A Deal to Avoid a Shutdown in October

Friday, September 18, 2020

A Tentative Deal to Avoid a Shutdown in October

Congressional negotiators on Friday reached an agreement "in principle" on a short-term spending deal that would avert a government shutdown on October 1, when the next fiscal year begins. Assuming the agreement holds, the House is expected to vote on the bill next week, followed by the Senate.

Missing a self-imposed noon deadline, the deal was held up by a White House demand for $30 billion to replenish a Depression-era fund that has been used to provide aid for farmers hurt financially by President Trump’s trade policies. Trump took to Twitter to press his case Friday, charging that "Pelosi wants to take 30 Billion Dollars away from our great Farmers. Can’t let that happen!"

Initially resisting the White House request – a Democratic aide said it was "an abuse of taxpayer dollars to give this administration more money so the president can grab headlines with announcements at campaign rallies" – House Speaker Nancy Pelosi (D-CA) reportedly backed down late in the day. In exchange, Democrats will get one of their funding requests, about $2 billion for nutrition assistance for children affected by the coronavirus pandemic.

Democrats reportedly will not get some of their other demands, however, including $3.6 billion for election security and an extension of the December 31 deadline for the Census Bureau to turn over the data from the latest national count to Congress.

The deal would extend current funding levels until December 11, well short of the February 26 end date Democrats had been seeking, potentially setting up another contentious standoff in a lame-duck Congress and during a possible presidential transition.

Pandemic Legislation to Boost GDP 4.7% This Year: CBO

The four major laws passed by Congress to address the coronavirus pandemic will boost real domestic gross product by 4.7% in 2020 and 3.1% in 2021, the Congressional Budget Office said Friday. The "wide array of conventional and unconventional fiscal policies" in the laws will also add $2.3 trillion to the deficit in the current fiscal year and $0.6 trillion in the following fiscal year, according to CBO estimates.

"By providing financial support to households, businesses, and state and local governments, the legislation will offset part of the deterioration in economic conditions brought about by the pandemic," CBO said. "From fiscal year 2020 through 2023, for every dollar that it adds to the deficit, the legislation is projected to increase GDP by about 59 cents."

In the long run, CBO expects the increased debt to weigh on growth, in part by driving up borrowing costs.

Massive Corporate Tax Holiday Could Cause Headaches Next Year

Worried about getting stuck with unpaid tax bills in 2021, private employers have largely passed on President Trump’s voluntary program that allows companies to defer the Social Security portion of employee payroll taxes until the end of the year. But an earlier rule change that allows companies to defer the employer portion of both Social Security and Medicare taxes has proven more popular. Some analysts, though, are starting to worry about what happens when those taxes come due over the next two years.

The collective bill will be substantial. According to the Joint Committee on Taxation, unpaid payroll taxes could total $211 billion this year.

"While this may be good for a short-term cash flow, it may backfire," tax attorney Cameron Hess told Bloomberg. The program could leave employers "under an even more serious financial crisis, with obligations owing to the U.S. Treasury."

For the most part, analysts say the liquidity provided by the tax deferral – United Parcel Service saved $370 in the second quarter, for example, while Lowe’s saved $251 million – was worth it, coming as it did in the middle of the worst of the pandemic shutdowns, even though there may be some pain down the line.

"Things would be drastically different if we hadn’t had the flood of liquidity in the system from the CARES Act," Mark Mazur of the Tax Policy Center said. "On balance, it has been more positive than negative. But there are going to be unintended consequences that we haven’t even anticipated."

Judge Orders Halt to Changes at US Postal Service

Chief Judge Stanley A. Bastian of the U.S. District Court for the Eastern District of Washington on Thursday night granted a request to block operational changes at the U.S. Postal Service.

Democratic officials from 14 states sought the injunction, and the decision in their favor stated that President Trump and Postmaster General Louis DeJoy are intentionally interfering with the postal system for political gain.

"The states have demonstrated that the defendants are involved in a politically motivated attack on the efficiency of the Postal Service," Bastian said. "They have also demonstrated that this attack on the Postal Service is likely to irreparably harm the states’ ability to administer the 2020 general election."

The ruling, which you can read here, includes a stinging indictment of the Trump administration’s efforts, which the judge said amount to "voter disenfranchisement":

"Although not necessarily apparent on the surface, at the heart of DeJoy’s and the Postal Service’s actions is voter disenfranchisement. This is evident in President Trump’s highly partisan words and tweets, the actual impact of the changes on primary elections that resulted in uncounted ballots, and recent attempts and lawsuits by the Republican National Committee and President Trump’s campaign to stop the States’ efforts to bypass the Postal Service by utilizing ballot drop boxes, as well as the timing of the changes. It is easy to conclude that the recent Postal Services’ changes is an intentional effort on the part the current Administration to disrupt and challenge the legitimacy of upcoming local, state, and federal elections, especially given that 72% of the decommissioned high speed mail sorting machines that were decommissioned were located in counties where Hillary Clinton receive the most votes in 2016."

Donald Lee Moak, a member of the USPS Board of Governors, denied the accusation. "Any suggestion that there is a politically motivated attack on the efficiency of the Postal Service is completely and utterly without merit," Moak said, according to The Washington Post.

Number of the Day: 247%

Private insurers and employers paid hospitals 247% of what Medicare would have paid for the same services in 2018, according to a new report from RAND. The study found considerable variation in prices, though, with little or no relation between cost and quality.

Researchers said the report would help provide a greater degree of transparency around pricing, which is often lacking in the complex and murky world of American health care. Although health care consumers and providers may argue about whether private prices are too high or Medicare reimbursement rates are too low, the researchers said the results indicate that "there are large potential savings at stake" when it comes to negotiating deals for the provision of health care services.

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A Deal to Avoid a Shutdown in October