More COVID-19 Funding, Won’t be the Last

Weekly WastebasketMore COVID-19 Funding, Won’t be the LastLawmakers dole out nearly $500 billion; the next package will likely be far bigger.

Congress just approved the latest tranche of COVID-19 response funding. This is the fourth package, but because it was more limited in scope as far as pots of cash go, it is being colloquially referred to as Version 3.5. Notice we didn’t say limited in cash – it was nearly $500 billion in funding, the bulk of which ($321 billion) went into the Paycheck Protection Program (PPP) that is targeted at small businesses, but benefiting some big restaurants as well. (Looking at you Ruth’s Chris Steak House.)

There was cash in there for hospitals and healthcare providers to support needs or losses related to COVID-19 ($75 billion on top of the $100 billion in the CARES Act). There was also $25 billion for testing. Importantly, $11 billion of that money is intended for localities, states, territories, and tribes. Those governmental entities are required to submit plans for how the money will be spent on testing. This is an important point. As we’ve been saying a lot lately: #OversightMatters. And further to the matter of oversight, we’re glad to see the Inspector General at the Department of Health and Human Services gets another $6 million to help with their increased workload. Although it doesn’t look the Small Business Administration IG is getting a boost to deal with hundreds of billions more in PPP funds.

Unfortunately,  although there were issues with non-small business, and banks shuffling paperwork (resulting in four lawsuits) to get biggest payoffs, there wasn’t language cleaning up the PPP. Meanwhile agricultural businesses have also been included as eligible for economic injury disaster loans within the Small Business Administration.

The relative narrowness of this proposal has left a lot of entities with their hands out for COVID relief Version 4 – the blockbuster sequel, coming to a taxpayer wallet near you, when Congress is back in town next month.

We’ve been tracking industry requests and there’s been a reported boom in lobbying. Which isn’t surprising, but kind of interesting. No, there’s not a lot of rubbing elbows and fundraisers and normal glad-handing happening right now. But, like the rest of us, K Street has learned to level up and embrace new tech skills. You can be sure lobbyists are Zooming into the Capitol and Members’ offices using all the contacts they have (well also Skype for Business because that’s what the Senate uses). Because everyone thinks the fourth round will be about stimulus and recovery more than response. Some examples: Oil and gas, and ethanol producers. The Renewable Fuels Association expressed their disappointment about being left out of the USDA’s $19 billion aid program.

Meanwhile states and localities are also gearing up for aid. They were shut out of V3.5 and they may be shut out of V4 as well if Senate Majority Leader McConnell has his way. This week, in the current political moment’s equivalent of “let them eat cake,” he said let them go bankrupt. Which, if that actually happens, is sure to roil the bond markets and increase borrowing rates for all states.

It also pretty much ignores that states are facing huge revenue shortfalls driven by pursuing stay-at-home orders and shuttering business for public health. So the incentive would be to open up and get some revenue, but with the added consequence of stoking the virus – about which, more in a bit. States are being told to go it on their own on testing, on acquiring personal protective equipment, but federalism looks like a one-way street when they’re given the stiff-arm of support. Like with other emergency aid, any assistance shouldn’t just be a handout, but targeted assistance to deal with a national pandemic.

Lastly we would be remiss if we didn’t call out some selfish “essential” businesses – namely in the defense sector. Remember that bit about stoking the virus? Here’s your cautionary tale: After requesting (and getting) language referring to the defense manufacturing sector as “essential”COVID-19 outbreaks are vectoring in places like Electric Boat in Connecticut and Rhode Island or a Boeing helicopter facility in Philadelphia. EB has had 30 cases of COVID-19, but is still going with some of the recovered back to work building submarines. The Boeing facility shut a couple weeks after several cases to clean and reopened recently with distancing measures, but are we really desperate for more Chinook helicopters for the next couple months? Defense contractors are trying to force Mexico to reopen plants so they can get parts for various weapons systems. In fact the pandemic demonstrates the risk of the political strategy that companies like Lockheed Martin pursued – parts for the F-35 are produced in virtually every state and are good politics, but make for supply chain woes during a pandemic.

But you won’t hear a lot about those problems. Instead, the defense sector is asking for monetary relief for delays in their contracts. Because, you know, defense contractors are exactly what the Congress should be worried about now, not the Mom and Pop corner grocery store in Connecticut or Pennsylvania, or millions of frontline workers without sufficient personal protective equipment and no solid advances towards testing or clear end in sight to the pandemic.