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Saturday February 27th, 2021 10:15AM

Congress averts shutdown; fight continues over pandemic aid

By The Associated Press

WASHINGTON (AP) — Congress passed a two-day stopgap spending bill Friday night, averting a partial government shutdown and buying yet more time for frustratingly slow endgame negotiations on an almost $1 trillion COVID-19 economic relief package.

The virus aid talks remained on track, both sides said, but closing out final disagreements was proving difficult. Weekend sessions were on tap, and House leaders hoped for a vote on Sunday on the massive package, which wraps much of Capitol Hill's unfinished 2020 business into a take-it-or-leave-it behemoth that promises to be a foot thick — or more.

The House passed the temporary funding bill by a 320-60 vote. The Senate approved it by voice vote almost immediately afterward, and President Donald Trump signed it late Friday.

Senate Majority Leader Mitch McConnell, R-Ky., said both sides remain intent on closing the deal, even as Democrats launched a concerted campaign to block an effort by Republicans to rein in emergency Federal Reserve lending powers. The Democrats said the GOP proposal would deprive President-elect Joe Biden of crucial tools to manage the economy.

Negotiations continued into Friday night but an agreement wasn't likely before Saturday, lawmakers and aides said. House lawmakers were told they wouldn’t have to report to work on Saturday but that a Sunday session was likely. The Senate will be voting on nominations.

The $900 billion package comes as the pandemic is delivering its most fearsome surge yet, killing more than 3,000 victims per day and straining the nation's health care system. While vaccines are on the way, most people won't get them for months. Jobless claims are on the rise.

The emerging agreement would deliver more than $300 billion in aid to businesses and provide the jobless a $300-per-week bonus federal unemployment benefit and renewal of state benefits that would otherwise expire right after Christmas. It also includes $600 direct payments to individuals; vaccine distribution funds and money for renters, schools, the Postal Service and people needing food aid.

Democrats on Friday came out swinging at a key obstacle: a provision by conservative Sen. Pat Toomey, R-Pa., that would close down more than $400 billion in potential Federal Reserve lending powers established under a relief bill in March. Treasury Secretary Steven Mnuchin is shutting down the programs at the end of December, but Toomey's language goes further, by barring the Fed from restarting the lending next year, and Democrats say the provision would tie Biden's hands and put the economy at risk.

“As we navigate through an unprecedented economic crisis, it is in the interests of the American people to maintain the Fed’s ability to respond quickly and forcefully," said Biden economic adviser Brian Deese. “Undermining that authority could mean less lending to Main Street businesses, higher unemployment and greater economic pain across the nation."

The Fed programs at issue provided loans to small and mid-sized businesses and bought state and local government bonds, making it easier for those governments to borrow, at a time when their finances are under pressure from the pandemic.

The Fed would need the support of the Treasury Department to restart the programs, which Biden’s Treasury secretary nominee, Janet Yellen, a former Fed chair, would likely provide. Treasury could also provide funds to backstop those programs without congressional approval and could ease the lending requirements. That could encourage more lending under the programs, which have seen only limited use so far.

Friday opened on an optimistic note after the talks appeared stalled for much of Thursday.

The pending bill is the first significant legislative response to the pandemic since the landmark CARES Act passed virtually unanimously in March, delivering $1.8 trillion in aid, more generous $600 per week bonus jobless benefits and $1,200 direct payments to individuals.

The COVID-19 package would be added to a $1.4 trillion governmentwide appropriations bill that would fund federal agencies through next September. That measure is likely to provide a last $1.4 billion installment for Trump's U.S.-Mexico border wall as a condition of winning his signature.

For Republicans, the most important COVID-19 aid provision was a long-sought second round of “paycheck protection” payments to especially hard-hit businesses and renewal of soon-to-expire state jobless benefits for the long-term unemployed.

Democrats have been denied fiscal relief for states and local governments, a top priority, and they won a supplemental COVID-19 unemployment benefit that was only half the size of what the CARES Act delivered. Democrats also won $25 billion to help struggling renters with their payments and $45 billion for airlines and transit systems, but some critics on the left said Democratic negotiators were getting outmaneuvered.

Indeed, McConnell has been in the catbird's seat since Senate Republicans outperformed expectations in November while House Democrats barely held their majority. Preelection Democratic demands for a bill exceeding $2 trillion were quickly cut by more than half. Still, Biden is pressing for an agreement, fearing a weakening economy will await him on Inauguration Day.

Biden is promising another bill next year, but if Democrats lose Georgia Senate runoff elections next month and fail to win the Senate majority, they may have little leverage.

Most economists, including Federal Reserve Board Chairman Jerome Powell, strongly support additional economic stimulus as necessary to keep businesses and households afloat through what is widely anticipated to be a tough winter. Many forecast the economy could shrink in the first three months of 2021 without more help. Standard & Poor’s said in a report Tuesday that the economy would be 1.5 percentage points smaller in 2021 without more aid.

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AP Economics Writer Christopher Rugaber contributed.

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