Washington Weekly: Law Enforcement Reforms

U.S. Office of Public Policy, 12 June 2020

This Week:

The Senate approved various nominations and debated a bill to reauthorize the federal Land and Water Conservation Fund. The House did not vote on any legislation but held various committee hearings.

Next Week:

The Senate will continue to vote on the pending logjam of executive branch nominations. The House has not scheduled any votes on legislation.

Coronavirus-Related Issues

Stimulus 4: the Next Stimulus Bill.

Last Friday's surprising jobs report has further dampened talk of an immediate need for a stimulus 4 bill. Many in the Senate want to better understand emerging economic conditions in order to target aid appropriately. Given the recent improvements in the economy, the ultimate stimulus 4 bill will be far smaller and more narrow in scope than the $3.5 trillion package that the House passed last month. We still see the passage of another stimulus bill as highly likely, probably in late July. Bear in mind that enhanced unemployment benefits expire at the end of July and may serve as an inflection point. If financial markets perceive the more deliberate Senate action as an impediment to an improving economy, the Senate may accelerate its efforts.

Small Business Loans and Deductions.

The Paycheck Protection Program (PPP), the popular small business lending program, was a centerpiece of the CARES Act (stimulus 3). Since the PPP was established over two months ago, there have been almost daily changes, with more recent efforts focusing on making the loan forgiveness part of the program more flexible for borrowers. One ongoing issue has concerned the ability of borrowers to take the normal tax deduction for business expenses funded through PPP. The Treasury Department has viewed this as "double dipping," ruling that borrowers would not be able to claim these expenses for tax purposes given that they don’t have to treat the forgiven loan as income. A group of bipartisan lawmakers are pushing back and have introduced a bill to clarify that these business expenses should be deductible. This bill has been held up in the Senate for the time being but could be added to the stimulus 4 package. It would represent yet another improvement to the program that would benefit borrowers.

Still in Play, Kind of.

Two major issues are longshots to be included in a final stimulus 4 bill, but they are still a part of the discussion in Washington and therefore cannot be ruled out. One is an infrastructure bill – not on the scale that President Trump and others have called for in the $2 trillion range – but rather a scaled-back bill that would be more in the range of $300 billion and address transportation projects. The House likely will pass a larger infrastructure bill early next month. That will go nowhere in the Senate, which has a smaller infrastructure bill pending that would be a more viable alternative. The second is a provision to establish a bipartisan budget commission that would make recommendations on reducing the annual deficit and debt (with a special focus on Social Security and Medicare). The recommendations would be subject to automatic votes in the House and Senate for possible implementation. This idea has been tried before with mixed success, but it may have a better chance going forward if urgency grows around containing the national debt, which just exceeded $26 trillion. Again, we view both an infrastructure plan and a deficit reduction commission as unlikely to be added to the stimulus 4 bill, but the fact that they are consistently brought up as possible add-ons by the Senators we speak with gives them a chance.

Other Issues

Law Enforcement Reforms.

House Democratic leaders and members of the Congressional Black Caucus announced a sweeping law enforcement reform package early this week as a response to events of the past two weeks. The bill targets federal law enforcement practices and encourages state and local governments to enact changes at the local level through grant awards and other incentives. Among other things, the bill bans law enforcement agencies from racial profiling and using chokeholds, updates the statute for prosecuting police misconduct, creates a national database to track police misconduct, and increases funding for police training. Perhaps the most impactful part of the bill limits the "qualified immunity" in current law that has shielded certain government officials (including police officers) from being sued over actions performed on the job. Reforms in this regard would make it easier for individuals to sue police officers for mistreatment. A hearing was held this week on the bill in the House Judiciary Committee, and the measure should be approved by the full House in the next two weeks.

Senate Action.

Senator Tim Scott (R-SC), one of three African-Americans in the Senate, is working with his Senate Republican colleagues on their own law enforcement reform package, which may be outlined next week. This plan will share a lot of similarities with the House bill, but there also will be important differences. Notably, it will not contain the changes to qualified immunity. The Senate will likely move quickly on this package, perhaps before the July 4 holiday. What final bill the House and Senate can agree to is unknown now, but the dispute over the exact provisions will be the subject of debate and political posturing by all sides over the next few weeks.

Funding the Police.

Amidst some calls for police de-funding, it is noteworthy that the House bill neither adds nor reduces police funding. Keep in mind that a majority of police funding comes from local sources, not the federal government. While the funding (or de-funding) of police departments will continue to be debated in the public, at local governmental levels and in this year's political campaigns, there isn't enough support in the House or Senate to de-fund police departments at this time.

Spotlight on Diversity and Inequality.

The national protests on racial justice will put renewed focus on diversity and inclusion (D&I) and racial inequality in the House Financial Services Committee (HFSC) and elsewhere in Congress. HFSC Chairwoman Maxine Waters (D-CA) already established a D&I subcommittee and issued a report earlier this year on the D&I practices of the banking sector. In the current environment, the committee may request information from financial services firms on such issues as investments in private prisons and efforts to promote wealth creation in minority communities. The pandemic’s negative impact on racial and economic equality will be important topics as the HFSC and Senate Banking Committee hears next week from Federal Reserve Chairman Jay Powell. The HFSC also likely will investigate topics like racial disparities in home ownership and access to financial services in future hearings. Democrats will continue calls for greater consumer protections (including extending and expanding forbearance measures) and increased investment in affordable housing and minority small businesses as a response to both the pandemic and more longstanding concerns. While it is unlikely that the next stimulus package will incorporate many of these proposals, the broader issues will be fixtures of both the political and financial landscape for years to come.

Big Immigration Case Looming.

The Supreme Court is expected to decide this month whether the Trump administration can end the Deferred Action for Childhood Arrivals (DACA) program, as it has proposed. The DACA program was put into effect in 2012 to provide temporary protection from deportation to individuals who were children at the time they entered the US with their parents without proper documentation. There are approximately 644,000 such individuals in the US today. The DACA program is not rooted in law, however, and has been implemented and extended temporarily in the past through various executive orders. President Trump has professed support for DACA individuals but also prefers the passage of a law to make the protections permanent and to carry other immigration reforms that Congress has been unable to pass. A decision in favor of the administration coupled with action to follow through on the proposal will certainly set off alarm bells in many US communities and create a new controversial election issue. We don't think this is the course this issue will follow, but this is a potential sleeping giant issue that could affect both election turnout and the election result.

The Final Word

Biden's VP.

This week, former Vice President Joe Biden crossed the delegate threshold needed to officially secure the Democratic presidential nomination for 2020. A key "next step" is to select a nominee for vice president, which Biden has indicated he will do by August 1. Who will Biden select? No one knows other than possibly the former vice president himself, but an informal poll of the UBS US Office of Public Policy (all six people) had unanimous agreement on Senator Kamala Harris (D-CA). Senator Harris has a full resume and would check the box of being sufficiently experienced. Philosophically, she is closer to Biden than most others under consideration. Personally, she is not a threat to outshine Biden, as others may be. She's not the perfect pick, however. She's not from a valuable swing state, and her presidential bid was lackluster. While her career as a prosecutor has been controversial with some voters, it could also showcase her background in law enforcement and an ability to make needed reforms. We obviously could be wrong and it's still relatively early in the process, but at this time it appears to our office that Biden's best and most likely pick is Senator Harris.