Image of global connectivity with text Public Policy Group ReportCongress is facing renewed pressure to provide hundreds of billions of dollars in “stimulus” money to states, territories, counties and municipalities and to allow such entities the option of using the money to offset revenue lost as a result of the COVID-19 pandemic. The Democratic-controlled US House of Representatives has begun floor consideration of a US$1.5 trillion national infrastructure bill in preparation for upcoming negotiations with the Republican-led Senate on the next coronavirus response measure. But the White House has announced President Donald Trump would veto the infrastructure measure if it were to reach his desk, and the Trump Administration appears uncertain at best as to whether it will make infrastructure spending a priority in the upcoming talks.

Topics covered today include: tax and economic development, health, international trade, government oversight and US states developments. 

A sprawling coalition of government and business organizations sent a letter to Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY) on Monday calling for congressional action in the coming days to provide significant new aid to states, territories, counties and municipalities to stem job losses as communities continue to struggle with the economic hit from COVID-19. The letter’s 170 signatories included the National Governors Association, the Council of State Governments, National Conference of State Legislatures, National Association of Counties, National League of Cities, US Conference of Mayors and the International City/County Management Association, as well as an array of trade associations, labor unions and corporations, including Coca-Cola and IBM. Excerpts:

We write today to advocate on behalf of states, territories, counties, cities and towns, all of which are experiencing historic budget shortfalls as they continue to respond to the pandemic. In less than two days, the budget years for 45 states and thousands of local governments will begin. Unlike the federal government, these state and local governments must begin their fiscal years on time and with a balanced budget. If the Senate fails to act immediately to support state and local governments, our nation’s recovery from the pandemic-induced recession will suffer and millions of Americans will needlessly be harmed.

Previous federal bills responding to COVID-19 provided important support, many through well-established grant programs, yet none allow for the replacement of billions of lost revenue due to COVID-19. More robust and direct stimulus is needed for state and local governments to both rebuild the economy and maintain essential services in education, health care, emergency operations, public safety and more.”

Congressional Democrats have made additional aid to states and local governments a key priority for the next federal coronavirus response package. Republicans have been divided on the question, with some joining Democrats in calling for such aid, and others railing against the possibility that federal funds could be used to bail out states that may be poorly run.

In a statement of administration policy posted Monday, the White House indicated President Trump would veto the US$1.5 trillion infrastructure bill being considered by the House. The White House attacked the House measure for being “full of wasteful ‘Green New Deal’ initiatives,” financed by deficit spending, “biased against rural America,” and failing to take steps to speed up permitting.

Leader McConnell has openly opposed the concept of making infrastructure spending a major component of the next federal COVID-19 response bill, arguing the total price tag of the next measure should not exceed US$1 trillion. McConnell’s opposition has touched off a debate inside the Trump Administration that has raged for weeks, with some presidential advisors urging the president to formally release a national infrastructure spending blueprint that has been circulating inside the administration for months, and others arguing against it on the basis that it would divide Republicans on the Hill and undermine GOP efforts to keep the size of the next package under control.

Tax and Economic Development Updates

Yesterday, the Federal Reserve released a new term sheet for its Primary Market Corporate Credit Facility (PMCCF), which now includes information about pricing and other issues, along with FAQs. Pursuant to the FAQs, pricing will be issuer-specific, informed by market conditions, and be subject to minimum and maximum spreads over comparable maturity Treasury securities. According to the central bank, “[b]y standing ready to provide credit to qualifying issuers of corporate bonds in periods of stress, the PMCCF” – which is the last of the Federal Reserve’s 13(3) liquidity facilities to become operational – “serves as a funding backstop, supporting market liquidity and the availability of credit for large employers.” Between the PMCCF and the Secondary Market Corporate Credit Facility, the Federal Reserve stands ready to lend up to US$750 billion, which is backstopped by US$75 billion in Treasury funding provided by the CARES Act.

As Congress continues its efforts to reach agreement on another COVID-19 relief package, White House economic adviser Larry Kudlow has made it clear that the Administration’s “main goal, hopefully, is to get people to get re-employed. Re-employment is absolutely essential and we want to give them perhaps a boost, a benefit for re-employment.” With regard to efforts to extend the expanded US$600 per week unemployment benefit, Mr. Kudlow acknowledged that the Administration is “looking at a lot of options.” Separately, the Internal Revenue Service announced yesterday that, despite calls by certain stakeholders to extend the tax filing and payment deadline beyond its current July 15 deadline, the agency is declining to issue another extension.

Outside of the scope of COVID-19-specific issues, there were several notable tax and economic developments yesterday, including:

  • The Office of the Comptroller of the Currency (OCC) issued its Semiannual Risk Perspective, which addresses key issues facing banks and presents data in four main areas: the operating environment, bank performance, trends in key risks, and supervisory actions. Notably, the OCC expressed concern that government programs – including stimulus checks, business loans, and a number of developing regulatory requirements – “required banks to act quickly to modify operational processes while also functioning with high levels of employees working at home and absenteeism,” which poses a significant compliance risk.
  • The Department of Labor (DOL) proposed a new fiduciary rule, which provides a new exemption for investment advice fiduciaries. The proposed exemption offers a new prohibited transaction class exemption for investment advisers, which would allow them to provide additional choices for retirement using Impartial Conduct Standards. According to DOL, “Impartial Conduct Standards are a best interest standard; a reasonable compensation standard; and a requirement to make no materially misleading statements.” The proposed exemption will be published in the Federal Register for notice and comment “in the near future.” Additionally, the proposed exemption outlines DOL’s views on when rollover advice could be considered fiduciary advice under the Employee Retirement Income Security Act and Internal Revenue Code. Notably, this proposed rule comes after the Second Circuit Court of Appeals last week upheld the Securities and Exchange Commission’s fiduciary rule for broker-dealers, finding that the rule is permitted by the Dodd-Frank Act.
  • The US Supreme Court ruled that “[t]he structure of the [Consumer Financial Protection Bureau] violates the separation of powers…The agency may … continue to operate, but its Director, in light of our decision, must be removable by the President at will.” As noted by Politico, “[t]he decision could have significant implications for the future of the similarly structured Federal Housing Finance Agency, the overseer of mortgage giants Fannie Mae and Freddie Mac. Like the head of the CFPB, the FHFA director is appointed to a five-year term and can only be removed for cause.”

Health Updates

On Monday, the Department of Health and Human Services (HHS) announced an agreement with drug manufacturer Gilead to purchase 500,000 treatment courses of remdesivir, which will be distributed through September 2020. Remdesivir is an experimental drug that has been shown to reduce a patient’s hospital stay by about four days. According to the HHS release, “the delivery of the purchased remdesivir will be streamlined, going directly to the hospital, per the state’s allocation decision, rather than going first to the state health departments for subsequent delivery to hospitals.” Hospitals will pay no more than Wholesale Acquisition Price, which amounts to approximately US$3,200 per treatment course (6.25 vials), and shipments will occur every two weeks. In general, patients are not expected to pay for the treatment. Rather, Medicare, Medicaid, and private insurers cover the cost. In an open letter, Gilead CEO Daniel O’Day defended the cost of the treatment by saying, “even just considering these immediate savings to the healthcare system alone, we can see the potential value that remdesivir provides. This is before we factor in the direct benefit to those patients who may have a shorter stay in the hospital.”

Meanwhile, the issue of health insurance and coverage is receiving further attention in Congress. On Monday, the House passed a bill making changes to the 2010 the Patient Protection and Affordable Care Act (“ACA” or “Obamacare”) by a near party-line vote of 234-179. H.R. 1425, the Patient Protection and Affordable Care Enhancement Act, would expand eligibility for premium tax credits beyond 400% of the federal poverty line; renew the ACA’s original expanded federal matching for states that adopt the Medicaid expansion and progressively reduces the administrative Federal Medical Assistance Percentage for states that do not expand; provide funding for outreach and enrollment for insurance plans on the marketplace exchange, and; restrict short-term limited duration insurance plans. As previously reported, the legislation is seen as mostly a messaging exercise, as the Senate is highly unlikely to debate the bill in its chamber and the administration is working through the Supreme Court to dismantle the original ACA.

A blockbuster lineup of witnesses will appear in front of the Senate Health, Education, Labor and Pensions Committee in a hearing today on safely getting back to work and school. Director of the National Institute of Allergy and Infectious Diseases Anthony Fauci; Centers for Disease Control and Prevention Director Robert Redfield; Assistant Secretary of Health Brett Giroir; and Food and Drug Administration Commissioner Stephen Hahn are all slated to testify. It is a near certainty that the witnesses will receive questions and criticism from Democrats on the committee about the administration’s handling of testing, the utilization of face masks as a protective measure, the aggressive timeframe for the development of a vaccine and other issues.

Trade Updates

On Monday, State and Commerce Department officials confirmed that the US would suspend Hong Kong’s special treatment under US export regulations. Now, exports of certain sensitive technologies will face the same licensing requirements as those required by exporters to China. The action is the latest response to a new national security law passed by Chinese government officials regarding Hong Kong, which has enjoyed special status in its relations with the US for decades. The national security law was reportedly approved by the National People’s Congress earlier today.

The US-Mexico-Canada Agreement (USMCA), one of the president’s biggest economic achievements in his first term, is expected to enter into force on Wednesday, July 1. The North American trading partners are finalizing certain final requirements ahead of that deadline. The Office of the US Trade Representative and DOL have released further information on the deal’s labor provisions, including how groups or individuals could file complaints regarding labor rights violations and how officials plan to calculate whether a vehicle manufactured in Canada or Mexico meets new labor value content requirements. Late Monday, President Trump signed a proclamation taking a number of executive actions to implement the USMCA, including delegating certain authorities provided by USMCA’s US implementing legislation to cabinet officials.

Oversight Updates

The Hill reports Representative James Comer (R-KY) was tapped yesterday to take over as the top Republican on the House Oversight and Reform Committee from former Representative Mark Meadows (R-NC), who is now President Trump’s chief of staff. Representative Comer is currently the Ranking Member of the Oversight and Reform Committee’s Subcommittee on the Environment and the Education and Labor Committee’s Subcommittee on Civil Rights and Human Services.

James Clyburn (D-SC), the Chairman of the House Committee on Oversight and Reform’s Select Subcommittee on the Coronavirus Crisis, sent a letter yesterday to Subcommittee Ranking Member Steve Scalise (R-LA), condemning Subcommittee Republicans’ decision not to wear masks at an in-person hearing last Friday. Chairman Clyburn wrote that as long as the Attending Physician’s requirement to wear masks is in place, he “will not recognize any Member of this Subcommittee to participate in person in any Subcommittee meeting or hearing unless the Member is wearing a mask.” Members who do not wish to wear a mask have the option to participate remotely.

Also yesterday, the House Energy and Commerce Committee Republican leader Greg Walden (R-OR) and Senate Finance Committee Chairman Chuck Grassley (R-IA) sent a letter to the Office of the Inspector General (OIG) at HHS requesting an investigation into whether five states—California, Michigan, New Jersey, New York and Pennsylvania—violated federal guidance in allowing nursing home facilities to accept patients who tested positive for COVID-19. Earlier this month, the Republican members of the House Select Subcommittee on the Coronavirus Crisis and other Republican lawmakers sent letters to the governors and attorneys general of these five states, requesting documents and investigations into the governors’ “lethal” decisions with regard to nursing homes. Yesterday, in responding to one of these letters, Michigan’s Attorney General Dana Nessel (D) refused to “launch a criminal investigation simply because of someone’s political affiliation.” She pointed out that, while the nursing home deaths in some states with Republican governors are similarly high, the Subcommittee’s Republican members sent investigation requests only to states with Democratic governors.

State Updates

Florida Governor Ron DeSantis (R) said he will not make wearing a mask mandatory in his state, and instead is leaving that decision to local officials. The City of Jacksonville, which is set to host the Republican National Convention in August, did an about-face yesterday from a week ago when its mayor said he did not think it “prudent” to require face masks in his city. The city is now requiring mask wearing in public and indoors. The mandate, which began on Monday at 5 pm ET, is not required for outdoors, for anyone under 6 years old, for anyone with breathing problems or while at a table at a restaurant. City officials also said the beach area is included in the mandate and masks are required anywhere inside where people are unable to socially distance.

Similarly, Governors in Arizona and Texas, among other states, have resisted calls to require masks statewide, though local officials have done so as new outbreaks of the coronavirus continue. Oregon Governor Kate Brown (D) also said she is not yet ready to mandate statewide mask wearing. However, seven Oregon counties are required to wear masks if they work at or enter public places such as grocery stores, retailers and offices.

Last week, Utah Governor Gary Herbert (R) and New Mexico Governor Michelle Lujan Grisham (D) urged Vice President Mike Pence to adopt stronger messaging in encouraging Americans to wear masks to help slow down the spread of the virus. The governors were not asking for a national mandate but were requesting a more unified message on the wearing of face coverings from the administration as states continue to struggle with how to move forward in opening their economies while trying to keep their communities safe.

For Trump Administration activities, please see our US Executive Branch Update for today.