Emergency Economic Rescue Plan in Limbo as Democrats Raise Objections

WASHINGTON — The fate of a sweeping government rescue package to prop up an economy devastated by the coronavirus pandemic was in limbo on Sunday after Democrats threatened to block action in the Senate, objecting to an emerging deal they said failed to adequately protect workers or impose strict enough restrictions on bailed-out businesses.

Senator Mitch McConnell, Republican of Kentucky and the majority leader, postponed a midafternoon test vote on the measure until 6 p.m., as negotiators struggled to keep the talks on track.

The disputes threatened to derail a package that is shaping up as the largest economic stimulus measure in modern American history — now expected to cost $1.6 trillion or more — as Democrats said they would begin drafting their own proposal that better reflected their priorities.

Congressional Republicans and Democrats, as well as President Trump, have agreed that the plan is crucial to cushioning the economic blow of the rapidly spreading disease, which has shuttered entire industries, forced workers to stay at home and wreaked havoc in the global markets. It would send $1,200 direct payments to millions of Americans, additional jobless benefits and aid to states and provide hundreds of billions of dollars for loans to businesses.

But as its outlines emerged on Sunday, Democrats denounced the package as a corporate giveaway that favored big business over workers and failed to ensure that bailed-out companies would not enrich themselves after receiving government aid. They were particularly incensed at the inclusion of a provision to give the Federal Reserve access to $425 billion that could be leveraged for loans to flailing companies.

“In the midst of an unprecedented national crisis, Republicans can’t seriously expect us to tell people in our communities who are suffering that we shortchanged hospitals, students, workers and small businesses, but gave big corporations hundreds of billions of dollars in a secretive slush fund,” said Senator Patty Murray, Democrat of Washington, a top negotiator on the package.

Democrats also said the measure provided insufficient unemployment aid — offering only three months while they have insisted on at least four — and lacked adequate funding for state and local governments, emergency food assistance and relief from student loans.

Earlier in the day, the top four congressional leaders met with Steven Mnuchin, the Treasury secretary, to hash out differences over the package. But far from emerging with news of an agreement, Speaker Nancy Pelosi, who returned from San Francisco on Saturday to take part in the final stages of negotiations, said the House would pursue its own legislation.

“We’ll be introducing our own bill and hopefully, it will be compatible with what they discussed in the Senate,” Ms. Pelosi told reporters as she left a meeting in Mr. McConnell’s office.

In a fiery speech on the Senate floor a few hours later, Mr. McConnell, his voice occasionally rising, blasted Democrats for their reluctance to support the measure after Republicans gave ground and struck several major compromises on their highest priorities.

“We are at the point where both sides have come a long way towards each other,” he said. “And each side has to decide whether to continue elbowing and arguing over the last several inches — and risk the whole thing — or whether to shake hands and get it done.”

Earlier, Mr. McConnell had said he would stick with his goal of holding a vote on the legislation on Monday, whether or not Democrats were on board.

“Make no mistake about it, we’ll be voting tomorrow,” Mr. McConnell said. “I mean, the wheel has to stop at some point.”

Having missed a self-imposed deadline at 5 p.m. Saturday to strike an agreement with Democrats, Republicans began drafting and circulating their own text on Sunday, which was obtained by The New York Times.

Democrats said they were deeply concerned about how the government would go about bailing out distressed companies, complaining that the measure would give far too much discretion to Mr. Mnuchin and his lieutenants to decide who received funds, and would allow too much time before he would have to disclose the recipients. The measure gives the Treasury secretary six months to reveal them.

With lawmakers in both parties reluctant to embrace a bailout with no strings attached that could anger voters, the measure includes a prohibition against stock buybacks by corporations that receive federal dollars and imposes a two-year limit on executive compensation. But Democrats balked at a provision that would allow the Treasury secretary to waive the bar on buybacks, and were insisting that the curbs on executive compensation last longer, according to a senior House Democratic aide familiar with the discussions, who spoke on condition of anonymity to describe the remaining sticking points.

They were also pressing for additional safeguards to prevent companies from taking federal funds and then laying off workers. Democrats have proposed restricting eligibility for the government aid to companies that promise to maintain 90 percent of their staff.

Democrats were also balking at imposing limits on paid-leave benefits that were part of a program enacted last week to respond to the coronavirus crisis.

“Mitch McConnell and Senate Republicans had an opportunity to draft a bipartisan relief package that would help the people who are suffering the most in this pandemic — American workers and their families,” said Senator Sherrod Brown, Democrat of Ohio. “Instead, they chose to do what they did in 2008 and 2009 and give Wall Street a blank check with taxpayer money.”

Yet it remained unclear whether Democrats would put their objections aside and allow the measure to clear a crucial procedural hurdle on Sunday evening, allowing the Senate to vote on the final bill on Monday as Mr. McConnell and White House officials have insisted.

“We want this to be successful,” said Senator Debbie Stabenow, Democrat of Michigan. “There are a lot of differences. They’re all things that can be easily resolved, if people want to do that.”

The draft bill being circulated by Republicans on Sunday contains $500 billion in loans and other support for distressed cities, states and industries, including up to $50 billion for passenger airlines and $8 billion for cargo carriers.

The federal government would be allowed to take stock shares or other equity in any business that accepts loans under the program, a provision that administration officials had floated publicly over the past several days.

Mr. Mnuchin, the Treasury secretary, estimated that the total economic impact of the aid to Americans and distressed industries would ultimately be more than $4 trillion, with the Federal Reserve helping amplify the effects. Speaking on “Fox News Sunday,” he said the federal government hoped the stabilization effort could buttress the economy for 90 to 120 days so that when the virus is contained businesses can quickly reopen and the economy can rapidly rebound.

Despite the remaining disputes, the emerging deal reflected several substantial compromises that underscored the urgency of the moment.

Republicans agreed to a significant expansion of jobless benefits insisted on by Democrats that would extend unemployment insurance by 13 weeks and include a three-month enhancement of benefits. Democrats say it would ensure that typical workers came close to maintaining their full salaries if they were forced off the job during the crisis. The expansion would end once the economy stabilized.

The two sides also reached agreement to provide $1,200 direct payments that would apply equally to workers with incomes up to $75,000 per year before phasing out and ending altogether for those earning more than $99,000, according to the two people, who cautioned that adjustments could still be made. Families would receive an additional $500 per child.

The current plan would include one such payment, but Mr. Mnuchin said another one would be considered if the crisis persisted.

The agreement also would provide $350 billion to establish lending programs for small businesses, $50 billion more than the Trump administration had initially proposed. But the money would apply only to those who keep their payrolls steady through the crisis — which means hundreds or thousands of firms that have already laid off workers would not be eligible for assistance.

Small businesses that pledged not to lay off their workers would receive cash-flow assistance structured as federally guaranteed loans — potentially as much as they needed to stay in business for six weeks without layoffs. Those loans would be forgiven if the employer continued to pay its workers for the duration of the crisis.

The aid to small businesses fell well short of what proponents of aggressive federal action have said is necessary to prevent a wave of small business bankruptcies. But lawmakers have acknowledged that additional legislative steps are likely as the effect of the pandemic on the economy is fully realized.

Mr. Mnuchin also said the hospital industry would most likely receive about $110 billion in federal funds to help medical centers manage the influx of patients. That would partially fulfill a demand from Democrats, who have pushed for what they have called a Marshall Plan to send substantial federal funds to hospitals. But Democrats are continuing to push for even more funds as negotiations continue, a person familiar with the negotiations said.

Reporting was contributed by Alan Rappeport, Nicholas Fandos, Carl Hulse, Jeanna Smialek and Catie Edmondson.

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