Senate Majority Leader Mitch McConnell on Tuesday launched a new attack on Democratic demands that any coronavirus stimulus bill includes help for states and localities whose revenues have bottomed out due to the pandemic.
“Democrats still want coronavirus relief for the entire country held hostage over a massive slush fund for their own use,” McConnell said on the Senate floor.
President-elect Joe Biden, though, endorsed federal assistance to states and localities as part of the next stimulus bill.
Biden emerged from a meeting Monday with corporate chief executives and labor union presidents by saying that the group agreed “on the urgent need for funding for states and cities to keep front-line and essential workers on the job and vital public services running — law enforcement officers, educators, first responders.”
When Biden was vice president, federal aid to state governments was a key component of the $787 billion stimulus law enacted in 2009 in response to the Great Recession. It accounted for 42% of the package, or $330 billion, according to the California State Legislature’s fiscal and policy analysis office.
A refusal to support the assistance this time likely would doom any new legislation. Aid to state and local governments, whose tax revenues have plummeted due to the pandemic-induced economic downturn, has been a non-negotiable demand of House and Senate Democrats.
New Jersey lost $1.4 billion in tax revenue in the 2020 fiscal year due to the coronavirus and is projecting a $4.3 billion shortfall in the current fiscal year, according to the state Treasury Department.
The loss wasn’t limited to Democratic-run states. Texas saw a $4.4 billion shortfall in the 2020 fiscal year and a projected $8.8 billion shortfall in 2021, while Florida had a $1.9 billion shortfall in the 2020 fiscal year and a projected $3.4 billion shortfall in 2021, according to the Center on Budget and Policy Priorities, a progressive research group.
“It’s a joke to claim this is some sort of blue state giveaway,” said Rep. Josh Gottheimer, D-5th Dist. “The whole country is facing a crisis right now.”
Gottheimer met Tuesday with members of both houses and both parties to discuss a way forward on stimulus, and said congressional leaders needed to make the compromises needed to make a deal.
“People are really hurting,” he told NJ Advance Media. “The idea that we’re going to play games, that either side is going to posture while people are in dire need of help, is to me just pathetic. People have a right to be pissed off.”
“Both sides have to go in there with good faith and understand they’re not going to get everything they want,” he said.
Senate Democratic Leader Chuck Schumer of New York on Tuesday called on McConnell to negotiate a bipartisan stimulus bill. He then joined with House Speaker Nancy Pelosi, D-Calif. in sending a letter to McConnell.
“Democrats are eager to sit down and get a bipartisan bill,” Schumer said at a Capitol press conference. “It’s only the Democratic House that has passed a bill. If you want to get something done, we need our Republican senators to tell Leader McConnell to sit down and come up with a fair, comprehensive, bipartisan negotiation.”
McConnell, R-Ky., said last week he would consider including such aid, but on Tuesday blamed Democrats’ insistence on “huge sums of money for state and city governments with no linkage to demonstrated COVID needs” for the current stalemate in passing a new stimulus bill.
He also objected to the provision in the House-passed stimulus bill, known as the HEROES Act, that would waive for one year the Republican tax law’s $10,000 cap on deducting state and local taxes. calling it “a massive tax cut for wealthy people in blue states.”
The House-passed stimulus bill specifically limits the federal aid to “respond to, mitigate, cover costs or replace foregone revenues not projected on January 31, 2020 stemming from the public health emergency, or its negative economic impacts, with respect to the Coronavirus Disease (COVID–19).”
The deduction cap most affected New Jersey and other high-tax states that send billions of dollars more to Washington than they receive in services. While New Jersey received 90 cents for every $1 paid in federal taxes, less than every state but Connecticut, McConnell’s Kentucky got back $2.41, more than any other state, according to the State University of New York’s Rockefeller Institute of Government.
McConnell has tried twice to no avail to pass a $500 billion stimulus package with funds for small businesses and extra unemployment insurance, which Democrats support, but also additional taxpayer subsidies for religious and other private schools and protections against lawsuits for businesses if their customers or employees became infected with COVID-19.
The House Democratic legislation included another round of $1,200 stimulus payments, safety standards for businesses to protect customers and employees from the coronavirus, and $75 billion for a national testing, tracing and treatment program.