Veterans, carpenters and vaccines: What's at stake if US COVID aid is canceled

2/2 © Reuters. FILE PHOTO: The sign of the Department of Veteran Affairs is seen in front of the headquarters building in Washington, May 23, 2014. REUTERS/Larry Downing 2/2

By Andy Sullivan

WASHINGTON (Reuters) -A Republican proposal to cancel unspent COVID-19 relief money could undercut healthcare 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 figures found.

The flood of COVID-relief aid -- $5.2 trillion in all -- that Congress approved in 2020 and 2021 under Republican President Donald Trump and his Democratic successor Joe Biden has emerged as an early target for House of Representatives Republicans as they search for ways to rein in federal spending.

House Republicans, who hold the majority in that chamber, have said the 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.

But unspent COVID aid is a small target, with less than $80 billion unspent as of January, White House budget figures show. Medical programs to combat the virus have run through most of their funding and the 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 decline further in coming months as federal agencies continue to push money out the door. Federal spending on health care and food stamps is also due to decline when Biden allows the government's public-health emergency to expire in May.

"At this point we are so late in the game that we are just not going to recover much," said Marc Goldwein, a policy director at the Center for a Responsible Federal Budget, a nonpartisan watchdog group.

Republicans say that's no reason to ignore the remaining money as they assemble a spending-cut proposal.

"Clawing back any unspent funds from the trillions that Washington flooded the economy with during the pandemic is an obvious starting place for any debt ceiling discussion," said Tim Reitz, executive director of the House Freedom Caucus, one of several Republican groups that has said the remaining aid should be canceled.

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

CARPENTERS, VETERANS AND MEDICAL RESEARCH

Reclaiming unspent COVID funds would have real-world repercussions.

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

If Congress reclaimed that money, fishermen in Massachusetts and carpenters in Ohio, would be among the roughly 1 million union workers that would not receive their full retirement benefits.

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

Another $6.8 billion remains to fight the virus itself by developing improved vaccines and tests and researching topics like long COVID, according to the White House.

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

"Some people want to create a false sense that there's some big stack of money that nobody has gotten around to that can be painlessly clawed back," White House adviser Gene Sperling said in an interview. "But when you look at the facts, you see that nearly all of the funds have been obligated and that even the percent or two that haven’t been are going out as they were designed to by law."

SOME MONEY WON'T BE SPENT

Some funding that remains on the books will never be spent, and thus offers no potential budget savings.

The Transportation Department handed out less than $700 million from a $3 billion fund that aimed to preserve airplane-manufacturing jobs after several major firms declined to participate, for example.

Businesses also claimed less than Congress anticipated in tax breaks to keep employees on the payroll and provide COVID-related sick leave, according to the U.S. Government Accountability Office.

RED STATES REJECT SOME MONEY

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

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

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

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

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