Next coronavirus aid package may not pass Congress until June as battle lines harden

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The battle lines are hardening over Washington’s next legislative response to the coronavirus crisis, with top Democratic lawmakers calling for another big spending package while the leading Senate Republican is urging restraint — especially when it comes to more aid for state and local governments.

“We’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” Senate Majority Leader Mitch McConnell told talk show host Hugh Hewitt on Wednesday.

When asked by Hewitt if there should be a “bankruptcy code chapter” invented for “mismanaged” states, the Kentucky Republican said he “would certainly be in favor of allowing states to use the bankruptcy route.”

Meanwhile, House Speaker Nancy Pelosi said Wednesday that she favors a “major package” of aid for state and local governments, as she spoke during a Bloomberg TV interview. The California Democrat echoed remarks that Senate Minority Leader Chuck Schumer made on Tuesday evening in their joint news conference.

“There will be a big, broad COVID-4,” said Schumer, the New York Democrat, using the Capitol Hill term for the next measure. It also has been called “CARES 2” and Washington’s “Phase 4” response.

“For anyone who thinks this is the last train out of the station, that is not even close to the case,” he added. Schumer said Democratic priorities will include aid for state and local governments, election reform, housing assistance, funds for the U.S. Postal Service and “money for a ‘Heroes Fund’ for people who are on the front lines.”

Democratic lawmakers tried but failed to get $150 billion for state and local governments in a deal that they reached Tuesday with Republicans that will provide funds for small businesses, hospitals and testing. That $480 billion package, which some analysts have described as a “Phase 3.5” response, passed the Republican-led Senate on Tuesday and was on track to get the Democratic-run House’s OK on Thursday. It comes after the $2.2 trillion CARES Act that was enacted a month ago.

McConnell, for his part, said Wednesday that aid for states is a “much bigger conversation than we’ve had providing assistance for small business because the government shut them out … or assistance to hospitals, which were overwhelmed by the COVID-19 disease.”

“We haven’t had much discussion about adding $2.7 trillion dollars to the national debt, and the way that could indeed also threaten the future of the country,” the Kentucky Republican also said.

President Donald Trump on Tuesday evening said he supports providing more aid for states in the next package, adding that infrastructure spending could be a big part of the legislation, too. Pelosi also has called for infrastructure outlays in the next measure, but then pulled back on that stance earlier this month.

The fourth package, with a potential $1 trillion price tag, “is already turning into a much heavier lift than we anticipated just a few weeks ago,” said Henrietta Treyz, director of economic policy research at Veda Partners, in a note on Wednesday. She said her firm has “pushed out our expected time of passage of a fourth stimulus bill to late May-June 2020 and it is no longer clear to us that a fifth or sixth stimulus bill will also pass this year.”

The “growing politicization of whether it’s safe to resume economic activity” has helped to stunt “calls for further massive stimulus bills,” Treyz also said.

U.S. stocks DJIA, 1.51% SPX, 1.38% have been volatile for weeks on coronavirus-related worries but were most recently up over 2% on Wednesday.

Originally Published on MarketWatch

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