U.S. Congress girds for partisan fight on coronavirus aid for cities, states

WASHINGTON (Reuters) – After passing $3 trillion of coronavirus relief in a rare run of bipartisanship, Republicans and Democrats in the U.S. Congress girded for a new battle over federal assistance to states and local governments grappling with the coronavirus outbreak.

Spurred on by governors and local officials, Democrats have put out the word that they want to provide a sizable rescue package as part of a broader bill – one that could total at least $2 trillion in coming weeks.

Their agenda has some Republicans seething, with Senate Majority Leader Mitch McConnell telling a conservative talk-radio host on Wednesday that he “would certainly be in favor” of letting states enter bankruptcy rather than send them cash.

The leading U.S. Democrat, House of Representatives Speaker Nancy Pelosi, shot back, saying: “Oh really? What made you think that was a good idea?”

The tit-for-tat continued, when Republican President Donald Trump, who is seeking re-election in November, noted during his daily coronavirus briefing on Thursday: “It is interesting that the states that are in trouble … happen to be Democrat.”

But the top Senate Democrat said on Friday that McConnell’s bankruptcy statement had stirred bipartisan criticism and increased the chances that Congress will provide assistance to state and local governments.

“McConnell is increasingly isolated,” Schumer said in an interview with National Public Radio. “I hope (he) comes to his senses, turns around and helps us get state and local. But if he doesn’t, I think there will be the momentum to defeat him.”

Republican Governor Larry Hogan of Maryland, who chairs the National Governors Association, joined with Vice Chairman Andrew Cuomo, the Democratic governor of New York, in calling for “robust support from the federal government,” in a Tuesday letter to congressional leaders. Republican Senator Rob Portman of Ohio echoed that call.

Republican Senator Bill Cassidy of Louisiana wants Washington to open a $500 billion stabilization fund for state and local governments.

With U.S. coronavirus cases approaching 900,000 and deaths nearing 50,000, some governors say that allowing states such as Michigan and Illinois to declare bankruptcy would be a recipe for collapsing the U.S. economy.

But all week, many Republicans attacked Democrats for insisting on the state aid, saying it delayed passage of help for small businesses.

Citing new unemployment figures, House Minority Leader Kevin McCarthy said during House debate on Thursday: “For those 4.4 million Americans who were laid off during the week, Congress owes you an apology. You did not have to have that happen.”

SCENARIO FOR NEGOTIATION?

With so much dissension, one senior Senate Republican aide wondered whether any legislation could surface anytime soon. Instead, he suggested the possibility of Congress persuading the Treasury Department to loosen some rules on existing funds that states could then better access.

But a second senior Senate Republican aide, who also asked not to be identified, sketched out a scenario in which lawmakers and the White House could be forced into a fast-track negotiation. Here is how that might unfold:

On Thursday, Congress completed work on a $484 billion emergency bill allowing more federally backed loans to small businesses. The second aide said that even before Trump could sign it into law, estimates swirled around Washington that this money could be gobbled up within a week.

If yet another small-business bailout was urgently needed, Pelosi could then be able to get Republicans back into dealmaking mode and push for the state aid.

At the same time, the environment could be ripe for Trump and Pelosi, following three years of sputtering negotiations, to agree on a massive infrastructure investment plan for roads, bridges, rural broadband access and other public works projects.

“If you’re spending another trillion dollars, unpaid for, Republicans would rather spend it on infrastructure than on direct aid to prop up states,” the staffer said.

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