As the nation deals with the coronavirus crisis, the U.S. Senate continues its deliberative debate on the merits of H.R. 748, the third coronavirus relief bill. Unfortunately, many of the objections that have been raised against the bill are based on a misunderstanding of the bill. Here we attempt to separate myth from fact as it pertains to this important legislation.
Myth: The $500 billion in aid to businesses is a “slush fund” with no accountability and oversight.
Fact: All $500 billion in aid comes with reporting requirements, and different portions of the aid come with limited, narrow waivers that could be amended by Congress.
Section 4003 of the Phase 3 bill authorizes the Secretary of Treasury to “make loans, loan guarantees, and other investments in support of eligible businesses, States, and municipalities,” up to $500 billion. Fifteen percent of these funds ($75 billion) are set aside for “passenger air carriers,” “cargo air carriers,” and “businesses critical to maintaining national security.” These loans and loan guarantees come with reporting requirements (Section 4017) from both the Secretary of Treasury and the Government Accountability Office (GAO). Section 4017(a) includes a provision that the names of applicants and amount of loans in the $75 billion of funds may be “delayed” up to six months, “if necessary and appropriate to promote the stability of United States financial markets or the safety and soundness of eligible businesses, States, and municipalities.” That’s a delay on reporting requirements for fifteen percent of the funds, hardly a “slush fund.”
The remaining 85 percent of the funds ($425 billion) are set aside for “loans, loan guarantees, and other investments in support of programs or facilities established by the Board of Governors of the Federal Reserve” (emphasis ours), for lending to businesses, States, or municipalities. Section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)) applies to this $425 billion in funds, and that section includes both reporting requirements and important guardrails for taxpayers. Among them are “protect[ing] taxpayers from losses,” prohibiting actions designed to benefit the balance sheet of “a single, specific company,” and Fed reporting within seven days on the recipient, date, amount, and terms of the loan. The bill appears to include a limited waiver for clause (i)(I) of the Fed reporting requirements; specifically, “the justification for the exercise of authority to provide such assistance.” This waiver hardly makes the $425 billion a “slush fund,” and certainly doesn’t make it a slush fund for Treasury Secretary Steven Mnuchin. He doesn’t even manage the funds here, as some bill opponents have claimed - the Federal Reserve does. Still, if opponents of this section want assurances about the Fed’s “justification[s]” for disbursing loans or investments, they could include a more relaxed three- or six-month reporting requirement, rather than the seven days under current law.
Myth: The $500 billion in aid contains no limits on corporations.
Fact: The aid prohibits recipients from conducting stock buybacks, and requires both the Treasury Secretary and the Federal Reserve to report on the terms and conditions of the aid.
Sen. Elizabeth Warren (D-MA) has framed the business and state aid as “a slush fund for the Treasury Department to be able to hand out to their friends.” Sen. Mazie Hirono (D-MI) said the fund would have “very little transparency,” and Sen. Joe Manchin (D-WV) accused bill supporters of “throwing caution to the wind.”
However, Sec. 4003 of the Phase 3 bill bans businesses receiving any of the $500 billion in relief from “repurchasing any outstanding equity interests while the loan or loan guarantee [or other interest] is outstanding.” This is a ban on the practice of stock “buybacks” that Democrats have criticized often in the last few years. While NTU Foundation has written at length about why stock buybacks are actually good for the economy, the merits of stock buybacks are irrelevant, as the legislation prohibits businesses from buying back their stock until the loans are repaid. There are also all the reporting requirements and guardrails already put in place by the Federal Reserve, as mentioned above. This governs a vast majority ($425 billion, or 85 percent) of the relief.
Myth: The Phase 3 bill includes “no real funding” for hospitals.
Fact: The Phase 3 bill includes $75 billion for hospitals.
Sen. Chris Murphy (D-CT) claimed that the Phase 3 bill does not include “real funding” for hospitals, and Senate Minority Leader Chuck Schumer (D-NY) wrote that the bill “shortchanges our hospitals and healthcare workers.”
In fact, the supplemental appropriations bill includes $75 billion for the Department of Health and Human Services (HHS) to disburse to hospitals and other providers “for health care related expenses or lost revenues that are directly attributable to coronavirus.” While that may fall short of the American Hospital Association (AHA)’s ask for $100 billion last week, the appropriation hardly meets either senator’s claim.
The bill includes a number of other items meant to provide funding and flexibility for health care providers:
Suspension of Medicare sequestration cuts through December 31, 2020
An add-on payment of 20 percent for Medicare’s hospital inpatient prospective payment system (IPPS) for COVID-19 patients
Delay of Medicaid Disproportionate Share Hospital (DSH) payment reductions from May 23, 2020 to September 30, 2021
Hundreds of millions of dollars in additional authorization of appropriations to Federally Qualified Health Centers (FQHCs), rural and small health care providers, and telehealth resource centers
Hundreds of millions of dollars in authorization of appropriations and supplemental appropriations for programs that support the health care workforce, including those in nursing and in geriatrics
Opponents may be able to argue the bill should do more for hospitals or health care providers, but the above list indicates that the claims of Sens. Schumer and Murphy do not hold water.
Myth: The Phase 3 bill includes “no real funding” for states.
Fact: The Phase 3 bill includes access to hundreds of billions of dollars for states and municipalities.
The supplemental appropriations bill includes:
Participation for states and municipalities in the $425 billion available from the Federal Reserve (and discussed at length above)
$20 billion to an Education Stabilization Fund, much of which will be directed to states
$3 billion to states to supplement their “child care assistance for low-income families”
$1.5 billion from the Centers for Disease Control and Prevention (CDC) to states and tribes to “carry out surveillance, epidemiology, laboratory capacity, infection control, mitigation, communications, and other preparedness and response activities”
The Phase 3 bill also tops off state unemployment insurance (UI) benefits by an additional $600 per week, to be fully paid for by the federal government. That’s hardly “no real funding” for states.
Myth: The Phase 3 bill does not provide sufficient aid for student loans.
Fact: The bill provides six months of payment relief for federal student loan borrowers, with no accrual of interest in that time period.
Days ago, a group of Senators led by Minority Leader Schumer and Sen. Warren introduced a plan for the federal government to “pay down [a] minimum [of] $10K for all federal student loan borrowers” as part of the Phase 3 relief package. Because the Phase 3 bill did not include this broad, expansive benefit, it appears some opponents of the bill want to accuse proponents of not doing enough.
However, what Section 3513 of the Phase 3 bill does is suspend federal student loan payments for six months, and ensure that interest does not accrue during that time period. That is significant relief for students facing job or income disruptions during the emergency, even if it isn’t a new, expensive benefit that some Senate Democrats want included in the bill.
Myth: The Phase 3 bill does not provide sufficient aid to workers.
Fact: The Phase 3 bill expands unemployment insurance (UI) by $600 per week, and includes $350 billion in loans to help small businesses make payroll. The loans may be forgiven if the recipient uses the loans to meet payroll costs, interest on mortgage payments, payment on rent obligations, or utility bills.
As previously stated, the Phase 3 bill includes a federally funded, generous increase ($600 per week) in unemployment insurance (UI) directed to the states. Given the average weekly UI benefit was $385.38 in February 2020, the Senate is proposing expanding the UI benefit by 155 percent (more than double) between March 13 and December 31. This will most help workers who are displaced by the current economic emergency.
The Phase 3 bill also includes a $350 billion “paycheck protection program” for small businesses, with loan forgiveness if the recipients use the loan amounts to meet payroll, interest on their mortgage payments, rent, and utility bills. This loan program will enable small employers to keep their workforce paid and employed through at least June 30.