Senate Republicans have cast aside one of President Trump’s key demands from a new coronavirus stimulus package, refusing to include a payroll tax cut in their opening offer to Democrats, which could be unveiled as soon as Thursday.

In recent days, Trump had insisted that he might not sign an eventual bill if it did not include the tax cut, but the plan was unpopular with Republicans. Treasury Secretary Steven Mnuchin said on CNBC Thursday morning that the White House still liked the idea and would pursue it in potential future legislation.

“It won’t be in the base bill,” Mnuchin conceded.

The evolving GOP plan, which Republicans have struggled to assemble, comes with coronavirus cases surging in much of the nation. The White House and GOP are under pressure to put together a public health and economic response as the November election nears. Republicans had hoped to present their plan on Wednesday but they couldn’t reach agreement, and the situation remained extremely fluid on Thursday morning as well.

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Trump said on Wednesday that the economy was making a remarkable recovery, but economic data has not supported this. The stock market does remain high, in part because of enormous interventions by the Federal Reserve, but the labor market is still in very bad shape, with between 20 million and 30 million people unemployed. And the situation appears to be worsening.

The Labor Department said 1.4 million people filed unemployment claims last week, the first increase since April and a sign that expiring stimulus programs could leave parts of the economy adrift.

The emerging GOP bill is expected to include a fresh round of $1,200 payments to individuals, a limited extension of enhanced unemployment insurance benefits, $70 billion for elementary and secondary schools, money for coronavirus testing and tracing, and legal liability protections for businesses and health care providers = among other provisions.

Half of the school money will be tied to schools physically reopening their classrooms. No new money for state and local governments is expected, but instead the legislation will allow local leaders more flexibility in spending $105 billion allocated in the Cares Act in March. Tax credits are expected to encourage businesses to retain workers and help them enact safety protections in workplaces.

The proposal, which McConnell views as the starting point for negotiations that will unfold over the next couple of weeks, falls far short of what Democrats have demanded. They have rallied around a $3 trillion bill passed by House Democrats in May, which includes $1 trillion for state and local governments alone and continues the $600-per-week enhanced unemployment benefits that will be expiring for millions of workers in coming days.

Trump pushes payroll tax cut while GOP eyes benefit cuts for unemployed

The GOP bill will limit those weekly payments, though the precise details remained unclear. Trump had suggested cutting the $600-per-week payment to closer to $200-per-week amid conservative complaints that the benefit encourages people to stay on unemployment, but some GOP lawmakers have pushed for a more robust temporary extension to keep money in the economy, according to multiple people involved in internal discussions around the legislation

Election-year politics have complicated the talks as a handful of vulnerable senators up for re-election push for more generous spending, while fiscal conservatives in the Senate GOP conference oppose spending any more money at all after Congress already pumped around $3 trillion into the economy in March and April.

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