What’s at stake if US cuts Covid aid?

What’s at stake if US cuts Covid aid?

By Andy Sullivan

WASHINGTON (Reuters) – A Republican proposal to scrap unspent COVID-19 relief money could cut health care for military veterans and pensions for blue-collar workers while doing little to improve the U.S. fiscal picture, a Reuters review of federal spending statistics found.

The flood of Covid-relief aid approved by Congress in 2020 and 2021 under Republican President Donald Trump and his Democratic successor, Joe Biden — $5.2 trillion in all — has emerged as a primary target for House of Representatives Republicans as they search for ways. Curb federal spending.

House Republicans, who hold the majority in that chamber, have said they will not vote to raise the federal government’s $31.4 trillion debt limit without a deal to cut spending. Failure to raise the limit would lead to a default that would shake the economy.

The less than $80 billion in unspent Covid aid as of January is a small target, according to White House budget figures. Medical programs to fight the virus have gone through most of their funding, and expanded safety-net programs that helped Americans weather the disruption have largely run their course.

That total — 1.5% of the amount authorized by Congress — will decrease further in the coming months as federal agencies push money out the door. Federal spending on health care and food stamps is also due to decrease when the Biden administration’s public health emergency is allowed to expire in May.

“At this point we’re so late in the game that we’re not going to recover much,” said Mark Goldwyn, policy director at the Center for a Responsible Federal Budget, a nonpartisan watchdog group.

Republicans say there’s no reason to ignore the rest of the money as they put together a spending-cut proposal.

“Recovering any unspent funds from the trillions that Washington flooded the economy during the pandemic is an obvious starting place for any debt ceiling negotiations,” said Tim Reitz, executive director of the House Freedom Caucus, one of several Republican groups that said so. The rest of the aid should be cancelled.

Democrats and Republicans have largely agreed not to cut the Social Security and Medicare programs, which account for about one-third of the nation’s $6.2 trillion budget, leaving lawmakers to find smaller targets for cuts.

Carpenter, Veterans and Medical Research

Restoring unspent COVID funds will have real-world repercussions.

The biggest chunk, $47 billion, is earmarked for financially troubled union pension funds that have asked the federal Pension Benefit Guaranty Corp. for help. The agency first prioritized the most troubled pension funds and is now working with those that need less immediate help, a White House official said.

If Congress restores that money, fishermen in Massachusetts and carpenters in Ohio will be among nearly 1 million union workers who won’t receive their full retirement benefits.

A clawback could also affect veterans’ health care, as the Department of Veterans Affairs has yet to spend $4.6 billion in funding it received for COVID-19-related care. The health system is currently treating 4,500 patients for the disease, according to an organization dashboard.

According to the White House, another $6.8 billion is left to fight the virus by researching things like better vaccines and tests and longer Covid-19.

Other remaining pots include $3.2 billion for small business assistance and $2.5 billion for bus and subway systems that have struggled with declining fare revenue. Most of that money is designated for specific recipients, according to the White House.

Some money will not be spent

Some funds on the books will never be spent and thus offer no potential budget savings.

The Transportation Department handed over less than $700 million from a $3 billion fund aimed at saving aircraft-manufacturing jobs after, for example, several large companies declined to participate.

According to the U.S. Government Accountability Office, businesses have claimed less than Congress expected tax breaks to keep employees on payroll and provide COVID-related sick leave.

Red State rejects some money

Some Republican-led states opted for extended unemployment and food-stamp benefits, saying they discouraged work. This led the federal government to spend less than it would have otherwise.

Republican governors in Nebraska and Arkansas last year rejected a second round of aid for people behind on their rent. Those dollars were then paid to other states.

But Republican- and Democratic-led states alike received $350 billion in 2021 and 2022. They have until the end of 2024 to figure out how to spend it and to actually do it by the end of 2026.

That money is in state and local government coffers, beyond the reach of Congress. Republican Senator Rick Scott in January called on governors and mayors to voluntarily return that money to help pay down the federal debt.

The Treasury Department said it had not seen many state and local governments return the funds, though it did not provide a specific dollar amount.

(Reporting by Andy Sullivan; Additional reporting by David Morgan; Editing by Scott Malone and Alastair Bell)

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