Stalled coronavirus relief negotiations hit new obstacle: State aid

The stalemate puts at risk potentially trillions of dollars in aid for families, businesses and the US economy

White House officials and Democratic leaders remained at an impasse Monday over another coronavirus relief package, with aid for cash-strapped state and local governments emerging as the latest obstacle in negotiations.

The two sides are at odds over whether states should receive additional funding in the next round of emergency aid -- and if so, how much.

Negotiators are trying to close the divide between the Senate Republicans' $1 trillion HEALS Act, which includes no new funding for states, and the House's $3.4 trillion HEROES Act, which allocates about $1 trillion in new funding for state and local governments.

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The stalemate puts at risk potentially trillions of dollars in aid for families, businesses and the U.S. economy, including a fresh round of $1,200 stimulus checks, extra unemployment aid for millions of out-of-work Americans, $100 billion to help reopen schools and relief for cash-strapped state and local governments.

There were no signs of a détente on Monday, with each party blaming the other for the stalled-out discussions.

Treasury Secretary Steven Mnuchin, one of the lead White House negotiators, called Democrats' request for $1 trillion for states "an absurd number," saying there's "plenty" of cash available already for the governments.

"We’re not going to give a trillion dollars for state and local," he said during an interview with CNBC on Monday. "That’s just not a reasonable approach."

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President Trump lashed out at Democrats for insisting on the inclusion of aid for state and local governments.

"So now Schumer and Pelosi want to meet to make a deal," he wrote in a tweet. "Amazing how it all works, isn't it. Where have they been for the last 4 weeks when they were 'hardliners,' and only wanted BAILOUT MONEY for Democrat-run states and cities that are failing badly? They know my phone number!"

But Democrats warned that without more federal funding, state and local governments -- which combined employ about 23.2 million essential workers -- will be forced to lay off employees and cut essential services.

Senate Minority Leader Chuck Schumer, speaking from the Senate floor, warned that the “economy is failing” and “state and local governments are cutting essential services.”

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“We’re going to see layoffs, and this is not an abstract concept," Schumer said Sunday during an interview with ABC's "This Week." "You know, the Republicans say ‘the blue states.’ A firefighter is a firefighter. A person who drives a bus, a person who picks up the garbage — those are important jobs."

State and local governments, reeling from the loss of tax revenue as a result of the virus-induced recession, are lobbying Congress to allocate billions more in relief. Budget shortfalls could total more than $500 billion in just one year, the Center on Policy and Budget Priorities reported.

The $2.2 trillion CARES Act approved in late March allocated $150 billion for state and local governments. The Treasury Department's inspector general's office reported in late July that states had spent about one-quarter of that money; however, some state officials said the report did not factor in the money that was already earmarked for spending.

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