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Truce over: U.S. Congress heads to partisan battle on coronavirus aid for states

By Richard Cowan

WASHINGTON (Reuters) – After passing $3 trillion of coronavirus relief in a rare seven-week run of bipartisanship, the U.S. Congress is headed back to its normal state of conflict, with leading Republicans lining up against aid for cities and states that Democrats say is essential.

Spurred on by governors and local officials, Democrats have put out the word that they want to provide a sizeable rescue package as part of a broader bill – one that could total at least $2 trillion in coming weeks.

Their agenda has some Republicans seething, with Senate Majority Leader Mitch McConnell telling conservative talk-radio host Hugh Hewitt on Wednesday that he “would certainly be in favor” of letting states enter bankruptcy rather than send them cash.

The leading U.S. Democrat, House of Representatives Speaker Nancy Pelosi, shot back on Thursday, saying: “Oh really? What made you think that was a good idea?”

Some governors called it a recipe for collapsing the U.S. economy if Congress allowed states such as Michigan and Illinois to declare bankruptcy.

The tit-for-tat continued, when Republican President Donald Trump, who is seeking re-election in November, noted during his daily coronavirus briefing on Thursday: “It is interesting that the states that are in trouble … happen to be Democrat.”

The infighting came as U.S. coronavirus cases approached 900,000 late on Thursday, with nearly 50,000 deaths. There are fears that even if the pandemic is soon tamed, a second wave could hit in late 2020.

It is not just Democrats clamoring for more aid to states as their revenues plummet during an outbreak that has sent unemployment soaring as efforts to combat the pandemic have closed many businesses and left Americans sheltering in their homes.

Republican Governor Larry Hogan of Maryland, who chairs the National Governors Association, joined with Vice Chairman Andrew Cuomo, the Democratic governor of New York, in calling for “robust support from the federal government,” in a Tuesday letter to congressional leaders. Republican Senator Rob Portman of Ohio echoed that call.

Republican Senator Bill Cassidy of Louisiana wants Washington to open a $500 billion stabilization fund for state and local governments.

But all week, many Republicans attacked Democrats for insisting on the state aid, saying it delayed passage of help for small businesses.

Citing new unemployment figures, House Minority Leader Kevin McCarthy said during House debate on Thursday: “For those 4.4 million Americans who were laid off during the week, Congress owes you an apology. You did not have to have that happen.”

SCENARIO FOR NEGOTIATION?

With so much dissension, one senior Senate Republican aide wondered whether any legislation could surface anytime soon. Instead, he suggested the possibility of Congress persuading the Treasury Department to loosen some rules on existing funds that states could then better access.

But a second senior Senate Republican aide, who also asked not to be identified, sketched out a scenario in which lawmakers and the White House could be forced into a fast-track negotiation. Here is how that might unfold:

On Thursday, Congress completed work on a $484 billion emergency bill allowing more federally backed loans to small businesses. The second aide said that even before Trump could sign it into law, estimates swirled around Washington that this money could be gobbled up within a week. [

If yet another small-business bailout was urgently needed, Pelosi could then be able to get Republicans back into dealmaking mode and push for the state aid.

At the same time, the environment could be ripe for Trump and Pelosi, following three years of sputtering negotiations, to agree on a massive infrastructure investment plan for roads, bridges, rural broadband and other public works projects.

“If you’re spending another trillion dollars, unpaid for, Republicans would rather spend it on infrastructure than on direct aid to prop up states,” the staffer said.

(Reporting by Richard Cowan; Editing by Peter Cooney)

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