Democrats work to fix mistakes in coronavirus relief package

President Biden says “the devil is in the details” of his $1.9 trillion coronavirus relief package. Turns out, there are a lot of details.

Mr. Biden and his team spent last week touting the benefits of the legislation. They will now have to fix some of the unintended consequences, which include looming Medicare cuts, a child credit that the IRS says it will struggle to implement on schedule, and language limiting states’ ability to cut taxes that has already triggered at least one lawsuit.

“I can’t give you a specific explanation as to how it got put in other than that kind of thing happens — always — when massive legislation like this is being crammed down without going through the committee,” Sen. Mike Crapo of Idaho, the top Republican on the Senate Finance Committee, told The Washington Times.

Mr. Crapo was referring to language Senate Democrats added to the bill that bars states from using the $350 billion in state and local aid to offset revenue losses that result from tax cuts.

The Treasury Department said the language doesn’t infringe on states’ ability to cut taxes in general.

That wasn’t good enough for Ohio Attorney General Dave Yost. He sued, saying the language is an unconstitutional attack on states’ rights.

Other Republican attorneys general have threatened similar action.

Mr. Crapo and fellow Republicans such as Sen. Mike Braun of Indiana introduced legislation to fix the issue, though they are not optimistic about getting any Democrats on board.

Democrats are unlikely to ever acknowledge that lower taxes, a good business climate and a solid pre-COVID economy are items worth highlighting, Mr. Braun said.

“And then they come up with this where they try to restrict what was kind of a discriminating allotment of $350 billion that hardly any red state needed in the first place,” he said in an interview. “It went to mismanaged state governments, and then you throw a provision like that in there.”

Mr. Braun tried to move his legislation forward on the Senate floor but Sen. Joe Manchin III, West Virginia Democrat, objected.

Mr. Manchin insisted that the language in the law doesn’t restrict states’ ability to cut taxes outright — just that they can’t use the federal largesse to pay for tax cuts.

“We’ve looked at it constitutionally. We’re solid on constitutional,” he said. “All we’re saying is, does the federal government have a responsibility to backfill with Treasury dollars a decision that could be self-inflicted? That’s all.”

Mr. Manchin’s assurances notwithstanding, West Virginia Attorney General Patrick Morrisey, a Republican, plans to go to court unless he gets clear guidance from Treasury Secretary Janet Yellen on what is allowed.

“If we don’t get clarity from the Treasury Department or the courts, West Virginia will have a sword of Damocles hanging over its head for the foreseeable future,” Mr. Morrisey said. “The state would be at risk of having a massive amount of money subject to a federal clawback.”

Mr. Braun also said that by tying the $350 billion to states’ unemployment rates, the bill arguably punishes well-managed states that still would like to use some of the funds to help their hardest-hit residents.

“Eight out of the top 10 based upon putting the highest unemployment rates into the formula were blue states who shut down early, kept the shutdowns late irrespective of the economic carnage,” he said.

In addition to the state and local aid and direct checks of up to $1,400 for millions of Americans, an expanded child tax credit is a key feature of the bill Democrats are touting as vital for the economy.

The temporary provision expands the $2,000 credit to $3,600 for children younger than 6 and $3,000 for older children. Mr. Biden and other Democrats are looking to make the provision a permanent feature of the tax code.

Instead of a one-time credit at tax time, Democrats pushed to make the payments monthly, or at least periodically, to try to give struggling families a boost throughout the rest of the year.

“It’s going to be delivered on a regular basis,” Mr. Biden said Friday in an appearance at Emory University in Atlanta. “So starting this summer, families with young kids will get $300 a month per child. This is going to lift 177,000 children in Georgia out of poverty.”

But Charles Rettig, the IRS commissioner, said it could take a herculean effort on the part of his already overworked employees to set up everything in time for a July 1 target date.

Mr. Rettig said his staff now has one month less to develop the “portal” for the credit because the Treasury Department pushed the federal tax filing deadline from April 15 to May 17.

“I don’t have the resources to devote to that portal until the filing season ends,” he told members of the House Ways and Means Committee. “But we intend to do our best to get there. I’m hopeful that I don’t have to come back to the committee to say that we’re unable to meet the statutory requirement.”

Mr. Rettig also said it could be a challenge to set up a monthly payment system but that the IRS would aim to get the payments out to people in a “meaningful time frame.”

Rep. Lloyd Doggett, Texas Democrat, said some have described the credit as the most important effort in a generation to reduce child poverty.

“The success of that provision is significantly dependent upon how the IRS implements it,” Mr. Doggett said.

Without further action from Congress, the $1.9 trillion relief package is set to trigger about $381 billion in mandatory spending cuts in 2022, including a $36 billion cut to Medicare.

The House passed legislation Friday to sidestep the cuts. It’s unclear whether the bill will survive any filibuster in the Senate, which is split 50-50 between Democrats and Republicans.

Republicans said they are not keen to help pass a fix without some changes to the law after Mr. Biden and congressional Democrats completely cut them out of negotiating the massive American Rescue Plan.

The mandatory spending cuts are the byproducts of a 2010 law requiring the White House budget office to identify cuts to offset projected increases in the deficit from new legislation. The 2010 law limits Medicare cuts and exempts several other programs, including Social Security.

Lawmakers can get around the Statutory Pay-As-You-Go Act, or pay-go in Washingtonspeak, by designating a bill as emergency spending. That was the case for multiple rounds of coronavirus relief last year.

Congress can waive compliance with the law, but the fast-track budget rules Democrats used to force through the $1.9 trillion package prevented them from waiving the rules.

House Budget Committee Chairman John A. Yarmuth of Kentucky pointed out that Democrats backed legislation to avert the cuts that the 2017 Republican tax law would have triggered, even though no congressional Democrats supported the tax law itself.

“Even in the wake of contentious legislation, Congress has come together to prevent sequestration and to protect Medicare, farm support programs, social services, resources for students and individuals with disabilities and other programs Americans rely on,” Mr. Yarmuth said. “This time should be no different.”

Mr. Crapo said Republicans don’t want cuts to Medicare, but he wasn’t prepared to sign off on a blanket waiver, either.

“It’s true. Congress can just waive it again. And there will be intense pressure to do that,” he said. “But I believe that we should work very hard to find out if there are either policy adjustments or offsets that can help to avoid this — not only avoid the excessive cuts to Medicare but do so in a way that is more fiscally responsible.”