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Senate GOP’s COVID Plan May Raid Social Security and Cut Unemployment Benefits

The plan being crafted could include a cut to the payroll tax — a funding mechanism for Social Security and Medicare.

Senate Majority Leader Mitch McConnell talks with reporters as he departs from the Senate floor in the Capitol in Washington, D.C., on July 20, 2020.

Progressives are pushing Democratic congressional leaders to forcefully oppose the Senate GOP’s coronavirus stimulus legislation after new reporting Monday revealed the package is likely to include a payroll tax cut, a reduction in enhanced unemployment payments, conditions on school funding, and little aid to state and local governments.

“After weeks of sitting on their hands and doing nothing while infections and deaths rise and tens of millions of people fear an imminent economic catastrophe, the reported plan Senate Republicans put out today would be laughable if it wasn’t so outright shameful and harmful,” said Care in Action, Community Change Action, Indivisible, MoveOn, and Greenpeace in a joint statement Monday.

The advocacy groups called on Senate Minority Leader Chuck Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif.) to “reject this plan outright.”

“The plan put forth by Mitch McConnell and Senate Republicans will do nothing but double down on the failed policies that put corporate profits before workers and families, and that helped get us here in the first place,” the groups said. “It is not a good faith starting point to negotiations.”

House Minority Leader Kevin McCarthy (R-Calif.) confirmed to reporters Monday that the plan being crafted in Senate Majority Leader Mitch McConnell’s (R-Ky.) office will include a cut to the payroll tax — a funding mechanism for Social Security and Medicare. “It’s one of the issues that we’re proposing,” said McCarthy.

An anonymous White House official told Roll Call that the Republican proposal under consideration would defer payment of the payroll tax to a later date. Congress would then have the option of waiving the payback requirement with separate legislation.

Nancy Altman, president of Social Security Works, said in a statement Monday that the Trump-GOP push for a payroll tax cut amounts to an effort to “raid” the Social Security system’s “dedicated revenue as a pathway to destroying it.”

“If the money lost in payroll contributions is replaced with general revenue, Social Security will still be a target,” warned Altman. “Currently, Social Security doesn’t add a penny to the deficit. Raiding its dedicated revenue is a set up to the claim that it must be cut in the name of reining in the debt! McCarthy’s statement today means that every Republican member of Congress supports defunding Social Security — unless they quickly and explicitly denounce their party’s plan to raid our earned benefits.”

Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee, was among the few Republicans who publicly voiced skepticism Monday about the payroll tax cut, calling the proposal a “public relations problem” for the GOP.

“Social Security people think we’re raiding the Social Security fund,” said Grassley, to which Social Security Works executive director Alex Lawson responded:

Schumer and Pelosi are expected to meet with White House officials Tuesday to formally kick off negotiations over the stimulus legislation. The Trump administration is advocating a relief package that contains “roughly $1 trillion in new programs, though officials are expected to use budget gimmicks to make the initial package slightly larger,” the Post reported.

By comparison, the $3 trillion HEROES Act passed by the Democrat-controlled House in May proposed more than $1 trillion just for state and local governments as they face pandemic-induced budget crises.

“The bill is expected to omit new aid that Democrats have sought for cities and states, instead allowing governors and local leaders more flexibility to spend the $150 billion already allocated,” the Post noted.

The GOP plan will also likely include another round of $1,200 direct stimulus payments and a cut to the $600-per-week increase in unemployment benefits, which is set to expire at the end of the week. During a private White House meeting on Monday, according to the Post, “Trump criticized the enhanced unemployment benefit, saying it never should have been agreed to in the first place.”

“From what we understand from press reports, McConnell’s bill will prioritize corporate special interests over workers and Main Street businesses,” Schumer said in a floor speech Monday afternoon. “It will fail to adequately address the worsening spread of the virus. There are currently between 20 million and 30 million unemployed Americans, and from all accounts the Republican bill will not do nearly enough for them.”

Sen. Ron Wyden (D-Ore.) warned on Twitter that reducing the boosted unemployment insurance (UI) payments will slash the incomes of 30 million Americans who are currently relying on the payments to meet basic needs.

Josh Bivens, director of research at the Economic Policy Institute, said Monday that it “sounds like Senate Republicans want to go cheap (and cruel) on by far the most-important bits of the economic response to Covid — enhanced UI benefits and aid to state/local governments.”

“Hard not see all of this as Republicans in the Senate and administration having given up trying to fix problems and shifting to attempts to hobble the political prospects of the next Congress and administration,” Bivens added. “We deserve a lot better than this.”

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