US politicians pass giant spending bill of $900bn in Covid relief aid and government funding

Package includes $1.4tn in regular government funding and tax breaks for businesses

(FILES) In this file photo taken on December 16, 2020 mist from a steam pipe is seen coming from a grate near the US Capitol as a snow storm develops in Washington, DC. US lawmakers on December 21 took the first step toward approving a $900 billion relief package for Americans hard hit by the pandemic, as Congress raced to finalize the massive legislation ahead of a midnight deadline. / AFP / ANDREW CABALLERO-REYNOLDS
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US politicians passed a giant year-end spending bill combining $900 billion in Covid-19 relief aid with $1.4 trillion in regular government funding and tax breaks for businesses.

The House passed the combined bill on two votes, with the defence and homeland spending part getting a 327 to 85 vote and the rest of the measure having a 359 to 53 vote. The Senate passed the legislation with a 92-6 vote that sends the bill to President Donald Trump to sign into law.

The bill, worth more than $2.3tn, contains the second-largest economic relief measure in US history – after the $1.8tn Cares Act passed in March as the pandemic throttled the world’s biggest economy. Economists say the aid should be enough to avert a double-dip recession next year, though risks remain.

Congress failed to approve 12 appropriations bills at the start of the fiscal year in October, and without passage of Monday’s bill the federal government faces a shutdown after midnight. Politicians on Sunday cleared a one-day stop-gap bill to get the mammoth spending deal into legislation and voted on.

Passage caps nine months of partisan warfare in Congress over pandemic relief. House Democrats backed a $3.4tn proposal in May, then reduced their demand to $2.4tn by October.

Senate Republicans, after calling for a pause to assess the recovery, put forth a $500bn measure. The White House at one point offered House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer a $1.8tn bill that included $1,200 stimulus checks, but Democrats rejected that due to a lack of Covid-19 health care measures, in the run-up to the election.

In the six weeks after election day, talks bogged down over whether to include lawsuit liability relief for employers – a top demand of Senate Majority Leader Mitch McConnell – and aid to state and local governments. A bipartisan group of senators and moderate House members led the way to breaking the impasse two weeks ago by proposing a $748bn bill without those two contentious issues.

Senate Majority Leader Mitch McConnell, a Republican from Kentucky, walks to his office at the U.S. Capitol in Washington, D.C., U.S., on Monday, Dec. 21, 2020. The House was poised to vote Monday on a massive 5,593-page package of legislation that combines pandemic relief with a bill to fund government operations just hours after lawmakers got the text. Photographer: Oliver Contreras/Bloomberg
Republican Senate Majority Leader Mitch McConnell walks to his office ahead of the House voting on a package that combines pandemic relief with a bill to fund government operations. Bloomberg

Leaders embraced the outline of the plan while adding in direct stimulus payments back into the mix. A final major holdup was resolved over the weekend when language ending Federal Reserve Cares Act lending programmes was narrowed with the aim of avoiding any rollback in pre-pandemic Fed powers.

While the bill is smaller than many economists had anticipated months ago, it could be enough to ward off another contraction in gross domestic product.

“Based on simulations of our model of the U.S. and global economies, this latest fiscal rescue package will add approximately 1.5 percentage points to annualised real GDP growth in the first quarter of 2021 and close to 2.5 percentage points to calendar-year 2021 growth,” said Mark Zandi, of Moody’s Analytics. “If lawmakers had not come through, the economy probably would have suffered a double-dip recession in early 2021.”

Michael Feroli, chief US economist at JPMorgan Chase, said on Bloomberg Television that the relief package “should be very helpful for the economy,” and estimated that it could boost GDP by as much as 3 per cent over time.

The bill passed by the House would provide direct payments of $600 to most Americans and their children. Those with incomes of more than $100,000 would be excluded, as would undocumented immigrants. The payments will go out as soon as next week, Treasury Secretary Steven Mnuchin said Monday.

For the unemployed, a $300-per-week in enhanced unemployment benefits will be put in effect through March. Unemployment insurance programmes for gig workers and the long-term unemployed also would be extended. There’s $284bn for the Paycheck Protection Programme that provides forgivable loans to small businesses. Businesses that previously had a PPP loan can qualify for a new one, and their PPP grants would be made tax deductible.

The package includes money for transportation – including for $15bn for airlines – vaccine distribution, schools and universities, farmers and food aid.

The relief plan is attached to a $1.4tn bill that would fund the federal government through the end of the fiscal year on September 30, 2021. That bill adheres to budget caps sent in place during the 2019-debt ceiling fight, including by keeping $12.5bn in veterans health spending under the cap – something that cropped up as a last-minute fight. The bill has $1.4bn for Trump’s border wall and related spending, although the incoming Biden administration could stop construction.

The bill also includes an extension of tax breaks – for the alcohol and renewable-energy industries, among others – a law to curb surprise medical bills, a water-infrastructure measure and an intelligence-agency policy bill, among its provisions.

The haggling over the relief package forced Congress to repeatedly pass temporary funding for government operations. Late on Sunday, President Donald Trump signed a one-day extension of government funding, giving politicians time for votes on Monday.

While the bill clears the decks for the incoming Biden administration by wrapping up the fiscal 2021 budget process, it leaves Democrats ready to push for more stimulus after the Jan. 20 inauguration.

Ms Pelosi and Mr Schumer said that the $900bn relief bill is just a first step, and vowed to make another package the top priority in the new Congress. That effort is likely to include a push for infrastructure spending, which has bipartisan appeal, but is already facing skepticism from Republicans, with Mr Mnuchin saying Monday that this week’s measure is likely the last aid bill needed to address the pandemic.

Critical to the outlook will be whether Democrats win the two Georgia runoff elections for the Senate on January 5 – giving them control of both chambers of Congress.

“I think we are going to have a much easier time than we had with a Republican president and a Republican Senate” Ms Pelosi said.