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Mnuchin To Cut Off $455 Billion In Stimulus Money and Move It Out of the Biden Administration’s Reach

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  • Treasury Secretary Steven Mnuchin has asked the Federal Reserve to return $455 billion in stimulus funding for key emergency lending programs when they expire at the end of the year. 
  • Previously, the Treasury Department was expected to extend those programs as the pandemic is still raging. Because it’s now pursuing the opposite, the Fed has rebuked Mnuchin’s decision, a rare move to see from the agency.
  • Other critics have called Mnuchin’s move political, saying it appears to be a blatant attempt to hamper Biden’s transition into the White House in January.
  • Still, the Fed has agreed to return the funding, and it’s now being reported that the money will be placed into an account that Mnuchin’s likely successor, Janet Yellen, will need Congressional approval to access.

Mnuchin To End Emergency Funding Without Extension

Treasury Secretary Steven Mnuchin said Thursday that he doesn’t plan to extend $455 billion in key emergency lending programs past the end of the year. Instead, he’s planning on stashing that money in a fund that his successor can’t reach without Congressional approval.

Mnuchin has asked Federal Reserve Chairman Jerome Powell to return the $455 billion in unused funding. Notably, that money is meant to fund programs stemming from the $2 trillion CARES Act — the only stimulus package Congress has agreed upon thus far. Those programs are meant to prop up the economy by providing financial assistance and loans for struggling businesses and local governments.

In his letter to Powell, Mnuchin said the Fed programs “have clearly achieved their objective” because “Markets responded positively, spreads tightened, and banks continued lending.”

While he also said that Congress will later be able to use that $455 billion for other purposes, such as PPP and grants, his decision has been so controversial that even the Fed criticized it. That’s highly unusual because the Fed isn’t usually keen on inserting itself within sensitive political issues.

The Fed has said that the programs are necessary while the pandemic rages on. In fact, it even noted the “important role” of these programs “as a backstop for our still-strained and vulnerable economy.”

The Treasury Department cannot simply reallocate that money on its own. Instead, it needs agreement from the Fed. Despite the Fed’s criticism, it ultimately gave that agreement on Friday.

Critics Blast Mnuchin’s Plan as an Attack on Biden

Top Republicans like Senate Majority Leader Mitch McConnell and Senator Patrick Toomey have backed Mnuchin’s decision. Last week, McConnell described it as “fully aligned with the letter of the law and the intent of the Congress.”

Among some Republicans, there is a concern that leaving the programs operational for too long could distort markets.

On top of that, only about $20 billion of that $455 billion has actually been used, likely because the program’s loan terms for small- and medium-sized businesses are very restrictive. Still, that’s not to say this money hasn’t been useful. As The New York Times pointed out, “Some programs calmed market conditions merely by reassuring investors.”

Connected to that and similar to the Fed’s arguments, economists are concerned that Mnuchin is pulling the plug on these programs too soon, arguing that they should not be ended before the markets have fully recovered.

The U.S. Chamber of Commerce — the largest lobbying group in the country — said that Mnuchin’s decision to end these programs “closes the door on important liquidity options for businesses at a time when they need them most.” 

The chamber also added that it “unnecessarily ties the hands of the incoming administration.”

“This appears to be a political move by Team Trump to limit what President-elect Joe Biden can do next year to boost the economy, especially if Congress fails to pass a big stimulus,” Jaret Seiberg, an analyst at Cowen Inc., added.

“It’s not just closing the store down for Biden,” policy economist Ernie Tedeschi said. “It’s burning the store down.” 

Mnuchin has said that this decision isn’t political. He also argued that in the “unlikely event” that these programs need to be re-established, the Fed can still request approval from other emergency funds.

Yellen Would Need Congressional Approval to Access Funds

Still, as The New York Times noted last week, this move could prevent President-elect Joe Biden’s incoming Treasury secretary from quickly restarting the efforts at scale in 2021.

That incoming secretary is expected to be Janet Yellen, who Biden chose for the role on Monday. Notably, if confirmed by the Senate, she would be the first female Treasury secretary. 

On Tuesday, it was reported that Mnuchin is planning on moving that $455 billion into the Treasury’s General Fund, which means that Yellen would need Congressional approval to access any of that money.

That would then leave Yellen with only $80 billion at her discretion. While that might sound like a lot of money for the average person, it’s much less than the nearly half a trillion dollars currently set to be removed from play. 

It also comes at a time where coronavirus cases are spiking, local and state governments are once again employing more restrictive lockdowns, and millions of people are set to lose their unemployment benefits at the end of the year.

Bharat Ramamurti, a Democratic member of the congressional watchdog panel overseeing the $455 billion, said on Twitter that Mnuchin’s move is illegal and that it can be reversed next year.

A spokesperson for the Treasury has asserted that Mnuchin’s move is legal under the CARES Act. 

In the summer, Mnuchin initially extended the fund’s expiration date, which is why it now expires at the end of the year.

See what others are saying: (Business Insider) (Axios) (Bloomberg)

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Judges Uphold North Carolina’s Congressional Map in Major GOP Win

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The judges agreed that the congressional map was “a result of intentional, pro-Republican partisan redistricting” but said they did not have the power to intervene in legislative matters.


New Maps Upheld

A three-judge panel in North Carolina upheld the state’s new congressional and legislative maps on Tuesday, deciding it did not have the power to respond to arguments that Republicans had illegally gerrymandered it to benefit them.

Voting rights groups and Democrats sued over the new maps, which were drawn by the state’s Republican legislature following the 2020 census.

The maps left Democrats with just three of North Carolina’s 14 congressional seats in a battleground state that is more evenly split between Republicans and Democrats. Previously, Democrats held five of the 13 districts the state had before the last census, during which North Carolina was allocated an additional seat.

The challengers argued that the blatantly partisan maps had been drawn in a way that went against longstanding rules, violated the state’s Constitution, and intentionally disenfranchised Black voters.

In their unanimous ruling, the panel — composed of one Democrat and two Republicans — agreed that both the legislative and congressional maps were “a result of intentional, pro-Republican partisan redistricting.”

The judges added that they had “disdain for having to deal with issues that potentially lead to results incompatible with democratic principles and subject our state to ridicule.”

Despite their beliefs, the panel said they did not have a legal basis for intervening in political matters and constraining the legislature. They additionally ruled that the challengers did not prove their claims that the maps were discriminatory based on race.

Notably, the judges also stated that partisan gerrymandering does not actually violate the state’s Constitution. 

The Path Ahead

While the decision marks a setback to the plaintiffs, the groups have already said they will appeal the decision to the North Carolina Supreme Court.

The state’s highest court has a slim Democratic majority and has already signaled they may be open to tossing the map.

There are also past precedents for voting maps to be thrown out in North Carolina. The state has an extensive history of legal battles over gerrymandering, and Republican leaders have been forced to redraw maps twice in recent years.

A forthcoming decision is highly anticipated, as North Carolina’s congressional map could play a major role in the control of the House in the 2022 midterm elections if they are as close as expected. 

See what others are saying: (Politico) (The New York Times) (The Wall Street Journal)

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Biden Administration Says Private Insurers Will Have to Cover 8 At-Home Tests a Month

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The policy will apply to all the nearly 150 million Americans who have private insurance.


New At-Home Testing Policy

The Biden administration announced Monday that private health insurers will now be required to pay for up to eight at-home rapid tests per plan member each month.

Under the new policy, starting Saturday, private insurance holders will be able to purchase any at-home test approved by the FDA at a pharmacy or online. They will either not be asked to pay any upfront costs or be reimbursed for their purchase through their provider.

The move is expected to significantly expand access to rapid tests that other countries have been distributing to their citizens free of charge for months. 

According to reports, nearly 150 million Americans — about 45% of the population — have private insurance. 

Each dependent enrolled on the primary insurance holder’s account is counted as a member. That means a family of four enrolled on a single plan would be eligible for 32 free at-home rapid tests a month.

Potential Exemptions

All tests may not be fully covered depending on where they are purchased. 

In order to help offset costs, the Biden administration is incentivizing insurance providers to establish a network of “preferred” pharmacies and stores where people in the plan can get tests without paying out of pocket.

As a result, health plans that do create those networks will only be required to reimburse up to $12 per test if they are purchased out of that network, meaning people could be on the hook for the rest of the cost.

If an insurer does not set up a preferred network, they will have to cover all at-home tests in full regardless of the place of purchase.

During a briefing Monday, Press Secretary Jen Psaki said tests should be “out the door in the coming weeks.”

“The contracts [for testing companies] are structured in a way to require that significant amounts are delivered on an aggressive timeline, the first of which should be arriving early next week,” she added.

See what others are saying: (The New York Times) (NPR) (The Washington Post)

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Biden Administration Unveils Plan To Replace All Lead Pipes

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The effort builds on the $15 billion allocated under the bipartisan infrastructure bill for lead pipe replacement, but industry leaders say $60 billion will be needed for nationwide revitalization.


White House Outlines Actions on Lead Pipes and Paint

The Biden administration rolled out a sweeping plan on Thursday to remove all the nation’s lead pipes over the next decade and take other steps to prevent lead paint contamination.

Lead, which was commonly used in piping for municipal water systems all over the country until it was banned in 1978, is a dangerous neurotoxin that can cause serious nervous system damage, especially in children.

Contamination from lead pipes seeping into water supplies has caused multiple high-profile public health and environmental catastrophes over the last decade, including the notorious crisis in Flint, Michigan.

According to a White House factsheet, an estimated 10 million households are connected to water through lead pipes. Children and teenagers in 400,000 schools and child care facilities also risk exposure to lead-contaminated water.

“Because of inequitable infrastructure development and disinvestment, low-income communities and communities of color are disproportionately exposed to these risks,” the factsheet stated.

To address those disparities and revitalize water systems across the nation, the White House outlined 15 new action items the Biden administration is taking, including:

  • Launching “a new regulatory process to protect communities from lead in drinking water” through the Environmental Protection Agency (EPA).
  • Clarifying that state, local, and Tribal governments can use the $350 billion aid allocated under the American Rescue Plan to replace lead service lines.
  • Establishing federally-operated regional technical assistance hubs “to fast track lead service line removal projects in partnership with labor unions and local water agencies.”
  • Awarding federal grants through the Department of Housing and Urban Development (HUD) to remove lead paint in low-income communities.
  • Directing the Centers for Disease Control and Prevention (CDC) to expand childhood lead testing.
  • Establishing “a new Cabinet Level Partnership for Lead Remediation in Schools and Child Care Centers.”

The White House also said it will direct the EPA to allocate $3 billion for state, local, and Tribal governments to replace lead pipes through funding that was approved under the bipartisan infrastructure bill signed by President Joe Biden last month.

A Matter of Funding

In total, Congress provided $15 billion to revitalize the nation’s lead-pipe systems under the infrastructure bill. 

However, industry experts have estimated that it will cost $60 billion to entirely overhaul all the remaining lead pipes in the U.S.

As a result, the Biden administration has proposed several additional funding mechanisms in the social safety net package, known as the Build Back Better Act, that is currently being negotiated by Congress.

Specifically, the legislation would set aside $9 billion for lead remediation grants to disadvantaged communities, $1 billion for rural water utilities to remove lead pipes, and $5 billion for mitigation efforts such as removing lead-based water fixtures in low-income households.

The Build Back Better Act would additionally provide $65 billion for public housing agencies and $5 billion for other federally-assisted housing organizations to improve housing quality, including by replacing lead pipes and service lines.

The status of that legislation, as well as what provisions will remain in the final version, remain in limbo. While Democratic leadership has pushed to pass the sweeping social bill before the new year, all 50 of the party’s members in the Senate will need to sign on, and moderate Sen. Joe Manchin (D-W.V.) has continued to withhold his support.

See what others are saying: (The New York Times) (Axios) (The Washington Post)

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