump and Treasury Secretary Mnuchin seemed to put infrastructure back on the table, suggesting that it is still in play for COVID 4.0.
It is largely thought House leadership holds the pen in drafting the next COVID-19 stimulus bill. This coming package could advance in the late-May to early-June timeframe, though more funding could be allocated in the interim to support small businesses and healthcare programs. In addition to making technical corrections to the CARES Act, COVID 4.0 may seek to replenish funding for programs created by COVID 3.0. These might include direct payments to individuals, extended unemployment insurance, and additional small business relief.
COVID 4.0 also presents an opportunity for Democrats to push for provisions that did not make it into COVID 3.0, such as daycare and emergency housing for healthcare workers, hazard pay for essential employees, workforce development and training initiatives, and financial assistance for Americans who cannot afford rent and utility bills. COVID 4.0 might also allow deals to be struck on issues that were unresolved in COVID 3.5, including enhanced Supplemental Nutrition Assistance Program (SNAP) benefits and more state and local aid.
A number of new policy ideas or previously introduced bills are also being discussed for inclusion in COVID 4.0 or other relief bills. Outlined below are a number of proposals under consideration for future stimulus legislation, but this is by no means an exhaustive list. As the situation remains incredibly fluid, provisions that are not included in COVID 4.0 may ultimately be debated as part of later vehicles, such as COVID 5.0, which could be taken up in August or September.
Infrastructure
As alluded to above, there are mixed signals regarding the inclusion of infrastructure in COVID 4.0. Speaker Pelosi has indicated COVID 4.0 is not likely to include infrastructure spending, suggesting instead the next stimulus bill will mirror the CARES Act and an infrastructure package could be part of future legislation, such as COVID 5.0. However, both President Trump and Secretary Mnuchin have been vocal advocates of quicker action, with the President showing support for a “big and bold” infrastructure bill. Despite Democratic leadership scaling back their immediate ambitions, there appears to be ongoing bipartisan support for infrastructure as a jobs program.
It is also worth noting the current highway authorization, the Fixing America’s Surface Transportation (FAST) Act, expires on September 30. Prior to the outbreak of COVID-19, Republicans seemed to favor a more traditional highway bill, focused primarily on roads and bridges. Meanwhile, Democrats envisioned a broader infrastructure package, such as the five-year, $760 billion Moving America and the Environment Forward framework, that would fund programs outside of transportation infrastructure, such as broadband, schools, and drinking water. While it remains to be seen how COVID-19 impacts the scope of infrastructure legislation, listed below are proposals under consideration:
Broadband: As teleworking and distance learning have drawn attention to the need for connectivity, there appears to be growing bipartisan support to expand broadband access to unserved and underserved rural, suburban, and urban communities. In particular, House Democratic Whip James Clyburn (D-SC) is working with the House Democratic Rural Broadband Task Force on legislation that may be included as part an infrastructure stimulus package.
Drinking Water: Negotiators are allegedly considering allocating $40 billion to the Clean Water State Revolving Fund (CWSRF), a federal-state partnership to help ensure safe drinking water.
Electric Grid: House Democrats have indicated they will be pushing for funding to modernize the electricity grid.
Highway Reauthorization/Surface Transportation: Senate Environment and Public Works (EPW) Committee Chairman John Barrasso (D-WY) is working to include the portion of the highway reauthorization bill under his committee’s jurisdiction, America's Transportation Infrastructure Act, in future COVID-19 legislation. The bill unanimously passed EPW Committee last year, but has not yet received floor time.
Passenger Rail: Stakeholders are looking at ways to expand passenger rail networks, potentially through investment in Amtrak.
Project Delivery: Future stimulus legislation could potentially include the Capital Investment Grant Program Act, which would extend the program through Fiscal Year 2025 (FY25), increase funding, and revise how the Department of Transportation (DOT) evaluates projects and reports on financing and technical barriers.
Shipping: The shipping industry has been educating members of Congress on an existing portfolio of approximately $7.5 billion in projects that could quickly put people to work.
State DOTs: In light of COVID-19, state transportation agencies are asking for $50 billion to prevent cancellation of projects and avoid worker layoffs.
Water Utilities: Congress could potentially establish a new Low-Income Household Drinking Water and Wastewater Assistance program that would allow states, territories, and tribes to seek federal grants to assist low-income households in paying drinking water and wastewater utility bills during public health emergencies.
Energy and Environment
Democrats have expressed early enthusiasm for climate-oriented infrastructure spending as part of the next COVID-19 relief package. Although infrastructure talks have been delayed, it remains possible Democrats will pursue opportunities in COVID 4.0 and future stimulus bills, including infrastructure legislation, to include provisions that expedite the transition to a low-carbon economy. Efforts to protect the environment may receive extra attention given initial findings regarding how air pollution has exacerbated COVID-19 patients’ challenges to overcome respiratory distress and fight the virus. Noted below are some proposals under discussion:
Carbon Sequestration: Future COVID-19 legislation could potentially include Sen. John Hoeven (R-ND) and Tina Smith’s (D-MN) Carbon Capture Modernization Act, which would modify the Section 48A Advanced Coal Tax Credit to incentivize the use of carbon capture and sequestration (CCS) technology.
Climate Bank: Reps. Debbie Dingell (D-MI), Paul Tonko (D-MI), Lisa Blunt Rochester, and Cynthia Axne (D-IA) are speaking with Energy and Commerce Committee leadership about inclusion of their legislation in the next stimulus package. The National Climate Bank Act would create a federal bank to leverage public and private funds to invest in clean energy technologies and infrastructure.
Concrete: House Transportation and Infrastructure (T&I) Committee Chairman Peter DeFazio (D-OR) is advocating for provisions that reduce the carbon footprint of concrete by altering its composition and recycling existing materials.
Electric Vehicles: Chairman DeFazio has proposed allocating stimulus funding for electric vehicle charging stations.
Energy Storage: Energy storage groups have asked for approximately $1 billion in grants for distribution system mapping and interconnection process enhancements, among others.
Fossil Fuels: As oil companies struggle with the dual issue of excess supply and tanking demand, Sen. Kevin Cramer (R-ND) and four other Republic senators are demanding that any assistance given to the renewable energy sector (e.g., extending safe harbor deadlines for renewable tax credits) be paired with benefits to the fossil fuel industry.
LIHEAP: COVID 4.0 could include an additional $4.3 billion in funding for the Low Income Home Energy Assistance Program (LIHEAP), which helps low income households pay their energy bills.
Nuclear: The nuclear industry is reportedly seeking a 30 percent tax credit for some expenditures converted into grants, among other aid.
Public Lands: There appears to be bipartisan support for attaching the Great American Outdoors Act to COVID-19 relief legislation. This bill allocates $9.5 billion over the next five years for maintenance and funding of land and water conservation efforts.
R&D: Environmental advocates are aiming to boost spending on energy efficiency and other R&D programs.
Solar Installations: Renewable power developers are pressuring Congress to allocate stimulus funding to keep solar installation workers employed.
Strategic Petroleum Reserve: In light of an oversupply of oil, decreasing demand, and falling oil prices, industry is seeking funding to buy oil for the Strategic Petroleum Reserve (SPR). President Trump has expressed interest in purchasing as much as 75 million barrels in oil reserves.
Transit: The “Green New Deal for City and Suburban Transportation” report recently released by transportation advocacy groups calls for increasing multi-modal transportation options for more people and greater investment in state and local transit agencies.
Utility Shutoff Moratoriums: In recent days, House and Senate leadership have received letters articulating support for prohibiting utility companies from shutting off services for consumers who are unable to pay utility bills due to changing financial circumstances in light of COVID-19.
Weatherization: Environmental advocates are hoping to boost spending on weatherization programs.
Tax, Economic Recovery, and Other General Business Provisions
Despite the strength of the economy in the months leading up to the COVID-19 pandemic, U.S. businesses have suffered mightily as large swaths of the economy have been partially or fully shut down. Though COVID 3.5 will replenish depleted funding for the Payroll Protection Program, additional small business relief may be needed in future vehicles.
Lawmakers have also already raised the possibility unemployment benefits may need to be expanded and extended. Industries that did not see relief in COVID 3.0 are likely to continue to seek assistance in COVID 4.0 and beyond. Finally, numerous tax reform proposals with impacts for both small and large companies are also on the table, including:
Bonus Depreciation: National Economic Council (NEC) Director Larry Kudlow has advocated for an expansion of bonus depreciation, although it remains unclear exactly how this may be structured legislatively.
Business Entertainment Deduction: President Trump has continued to tweet his support for bringing back tax deductions for business entertainment and meals to bolster the hospitality and restaurant industries as the economy reopens.
Capital Gains: There appears to be some support at the White House for including a capital gains tax cut in COVID 4.0.
Clean Energy Tax Credits: Trade associations, such as the American Wind Energy Association (AWEA), Solar Energy Industries Association (SEIA), and Advanced Energy Economy (AEE), are pushing to extend and improve the liquidity of clean energy tax credits. Others are asking Congress to allow direct payments from Treasury instead of the existing tax credits.
COVID-19 Care: Hospitals and healthcare providers are seeking a payroll tax credit for charity care. Additionally, they are pursuing a payroll tax credit to partially offset care and equipment expenses related to the increased number of patients.
Direct Cash Payments: Sen. Ron Wyden (D-OR) and Rep. Richard Neal (D-MA), the top Congressional Democrats in their respective tax committees, want to include direct cast payments to U.S. households and small businesses in coming rounds of relief spending. The plan would be limited to those companies with $1 million or less in revenue and with fewer than 50 employees, and would offer up to $75,000.
Electric Vehicles: Manufacturers of electric vehicles (EVs) are interested in expanding the current $7,500 tax credit and eliminating the manufacturer-specific caps.
Emergency Paid Leave, Public Employers: A bipartisan group of than 100 House members are working on a bill that would let public employers use tax breaks for offering emergency paid leave. This tax break is currently limited to private companies.
Employee Retention Tax Credit: The CARES Act created an employee retention tax credit to encourage companies to continue paying employees if their business has closed or if there has been a significant decline in sales due to COVID-19. As the rules for small businesses are more flexible, we could see an effort to expand the tax credit for larger businesses.
Multiemployer Pension Plans: During COVID 3.0 negotiations, House Democrats articulated support for action to mitigate collapse of the multi-employer pension system. Proposals such as Senate Republicans’ Multiemployer Pension Recapitalization and Reform Plan and House Democrats’ Rehabilitation for Multiemployer Pensions Act remain on the table for COVID 4.0.
Newspapers and Broadcasters: Largely left out of earlier COVID-19 relief bills, local newspapers and broadcasters are seeking to qualify for relief measures, with trade groups seeking changes to the SBA’s loan program that would allow their member organizations to apply for loans.
Oil Refiners: Given the global oversupply of oil, refiners are seeking a tax incentive for U.S. refiners who use domestic oil.
Pass-Through: Companies who have seen losses as a result of the pandemic are pursuing tax reforms that would allow pass-through businesses to carry back losses and suspend limits on owners using business losses to offset other income.
Payroll Protection Program: COVID 3.5 includes an additional $310 billion for the Payroll Protection Program, with $30 billion reserved for community-based lenders, small banks, and credit unions, and $30 billion for mid-sized banks and credit unions. Experts predict this funding could be depleted within days, requiring Congress to again replenish the program in a future vehicle.
Payroll Tax Reduction: The Trump Administration has signaled it could support a payroll tax reduction. In the early days of the pandemic, President Trump proposed suspending payroll taxes for the remainder of this year.
Restaurants: The National Restaurant Association has been vocal in calling upon Congress to create a recovery fund specifically for the restaurant industry, which has been hit especially hard by social distancing restrictions.
SALT Deduction: Speaker Pelosi and other Democrats have signaled support for rolling back the State and Local Tax (SALT) deduction cap to assist more urban areas with long-term economic recovery.
Treasury Bonds: The Trump Administration is considering issuing “COVID bonds” to help bolster the economy.
Unemployment Benefits: As unemployment figures continue to climb, there could be an interest in expanding and extending unemployment benefits for those affected by COVID-19. The additional $600 weekly pandemic unemployment benefit is due to expire July 31.
Healthcare
As states begin to reopen businesses and Congress begins to shift its focus to economic recovery, public health and supporting the healthcare system will remain a priority. In coming legislation, Congress is expected to approve additional relief for healthcare providers struggling with increased patient volume, enhance benefits and support, such as childcare and emergency housing for workers on the frontlines of the pandemic, and expansion of worker protections. Specific proposals include:
Child Care: During negotiations on previously enacted COVID-19 stimulus legislation, there has been some discussion of direct stipends for healthcare workers requiring childcare services. Prospects are rising such a proposal could be included in COVID 4.0.
COBRA: A coalition of healthcare providers has asked Congress to offset the cost of COBRA for former employees wishing to maintain their job-based health coverage through a direct subsidy.
Drug Pricing: Although Congress remains interested in passing legislation to control prescription drug costs, perhaps akin to the Prescription Drug Pricing Reduction Act, this issue may be difficult to tackle in stimulus legislation. Instead, we may see a broader focus on healthcare affordability issues, such as reopening the Obamacare exchange, tweaking cost sharing, and adjusting Medicaid eligibility requirements.
DSH Allotments: Democrats are hoping to increase federal Medicaid Disproportionate Hospital Share (DSH) allotments by 2.5 percent to cover the costs for DSH hospitals providing care to low-income patients during COVID-19 pandemic. Medicaid DSH cuts had been due to expire on May 22, but were extended by the CARES Act to November 30.
Emergency Housing: As noted above, future relief bills may allocate funding to provide emergency housing for healthcare and potentially other essential workers temporarily living away from home.
Health Care Coverage: Although Medicare and other health insurers are waiving out-of-pocket costs for COVID-related health issues for workers responding to the pandemic, Congress may seek to codify and expand such commitments.
Health Insurance Marketplaces: Health industry trade groups have called for a one-time Special Enrollment Period for uninsured individuals who are not otherwise eligible to enroll. Additionally, some groups have advocated to expand eligibility for those who may be eligible for federal healthcare subsidies.
Health Savings Accounts: Some health industry trade groups are calling for the suspension of a limit on HSAs that requires their use only for certain qualifying expenses, which does not include premiums.
Heroes Pay: Senate Democratic Leader Chuck Schumer (D-NY) and other members of the Democratic Caucus have introduced a proposal to establish a new fund that would pay up to $25,000 in hazard pay to frontline healthcare and service industry employees working through the pandemic.
Liability Protection: While the CARES Act included provisions to limit or immunize specific healthcare providers from liability due to the public health emergency, trade groups are advocating to expand liability protection to cover all healthcare providers and facilities as the pandemic continues.
Loans: With most hospitals still prohibited from performing elective procedures due to COVID-19, there has been some discussion of establishing a loan program for healthcare providers expecting lost revenue.
Medicare Interest Rates: The Centers for Medicare & Medicaid Services (CMS) has already taken steps to streamline advanced payments to ensure suppliers and providers have the resources needed to combat the pandemic. Still, there appears to be growing interest in further modifying interest rates for healthcare providers seeking financial relief during COVID-19 pandemic through Medicare’s Accelerated and Advance Payments Program.
Medical Supply Chain: Shortages in personal protective equipment (PPE) and the need to purchase critical supplies from China have prompted discussion on the need to mandate greater production of medical supplies in the U.S. and to centralize distribution of equipment that is in short supply.
Medicaid Fiscal Accountability Regulation: Democrats have signaled a preference to delay finalizing the Medicaid Fiscal Accountability Regulation (MFAR) for two years. The proposed rule would alter the federal financing structure for state Medicaid programs during COVID-19 pandemic.
Occupational Safety and Health Administration Protections: Though Democrats have unsuccessfully pushed to expand Occupational Safety and Health Administration (OSHA) protections for healthcare and other essential workers in earlier COVID bills, this effort will likely continue.
Rural Providers: The Immediate Relief for Rural Facilities and Providers Act has increasingly been referred to as a framework for supporting rural healthcare providers.
Senior Living: The senior living industry is seeking $20 billion in funding to help pay for additional staff, personal protective equipment (PPE), and expanded COVID-19 testing.
SNAP: Democrats called for a 15 percent increase to the maximum SNAP benefit during COVID 3.5 negotiations. SNAP provides nutrition benefits to low-income families.
Surprise Billing: Legislation to address surprise medical bills had been a priority prior to the onset of COVID-19, although no consensus had been achieved on the use of arbitration for payment disputes. Congressional leaders may be concerned that including surprise billing legislation as part of a COVID-19 relief measure may reduce support for the package as a whole.
Temporary Subsidies to Preserve Health Benefits: A coalition of healthcare providers has asked Congressional leadership to provide subsidies to employers to offset the cost of preserving healthcare in instances that they otherwise may have had to reduce benefits.
Testing: Democrats secured an additional $25 billion to enhance testing as part of COVID 3.5. However, ongoing efforts to scale up testing for the virus and COVID-19 antibodies and provide free testing for all Americans is likely to require additional funding.
Transportation: In the interest of supporting healthcare workers, Congress may seek to create new benefits, such as direct stipends, to ensure healthcare workers have safe options for traveling to work.
Technology and Telecommunications
With a large portion of the workforce now teleworking and nearly all students transitioning from in-person classes to distance learning, the need for fast and reliable internet and measures aimed at minimizing the digital divide and closing the homework gap are receiving greater attention. While COVID 3.0 included some funding for telehealth, these other connectivity issues were largely left out of earlier stimulus conversations, but are thought to be priories for COVID 4.0.
As noted above, rural broadband legislation could be included in a broad infrastructure package, potentially as part of COVID 5.0. We should also expect measures in forthcoming stimulus legislation to address cybersecurity shortfalls. The pandemic could even reinvigorate work on bipartisan privacy legislation. More specifically, we understand Congress could be considering provisions on:
Cybersecurity: A number of think tanks have called on Congress to provide additional funding that state and local governments might use to pursue enterprise solutions given that support teleworking. We also anticipate this year’s National Defense Authorization Act (NDAA) will include provisions adopting recommendations from the Cyberspace Solarium Commission Report.
E-Rate: Senate Democrats seem focused on increasing funding for existing programs, such as the Federal Communications Commission’s E-Rate program, that can quickly dole out funding to support distance learning. It is rumored COVID 4.0 could include $2 billion for E-Rate, along with other reforms to update the name of the program and revise eligibility requirements.
Government Information Technology Modernization: As states and the District of Columbia moved quickly to implement social distancing and stay-at-home orders, Capitol Hill and federal agencies were forced to act quickly to provide laptops and remote access credentials and educate staff on the use of virtual private networks (VPNs). Consequently, the COVID-19 crisis has sparked new discussion on government information technology (IT) modernization.
Keep Americans Connected Pledge: Building on language that Speaker Pelosi included in her COVID 3.0 proposal, the Take Responsibility for Workers and Families Act, Democrats continue to look at ways to codify the FCC’s Keep Americans Connected Pledge, which expires May 13. Republicans seem open to working with internet service providers (ISP) to launch a new program to help offset the costs of providing service to consumers who cannot pay. There has also been some discussion of the bipartisan Keeping Critical Connections Act, which would establish a $2 billion FCC fund to help small broadband providers to continue to serve rural communities during the pandemic.
Lifeline: Similar to efforts to expand E-Rate, Congress is also expected to include $2 billion in COVID 4.0 for the FCC’s Lifeline Program, which provides a discount on voice and broadband services for low-income households. This program may also be renamed and updated to expand eligibility.
Privacy: As individual states begin to lift restrictions using technologies that promote syndromic surveillance and contract tracing, we could see legislative provisions that seek to ensure that any health or location data that is collected voluntarily will be protected and used to limit the ongoing spread of the virus.
Defense and National Security
Conversations on COVID-19 relief for the defense sector are taking place, but these issues are likely to be addressed in COVID 5.0, later stimulus packages, or the FY21 NDAA. However, it remains possible that provisions targeting the Defense Production Act (DPA) and other proposals that allow the Department of Defense (DoD) new authorities to support healthcare-specific solutions may be included in more immediate legislation. Defense stimulus priorities may include:
Defense Industrial Base: DoD and prime contractors have already undertaken efforts to accelerate payments to small defense suppliers. Additional set asides for the defense industrial base are possible as part of ongoing efforts to provide relief for small businesses in future stimulus bills.
Equitable Adjustment for Contractors: Section 3610 of the CARES Act provides federal agencies, including DoD, discretion to modify contracts. Defense contractors may seek to refine this language in future stimulus legislation.
Production of COVID-19 Testing Equipment: President Trump is already leveraging the DPA to ramp up production of supplies needed for COVID-19 testing. Because DoD has extensive experience in logistics, future stimulus legislation or the NDAA could seek to utilize DoD expertise in mass production of testing swabs.
Reprogramming: Like other federal agencies, DoD is likely to engage with Congress to shift money, for example for funding that was allocated for military exercises that have been canceled due to COVID-19, to other accounts, including those for defense health programs. While the CARES Act prohibited reprogramming of DoD funds for the border wall, it remains to be seen if this provision will carry forward in future COVID-19 and defense bills.
Potential Sticking Points and Delays to Future Stimulus Bills
Already, we are hearing about substantive and logistical issues that could make consideration of future stimulus contentious or delay passage. These may include the following:
Abortion: As states have implemented restrictions on non-essential medical procedures, debate has erupted as to whether abortion is considered medically necessary. Any effort to legislate on this issue could waylay negotiations.
Congressional Calendar: Currently, the House and Senate are holding pro forma sessions and are not expected to be back in session until May 4, at the earliest. Members’ return to Washington could be further postponed, potentially slowing the pace of negotiations. It is possible Congress may work through previously scheduled district work periods this summer.
Remote Voting: Both House and Senate rules prohibit remote voting. After initially planning to take up a resolution authorizing a rules change to temporarily allow proxy voting, House leadership postponed those plans, instead opting to create a bipartisan group to study the issue. Although there is some support in the Senate for remote voting, Majority Leader McConnell has indicated his opposition to legislating away from the Capitol, stating all 100 senators need to be in Washington prior to the passage of any additional packages.
Social Distancing: There is no clear consensus among health professionals about how long social distancing guidance will last. Given many members of Congress are in the high-risk population if they become infected with COVID-19, as well as the fact that congressional staffers work in close proximity to one another, it remains to be seen how Capitol Hill will adjust its way of operating as restrictions are gradually lifted. Meanwhile, staffers continue to report that teleworking has made information sharing difficult.