Note: This post has been updated with more precise estimates of some revenue provisions (SALT, CTC) from the Joint Committee on Taxation (JCT).
This week, House Democratic leaders presented their opening bid for a “Phase 4” COVID-19 (coronavirus) relief package, the 1,800-page HEROES Act. Initial reports indicate the bill would cost upwards of $3 trillion, meeting or exceeding the costs of the first three ‘phases’ of Congressional legislation combined. Unfortunately, much like Speaker Pelosi’s botched attempt to introduce a counterproposal to the CARES Act, the HEROES Act contains hundreds of billions of dollars in provisions that are superfluous, unnecessary, wasteful, or unhelpful in fighting the current public health and economic emergencies. This includes, among other items, a multiemployer pension bailout, a suspension of the $10,000 limit on the state and local tax (SALT) deduction, and a $25 billion Postal Service bailout.
Economic relief measures from Congress should be as targeted and fiscally responsible as possible, especially given Congress has already added $3 trillion to the national debt to fight these crises. While some amount of government spending must be tolerated to support those most vulnerable to the economic and health impacts of COVID-19, bipartisan support for increased spending should not be used as an excuse to pass long-standing, unrelated pet political projects. Unfortunately, the HEROES Act contains several of these projects.
Below is a summary of the more than $400 billion in unnecessary or wasteful provisions of the HEROES Act, along with explanations for why we believe a given provision is unrelated to the pandemic and its severe economic impact. It is surely not an exhaustive list, given the bill is 1,800 pages.
Summary of Costs
- Butch-Lewis: $52 billion; see below for a full explanation of how we reach this estimate.
- NEH/NEA: $20 million
- Postal Service bailout: $25 billion
- SALT cap suspension: $136.6 billion, according to JCT. We initially estimated $140 billion.
- Highway and transit boost: $30.7 billion
- Student loan relief: $45 billion
- Child Tax Credit (CTC) expansion: $118.8 billion, according to JCT. We initially estimated $105.2 billion.
- Total: $408.1 billion
Bailing out multi-employer pension plans via the Butch Lewis Act: this provision would provide loans to bail out multi-employer private pension plans. As standalone legislation, it passed the House in July by a vote of 264-169, but due to sharp policy differences the Senate has declined to move the bill. This would cost at least $52 billion over 10 years (likely more), because it appears to contain all the new spending in H.R. 397, without the partial, $15.5-billion pay-for included in the H.R. 397.
Permanent reforms to election law: these provisions would implement permanent changes to election law by expanding early voting, absentee voting, and voting-by-mail policies. While some changes may be necessary for the election in November, it is not clear why these modifications are extended into perpetuity or why they should be implemented now, as opposed to after the crisis has subsided.
Creating a new type of retirement plan via the GROW Act: this provision would create a new type of retirement plan that has properties of both a defined-benefit and defined-contribution plan. While this has some bipartisan support, it does not directly relate to the current crisis.
Additional funds for National Endowment for the Humanities: the CARES Act provided $75 million -- nearly a third of its annual appropriation -- to help NEH respond to the coronavirus. It is unclear why an additional $10 million is needed.
Additional funds for National Endowment for the Arts: the CARES Act provided $75 million -- nearly a third of its annual appropriation -- to help NEA respond to the coronavirus. It is unclear why an additional $10 million is needed.
Postal Service bailout: Postmaster General Megan Brennan recently told a Congressional committee that the U.S. Postal Service (USPS) expects to lose $13 billion this year. This legislation would nearly double that estimate with a $25 billion bailout. Additionally, the bill would remove restrictions in the CARES Act that prohibited the USPS from using the $10 billion in lending authority to pay off outstanding debt.
SAFE Banking Act: this provision would allow access to banking services for legitimate hemp and cannabis businesses in states where these products have been legalized. It passed the House as a standalone bill by a 321-103 margin in September. While it enjoyed strong bipartisan support, it is not directly related to the coronavirus crisis and should be passed through regular legislative order; not included in a bill intended to address a public health and economic crisis.
Up to $10,000 in federal student loan payments for every borrower: under this provision the Treasury Department will make up to $10,000 in monthly federal student loan payments for all borrowers between now and September 2021. The Department is authorized to receive $45 billion to carry out this program.
Full student loan relief for borrowers from institutions that “made a false or misleading job placement representation”: this provision would require the Secretary of Education to, within 45 days of the bill’s passage, cancel, repay, or return to a borrower any federal student loan from a higher education institution that “made a false or misleading representation with respect to guaranteed employment or transferability of credits.” While the Department of Education plays an important role in cracking down on institutional fraud and providing relief for individuals defrauded by those institutions, this provision does not belong in a COVID-19 relief bill.
An effective gag rule for HHS on short term limited duration insurance (STLDI) plans and association health plans (AHPs): The bill provides $25 million in funding for the Department of Health and Human Services (HHS) to provide outreach and education to individuals and families who may be eligible for financial assistance with a plan on the Affordable Care Act (ACA) exchanges. However, it also includes an effective gag rule against HHS providing people with information about both association health plans (AHPs) developed by small businesses and short-term limited duration insurance (STLDI) plans that can help bridge gaps in coverage. In a time of crisis, the government should not be limiting information on the health coverage options people have - whether on or off the ACA exchanges.
Stopping the Administration’s Medicaid Fiscal Accountability Regulation (MFAR): the bill would prevent the Secretary of Health and Human Services (HHS) from finalizing the MFAR rule through the end of the emergency period. This proposed rule could help the federal government rein in improper Medicaid payments, crack down on ‘provider tax’ schemes at the state level, and, ideally, improve the fiscal standing of the Medicaid program.
Suspending the $10,000 limit on the state and local tax (SALT) deduction for 2020 and 2021: the Tax Cuts and Jobs Act (TCJA) established a new, $10,000 limit on the state and local tax (SALT) for individual taxpayers. The Pelosi bill suspends the limit for tax years 2020 and 2021, primarily benefiting the wealthy and high-tax states. This is a long-time priority for some members of Congress, and is unrelated to the COVID-19 public health or economic emergencies.
Child Tax Credit expansion: this provision would permanently expand the Child Tax Credit. The credit would increase from $2,000 to $3,000, become fully refundable, and provide an additional $600 for children under the age of 6. This is a highly consequential policy change with effects far outside any likely COVID-19 crisis period.
Moratorium on Furnishing Adverse Information: Section 605C subsection (b) prohibits consumer reporting agencies from creating credit reports that contain any adverse information that occurred during the COVID-19 pandemic or any other major disaster. This moratorium could be in effect as long as 270 days after the end of the declared disaster period.
Ban on Reporting Medical Debt: Section 605C subsection (h) prohibits Credit Reporting Agencies (CRAs) from furnishing medical debt incurred as a result of the COVID-19 pandemic or any other declared major disaster. Suppressing accurate credit information from appearing on credit reports is extremely problematic. These provisions will harm consumers by reducing the predictive information in credit reports and thus impacting credit scores. As a result, lenders would have to compensate either by charging higher interest rates or reducing the provision of credit.
New Private Sector Mandates: Section 605C subsection (f) requires an individual’s credit report and credit score be made available upon request for free, up to 1 year after the end of the declared disaster. Today free credit scores and credit reports are already available to the public in a myriad of ways. Under this provision individuals must be given any credit report or credit score, free of charge within 7 days (by mail), and within 15 minutes if online. Additionally, the language contains no cap on the number of times a consumer is eligible to request this information.
Preventing Companies from Implementing New Credit Scoring Models During Disasters: Section 605C subsection (i) states that during any declared major disaster, no company may create, implement, or revise a credit score model if it leads to a “significant” percentage of consumers from being less creditworthy compared to other models. This is an unnecessary provision that serves no useful purpose and will only delay the benefits derived by lenders and consumers of updated and more accurate credit scoring models from coming to market.
Extending the Qualified Mortgage Patch: the Qualified Mortgage Patch is a provision brought about by the Dodd-Frank law that allows GSEs to sidestep stricter mortgage underwriting requirements and underwrite mortgages that exceed a 43 percent debt-to-income ratio and is set to expire in 2021. However, language in the bill will extend the patch until mid 2022, resulting in taxpayers underwriting hundreds of billions of dollars worth of mortgage risk.
Up to $50 million “to support beginning farmers and ranchers”: the bill includes $50 million in funding under the Food, Agriculture, Conservation, and Trade Act “to provide training, outreach, and technical assistance on operations, financing, and marketing to beginning farmers and ranchers.” It is unclear what this has to do with the COVID-19 public health and economic emergencies.
Programs supporting renewable fuels and cotton textile mills: the bill directs the Secretary of Agriculture to support the “unexpected market losses” of renewable and advanced biofuel entities (up to 45 cents per gallon for renewable fuel (ethanol) produced between Jan 1 and May 1, 2020) and textile mills (up to 6 cents per pound of average consumption over a 10-month period). The programs have no specific authorization level, and the bill merely instructs Treasury to appropriate “such sums as may be necessary.”
Requires BEA to estimate economic growth across income groups: this provision, the “Measuring Real Income Growth Act,” was legislation that existed prior to the crisis. It would require the Bureau of Economic Analysis (BEA) to measure the amount of gross domestic product (GDP) that was added to the economy split by 10 deciles of income (and the top one percent of income). It is unclear what this has to do with the COVID-19 public health and economic emergencies.
Up to $15 billion for highways, when the current surface transportation bill does not expire until September 30: Included in the Transportation, Housing, and Urban Development portion of the bill is $15 billion in additional funding for states’ highway infrastructure programs. Lawmakers instruct states to use these funds for “administrative and operations expenses.” However, the current highway funding bill (the Fixing America’s Surface Transportation Act, or FAST Act) does not expire until September 30, 2020, and it is unclear why lawmakers cannot wait a few months to properly fund highway infrastructure through that bill - often a five-year reauthorization of funds. It is also unclear why Congress is authorizing roughly 33 percent of the annual average of funds in the FAST Act for highways ($45 billion) in just one supplemental appropriations bill.
Up to $15.7 billion for transit, when the current surface transportation bill does not expire until September 30: Included in the Transportation, Housing, and Urban Development portion of the bill is $15.75 billion in additional funding for public transportation (transit) programs. Again, the current public transit funding bill (also the Fixing America’s Surface Transportation Act, or FAST Act) does not expire until September 30, 2020, and it is unclear why lawmakers cannot wait a few months to properly fund public transit through that bill - often a five-year reauthorization of funds. It is also unclear why Congress is authorizing almost 130 percent of the annual average of funds in the FAST Act for public transit ($12.2 billion) in just one supplemental appropriations bill.
Prohibiting passenger air carriers receiving loans or investments under CARES from outsourcing any “heavy maintenance work”: though the HEROES Act appears to have far fewer superfluous restrictions on airlines receiving federal assistance than Speaker Pelosi’s last bill, the new legislation does include a provision banning passenger airlines from “increas[ing] the ratio of [heavy] maintenance work performed outside of the United States to all [heavy] maintenance work performed by or on behalf of such air carrier at all locations.” This is unrelated to the COVID-19 crisis and appears aimed at hamstringing airlines from making certain business decisions as they cope with the economic and public health emergencies.