Pelosi’s Updated HEROES Act Still Misses the Mark With Wasteful Spending

On Monday, Speaker Nancy Pelosi (D-CA) and House Appropriations Chairwoman Nita Lowey (D-NY) released an updated version of the HEROES Act that the House passed in May. This new bill cuts the cost of the May 2020 HEROES Act ($3.4 trillion) by about a third, to a total of $2.2 trillion. Unfortunately, the new bill still contains many of the wasteful or unnecessary provisions that NTU called out in the original HEROES Act. (NTU has also criticized unrelated spending in the Senate’s HEALS Act, though the Senate bill contained far less extraneous spending than the House’s HEROES Act.)

It’s impossible to fully analyze a 2,100 page bill over several weeks, much less one day. With the House voting on this legislation as soon as Wednesday, though, we took the time to review several of the major provisions in this $2.2 trillion bill. We believe cutting or reducing the spending in the most problematic provisions could help lawmakers and the Administration get closer to a deal on a new COVID-19 relief bill. As we noted in our vote alert on the new HEROES Act, NTU continues to believe that Congress should provide additional relief to unemployed and furloughed Americans, struggling businesses, and frontline workers. We believe that this relief can be properly targeted and delivered at a much, much lower cost than what Pelosi is proposing in either version of the HEROES Act.

Wasteful Spending

Several provisions of the new HEROES Act seek to address issues that either predate the COVID-19 health and economic crises or are only loosely related to the crises.

  • Butch-Lewis and the GROW Act: Both versions of HEROES include a multiemployer pension plan bailout that some Congressional Democrats have been pushing for for months (Butch Lewis), along with legislation that would create a new type of retirement plan (the GROW Act). While the latter bill has some bipartisan support, it does not directly relate to the current crisis. The Congressional Budget Office (CBO) estimated that these provisions in the first HEROES Act would, on net, increase deficits by $47 billion ($52 billion increase in outlays, $5 billion increase in revenues).
  • Elimination of the limit on the state and local tax (SALT) deduction: A long-time Democratic priority, the new HEROES Act would eliminate the SALT deduction limit of $10,000 for tax year 2020. The Joint Committee on Taxation (JCT) previously estimated that this provision would reduce revenues by $94 billion in fiscal year 2021 (when tax year 2020 refunds will be distributed).
  • Up to $10,000 in student loan relief for certain private loan borrowers: The new HEROES Act appears to slim down Democrats’ original plan for broad-based student loan relief, but would still instruct the government “to make monthly payments for economically distressed private student loan borrowers until February 1, 2021, with an aggregate cap of $10,000 in relief.” Whatever balance up to $10,000 is unused must be applied to “any remaining outstanding private loan balance when borrower payments resume.” While the current crises may call for suspending federal student loan payments and interest, or even assisting certain distressed private borrowers, there is little need for an automatic $10,000 of relief for certain borrowers.
  • $350 million to the Corporation for National and Community Service: This is appropriations for “new and existing AmeriCorps and Senior Corps programs.”
  • $270 million for the National Endowments for the Arts ($135 million) and Humanities ($135 million): Both line items are “for grants to support the general operations of recipients.”
  • $175 million for the Corporation for Public Broadcasting: “[T]o assist public telecommunications entities.”
  • $100 million for the domestic seafood industry: Specifically, these Saltonstall-Kennedy (SK) grants are part of the $392 million sent to the National Oceanic and Atmospheric Administration (NOAA).
  • $75 million for the Essential Air Service: NTU has argued before that the Essential Air Service should be eliminated.
  • $45 million for the Fish and Wildlife Service: This includes “$15 million to address wildlife trafficking, and $30 million for caring for captive species listed under the Endangered Species Act.”
  • $1.5 million for the Saint Lawrence Seaway Development Corporation: This item is “to support the operations, maintenance, and capital infrastructure activities of the Seaway International Bridge.”

Regardless of the merits of these programs, we do not believe they belong in COVID-19 relief legislation. These provisions alone may have more than a $140 billion deficit impact.

Extraneous Spending

NTU has argued before that several Congressional efforts aimed at COVID relief aim to spend far too many taxpayer dollars, at levels disproportionate to the challenges at hand.

  • $417 billion to states ($238 billion) and municipalities ($179 billion): NTU has argued several times before that federal proposals to send $1 trillion or even $500 billion to states and municipalities are poorly matched to the fiscal crises at hand. Recent data back up these claims: the Committee for a Responsible Federal Budget recently estimated that Congress has already appropriated $360 billion to support states, and the Tax Foundation estimated that state revenue shortfalls in fiscal years 2020 and 2021 will be around $200 billion combined. These figures do not justify sending a combined $417 billion to states and municipalities right now. A far lower number is in order.
  • $120 billion for restaurants, $25 billion to passenger airlines, and $10 billion for independent live venue operators: NTU has also urged lawmakers to avoid specific, carved out funds intended to benefit one industry or sector of the economy over others. Unfortunately, the updated HEROES Act proposes $120 billion just for restaurants and bars, $25 billion just for passenger airlines, and $10 billion in a Small Business Administration (SBA) program just for independent live venue operators. While businesses in these industries have been hard hit by pandemic-related shutdowns, and these businesses should certainly have robust access to initiatives like the Paycheck Protection Program (PPP) and the Employee Retention Tax Credit (ERTC), the federal government should not create unique programs designed just for one industry over others.

These provisions together may have a more than $572 billion deficit impact. While we would not necessarily suggest eliminating all $572 billion outlined in the new HEROES Act, we believe that the state and local aid figures could be reduced and that part of the carveout funding for restaurants, airlines, and live venues could be folded into PPP or ERTC expansion (and be made accessible to restaurants, airlines, and venues).

Where New HEROES Falls Short

We would also argue that several important initiatives fall short in the new version of HEROES.

  • Adequate support for individuals losing health coverage: It’s possible around 12 million individuals have lost access to employer-sponsored health insurance (ESI) due to COVID-19 job losses. While most individuals have joined Medicaid or are eligible for PTCs to buy an ACA plan, Medicaid surges are straining state budgets (even with generous federal support) and the updated HEROES Act is more focused on significantly expanding the ACA than targeting solutions at those most in need now. NTU has proposed Pandemic Health Accounts (PHAs), HSA-like accounts that could be pre-funded with a one-time federal credit and used by individuals and families losing access to ESI on a private health plan of their choosing. Another option for Congress would be some kind of temporary, limited COBRA subsidy, which became a more urgent potential need after a Trump administration regulation allowed for retroactive COBRA elections with significantly deferred premium payments.
  • FSA flexibility: While the new HEROES Act does wisely include an increase in the tax exclusion for employer-provided dependent care assistance, from $5,000 to $10,500, it excludes other provisions that have bipartisan support, such as allowing tens of millions of Americans with access to health care and dependent care flexible spending accounts (FSAs) to roll over their unspent FSA dollars from 2020 to 2021.
  • Other “no brainers”: At least three bipartisan bills on NTU’s recent “No Brainers” list are directly related to the pandemic and were not included in this package: 1) the aforementioned Family Savings Flexibility Act (concerning FSA flexibility), 2) the Stop PPE Taxes Act, which would temporarily suspend all tariffs imposed via Section 301 of the Trade Act of 1974 that are on the International Trade Commission’s current list of medical products needed to fight COVID-19 through 2022, and 3) the Remote and Mobile Worker Relief Act, which would attribute COVID-related remote work to an employee’s ordinary work location for income tax purposes, which would provide certainty and simplicity to millions of Americans working remotely.

Overall, Speaker Pelosi’s new legislation spends far too much and misses the mark on several fronts. It is why we urged all Representatives to vote “no” if the bill comes to floor. That said, a path to a bipartisan deal on targeted COVID relief is not impossible. If lawmakers and the Administration continue to negotiate, we hope they consider cutting or paring back some of the low-hanging fruit listed here.