Tough slog lies ahead on negotiations for next round of pandemic stimulus funding

It's a heavy lift, according to key players on both sides, but one that a resurgence of the coronavirus, coupled with new economic warning signs, should be doable. First, however, the GOP needs to put their cards on the table. And that's what this week is all about.

Bottom line

The time window is tight, but get ready for a slog. The two sides are far apart on central details, but the impetus to get something done, while not unanimous as it largely was in March, is still quite palpable. But the road between now and Trump signing something into law is filled with hurdles, road blocks and potential pitfalls.

The stakes

We've noted this several times in the past few weeks, but the stakes could not be higher. From the unemployed individual trying to feed their family, to the small business owner staring into the abyss, to the kids and parents weighing school decisions, the medical professionals attempting to wrangle control of a virus burning through an increasing number of US states, all the way to who holds the majority in the US Senate and who inhabits the Oval Office on January 20, 2021 -- everything will likely be affected by what lawmakers do in the coming days.

Yes. Those are some serious stakes.

What to watch

Senate Majority Leader Mitch McConnell and House Republican Leader Kevin McCarthy are scheduled to meet with Trump, Treasury Secretary Steven Mnuchin and Mark Meadows, the White House chief of staff, at 10:30 a.m. ET.

Senate Republican leadership meeting, which may shed some more details on how things will play out this week, is at 5 p.m.

The timing

This remains tentative, but GOP senators I've spoken to say the plan is to present the pieces of the GOP proposal at the closed-door Senate GOP policy lunch. The proposal itself would be released publicly sometime midweek. This is, of course, subject to change as details continue to be fleshed out.

What happens then

Negotiations will kick into gear. Remember, Democrats already have their proposal on the table -- the $3 trillion House-passed measure known as the Heroes Act. Senate Minority Leader Chuck Schumer has made clear that's what Democrats will be fighting for in the negotiations -- and that any talks must include House Democrats. As one Democratic senator told me this weekend: "The onus is on them. We've been clear about where we are and how crucial it is that this be taken seriously for months. We're here and have been her. It's time for them to get in the game."

What McConnell has (repeatedly) said

McConnell, the Kentucky Republican, has stuck to a simple framing for the forthcoming GOP proposal for weeks: it's about jobs, kids and health care. It's messaging, sure, but it also encapsulates the stated approach for each of the committee chairs who drafted pieces of the bill.

But there's another takeaway, too, which hasn't gotten as much notice. The goal, people involved say, will be to keep this proposal as narrow as possible as it pertains to the public health and economic response to the pandemic. Major pieces of legislation -- particularly in an election year -- can become aircraft carriers of sort, where lawmakers attempt to load on any number of non-germane policy issues in order to try and catch the last train leaving. McConnell's five-word shorthand for the bill is an early warning to steer members away from that (something the White House, for reasons no Senate Republican seems to be able to understand, has already tried to undercut. See more on that below).

The negotiators

Mnuchin, the lead Trump Administration negotiator in each of the past deals, and Meadows are the key players for the White House.

On Capitol Hill, this will be a leadership-driven negotiation, with McConnell and McCarthy on the GOP side, and Schumer and House Speaker Nancy Pelosi on the Democratic side.

That said, there is committee chair and staff work that goes into a package of this scope and scale. So expect key players from the previous rounds -- top members of Senate committees including Finance, Banking, Health, Education, Labor, and Pensions, and Appropriations, and their counterparts on the House side -- to be engaged throughout.

A rough start

The Trump administration already managed to get crosswise with GOP senators on their looming stimulus package. That's somewhat impressive given the real talks haven't even kicked into gear yet, but well, here we are.

Senate Republicans sent over a series of top lines to the White House. The administration, led by Mnuchin, sent back a redlined proposal of sort, which zeroed out roughly $25 billion in testing and tracing grants to states, $10 billion for the Centers for Disease Control and Prevention and $15 billion for the National Institutes of Health. Global health funding was also eliminated and virus-related funds for the Pentagon were also reduced.

Administration officials said this was a reflection of substantial funds still remaining in all of those locations, but bringing the hammer down on key funding priorities for a number of key senators in the GOP conference infuriated Republican senators.

As one senior GOP official involved in the stimulus talks put it to me: "Tone deaf as hell. Just totally, totally tone deaf."

What really fired up GOP senators

Testing and tracing, despite how the administration frames it, has become a major area of concern for Senate Republicans, and more and more have spoken out about it in recent weeks. But one thing several senators and senior aides kept coming back to in the White House response to the draft proposal was the inclusion of extraneous issues that had no bearing on the current talks (see McConnell's intent to keep the parameters of any package tight, above). "It was a little like a White House wish list of random things," one person familiar with the administration's response proposal told me. Most egregious? The inclusion of funds for the new FBI building, which has been a Trump priority for years.

The crosscurrents

The above is a good reminder of the *very* different dynamics at play when compared to the initial $2.2 trillion package. There is a chunk of the Senate GOP conference that would be fine with no new stimulus legislation. There are key players in the White House wary of a significant new package, even as others press its importance to the US economy and Trump's electoral future.

Lawmakers across the board have ideas or proposals or constituencies from their home states and districts looking for very specific things this time around. There are reelection campaigns, future presidential ambitions and powerful outside groups all playing a more forceful role this time around.

It's all a reminder that there are whole bunch of new variables this time around and how that affects things is yet to be seen.

All eyes will be trained on this group

With Trump's poll numbers continuing to sag, and Democratic challengers raking in huge fundraising numbers, every move made by the handful of GOP senators in the tightest races will be closely watched in the months ahead. Never will that be so apparent than during the coming days of negotiations. As we've written many times, when it comes to McConnell, conference unity is always the goal, but protecting his majority is his ultimate end game. Where the senators facing reelection -- including Susan Collins, Cory Gardner, Martha McSally, Joni Ernst, David Perdue and Thom Tillis -- move throughout the course of the coming weeks will be exceedingly important.

The caveat on the GOP proposal

The granular details -- which are extremely important -- have remained extremely fluid over the course of the last several days. To the extent some have leaked out, they're coming in isolation, without a full view of the actual complete proposal. That's important to keep in mind.

The way the $2.2 trillion relief measure was designed made the pieces interconnected and dependent on one another. If each piece worked properly, it would create a fully functioning life raft of sorts for every sector of the economy and the intertwined public health response. That doesn't mean it worked exactly this way, but it's a good reminder that the pieces are, technically, supposed to work in concert -- so without the entire proposal, it's tough to fully gauge the true reach of what Republicans have put together.

Where things stand

With the above caveat in mind, the numbers remain very fluid, according to people directly involved with the process. So for the sake of safety, the below is a general summary of what's expected to be in the bill, with acknowledgments of the things we simply do not know at this point.

Liability protections

Of all the pieces in the forthcoming GOP proposal, this is the most important for McConnell. He's made clear its his redline -- the one thing that must be included for any package to pass the Senate. A summary of McConnell and Sen. John Cornyn's liability proposal, which CNN reported on last week, essentially provides a shield for a wide range of entities -- think businesses, medical workers and health care providers, non-profits and schools -- so long as there isn't proof of gross negligence or intentional misconduct.

Direct payments

Republicans have been batting around different ideas related to new stimulus checks akin to the $1,200 for individuals included in the first package. Notably, there are a number of Republicans opposed to the checks entirely at this stage, but key players in the White House support them and the expectation is some form of stimulus check will be included. How much -- and whether it's more directly targeted at lower income individuals, as has been discussed -- remains an open question.

Unemployment insurance

This is the most urgent issue for lawmakers, as the $600 federal unemployment enhancement will disappear this week (the deadline is July 31, but due to the way the money is dispersed, this will be the final week it can be utilized).

Republicans are opposed to the $600 on account that it equates to an above 100% wage replacement for some of the unemployed. They have discussed a range between $200 and $400 instead, potentially pared with a re-employment bonus, but the exact details -- including the very important way it's structured together with potential new direct payments -- remains unclear.

Small business

There will be an extension of the Paycheck Protection Program, repurposing the more than $130 billion remaining unused for the program and retooled to target the smaller and hardest hit businesses and sectors. Mnuchin also raised an interesting wrinkle into things when he testified last week that lawmakers should consider automatic loan forgiveness for "smaller" loans. That idea has huge support in the business community.

Health care

Despite the dispute over the weekend with the administration, there is expected to be significant funds for health care providers, testing, tracing and vaccine related provisions, according to aides. That includes the money for the CDC, State Department and Pentagon.

State and local

This remains one of the flashpoints inside the GOP -- and one of the key pieces of any final deal for Democrats. With billions from the initial stimulus legislation still sitting in state coffers, tied up due to the restrictions placed on it, expect the GOP proposal to focus on increasing flexibility for those funds, not a major infusion of new funding.

Education

There will be a significant amount of funding for education in this proposal, but all eyes will be on how it is structured to incentivize school reopenings, particularly given the resurgence of the virus nationwide. Also key: the White House has made directing a sizeable chunk, as much as 10%, of any funds toward private and charter schools.

Payroll tax cut

Let's be perfectly clear about something: there has been no groundswell of support for a payroll tax cut or suspension on Capitol Hill. Democrats are ardently opposed and the vast majority of Republicans, for months, have been willing to go on the record and pan the idea in terms of its effectiveness in this particular moment. And yet ...

It has become a red line of sorts for Trump, telling "Fox News Sunday" when it comes to a stimulus package, "I would consider not signing it if we don't have a payroll tax cut." White House officials have communicated the same privately to GOP offices. Trump's conservative allies are pushing hard for it. And despite its expense, it has grown more likely it will be included, in some form, in the GOP proposal, people familiar with the matter say.