COVID-19 Response Dollars – Apple of Their Eye

Weekly WastebasketCOVID-19 Response Dollars – Apple of Their EyeNow is the time for more oversight and watchdoggery, not less.

How many bites of bad policy, unnecessary legislation, and requests can industry and special interest take from the stimulus apple? Evidently – a lot. And as unprecedented trillions of dollars begin to slosh through the system, we need more oversight, not less.

The Pentagon got in the game early, to the benefit of defense contractors. In late March, requirements to withhold a certain percentage of so-called “progress payments” in ongoing government contracts was relaxed. The cap for mid-sized and large federal contractors was previously 80 percent. This means that, until a contract was completed to the satisfaction of the federal agency, no more than 80 percent of the incurred costs under the contract could be paid to the contractor. This was increased to 90 percent of incurred costs. For small businesses the rate was increased to 95 percent from 90 percent.

While this might seem like a small difference, in the big business of defense contracting this can be a lot of money.

At the same time Undersecretary Ellen Lord, in charge of Pentagon acquisition, issued guidance to contractors working on programs for the Department of Defense that they were “expected to maintain their normal work schedules.” And the Aerospace Industries Association, early on in the pandemic, asked Congress to declare defense contractors “essential” workers who must continue to report to their workplaces. As we pointed out at the time, this seemed tone deaf in a pandemic that has proven to be made worse by tight working conditions. Our concerns were borne out by reports of COVID-19 outbreaks at Electric Boat and other defense production lines.

Meanwhile back at the Farm Bureau they’re looking to permanently raise the Commodity Credit Corporation’s (CCC) borrowing authority from $30 billion to $68 billion with legislation introduced by Reps. Scott and Bishop of Georgia. This is after debate for the CARES Act, when members of Congress tried and failed to raise the Commodity Credit Corporation’s borrowing authority from $30 billion to $50 billion.

The argument from the good gents from Georgia is that the current $30 billion cap was set in 1987, and this would simply adjust it for inflation. Keep in mind that normally the CCC is just a financing vehicle to cut checks for farm programs. But these aren’t normal times. The CCC also gives the Ag Secretary almost unlimited power to “promote” or “support” agriculture by cutting checks, without consulting Congress. The Trump Administration used this power to deliver $28 billion in hush money to farmers and ranchers affected by the president’s infamous trade war. It’s also been used in the past to try and buy elections, and do things Congress said USDA can’t. If farmers and ranchers need more money to deal with COVID-19, Congress can always appropriate it. Doubling the Secretary’s pot of discretionary “disaster” money is about securing COVID-levels of cash for agricultural special interests every year to come. Oh, but that taxpayer-funded apple is right tasty.

Since When Does Spending in 4 ½ Years Qualify as Emergency Spending?

It’s not just the executive or the private sector. Lawmakers are anxious to push their legislative agenda onto the economic stimulus gravy train. This week the Senate Environment and Public Works Committee unanimously adopted legislation authorizing more than $17 billion in water infrastructure (navigation, ports, environmental restoration, etc.) projects. But this will do nothing to stop COVID-19 or even recover. These are authorizations, not appropriations. There is no new money. And the Corps of Engineers already has an authorized project backlog topping $100 billion — even they don’t actually know the full size. What the nearly 400-page legislation does do is tweak or massively overhaul hundreds of specific projects, permanently increase federal costs for projects, and enshrine dozens of other long-sought changes by industry.

And now we have a new player – the auto industry, which is making noises about Cash For Clunkers, The Sequel. Even if that’s expressly not what anyone wants to call it. Also, they want to both get back to work and have liability protections. Because, well, restarting factory floors risks unflattening the current COVID-19 curve. (Exhibit A: All the meat packing plants that have shut down.)

And as if to underscore the cost of all this response to the pandemic, this week the Treasury plans to borrow nearly $3 trillion. Now more than ever, we need common sense budgeting and disaster response principles, transparency, and oversight. Time to get out the green eye shades.

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