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Bipartisan Capitol Hill talks have only just begun on a sweeping renewal of coronavirus legislation, but areas of likely agreement – and flashpoints of discord – are becoming apparent as the package starts to take shape.

The Democratic House passed a whopping $3.5 trillion coronavirus response bill more than two months ago, re-upping a $600 per week federal unemployment benefit that expires July 31, another round of $1,200 payments to most people and almost $1 trillion for cash-starved states and local governments. Senate Majority Leader Mitch McConnell is set to unveil a $1 trillion COVID-19 aid package on Thursday. The GOP’s response will have far less money than the Democrats’ and will feature a sweeping liability shield for schools, businesses and charities that are trying to reopen. It’s up to top congressional leaders to bridge the gaps.

Three components will likely be in the bill:

• $1,200 direct payments. President Donald Trump, House Speaker Nancy Pelosi and McConnell all agree that there should be another round of $1,200 direct payments to most Americans at a cost approaching $300 billion. It’s seen as a slam dunk for inclusion despite grumbling that the aid isn’t well targeted to those most in need.
• Aid to schools/universities. Both the House and Senate bills contain $100 billion or more to help schools and universities through the crisis and reopen as soon as possible. The emerging GOP draft would dedicate half of a $70 billion school aid package to schools that resume in-school learning, Republicans say, with half going to those reopening with remote learning. Democrats are sure to oppose the idea.
• Small business subsidies. The Paycheck Protection Program, or PPP, has received $660 million to help generally smaller businesses weather the pandemic, and Treasury Secretary Steven Mnuchin is pressing for more targeted to especially hard-hit sectors like restaurants. Democrats and Republicans have worked well together on the issue, and there’s more than $100 billion in unspent PPP funding that they could re-purpose.

Less certain is the inclusion of state and local aid, liability protection for businesses and business tax breaks.

A huge payment to state and local governments, including smaller cities left out of the huge $2 trillion CARES Act passed in March, is one of Pelosi’s core demands. She’s backed by a bipartisan gaggle of governors, Federal Reserve Chairman Jerome Powell, and Republicans like Susan Collins of Maine. Supporters say the funding is crucial to boost the economy, to prevent a wave of layoffs and to alleviate cuts to education and health care. Republicans so far are only promising new flexibility on $150 billion in state and local funding that was allocated in the March, but Democrats will insist on far more.

Liability protections are a must-have for McConnell, but Democrats and the still-powerful trial lawyers lobby are sure to resist. Republicans are pressing to extend both the employer retention tax credit, which helps businesses defray payroll costs, as well as the work opportunity tax credit, which subsidizes the hiring of disadvantaged workers. Those are likely to make it into the package, but lawmakers are unlikely to consider more ambitious tax breaks.