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White House drops 3 key demands as Senate Republicans drive party's response to crisis

(CNN) The White House didn't want to spend new money on coronavirus testing with billions in funds still leftover. President Donald Trump and his education secretary warned schools they wouldn't get money if they didn't fully reopen. And Trump even suggested he would "consider not signing" a stimulus bill without a payroll tax cut.

The White House came away empty on all three fronts.

During negotiations that have lasted much of the week, the White House conceded to Senate Republicans on several key issues, a sign that it's the GOP leadership on Capitol Hill driving the party's response to the economic and public health crisis with less than four months before the election -- not the President himself.

GOP leaders have taken a much different tack than Trump to the crisis, which he's downplayed for weeks amid the surge in new cases across the country before trying to take a more visible role this week. Republicans, including Senate Majority Leader Mitch McConnell tried to warn voters that the virus isn't going away.

"Cases are increasing in the country because the coronavirus is not gone," McConnell said this week, breaking with Trump when asked if he shared the President's view that cases are only rising because testing is increasing, something disputed by the nation's top public health experts.

After days of back-and-forth with the White House, Republicans and the administration reached what Treasury Secretary Steven Mnuchin called a "fundamental understanding," though many of the details are still being hammered out. The bill is only set to serve as an opening offer in what are expected to be fraught negotiations with Democrats who have their own $3 trillion plan, compared to the GOP's measure, expected to cost roughly $1 trillion.

Asked what was the most amount of spending the White House would be willing to accept, White House chief of staff Mark Meadows told CNN this week: "It's going to be a Senate and House-led process."

Under the outline of the GOP-White House proposal, there would be a second round of direct payments for certain Americans, money for small businesses hardest hit by the pandemic, $105 billion for education funds -- with $70 billion for K-12 schools, $30 billion for colleges and universities and $5 billion for governors. Plus the bill would propose $25 billion for more testing, including $16 billion in new grants to states, $26 billion for vaccine research and distribution, and deferral of student loan payments for individuals who don't have an income.

The bill also would include liability protections for businesses, schools, health care workers and others, a key McConnell priority. But the GOP measure falls short of the Democratic demands to extend expiring benefits worth $600 per week for the unemployed, an issue that the White House and GOP leaders were still trying to sort out Thursday afternoon.

For weeks, Trump and Education Secretary Betsy DeVos have demanded a full reopening of schools and have even pushed back on school districts looking to hold classes virtually -- even threatening to withhold new money if they didn't begin holding class in the fall.

But Republicans viewed such an approach as impractical, given how the virus is affecting different communities in different ways -- and that some schools might not be able to reopen and keep their students and faculty safe.

"By and large Republicans don't like to send too many orders from Washington to local schools," Sen. Lamar Alexander, a Tennessee Republican who chairs the Senate Health, Education, Labor and Pensions Committee, told CNN Thursday.

According to Sen. Roy Blunt of Missouri, a key negotiator in the GOP-White House deal, he said about half of the $70 billion for K-12 schools in the plan would be given regardless if they are open or not. The other half would "go out on the basis that you have more expenses if you're back to school than you do if you're not."

Blunt added: "But none of the college money and only half of the elementary and secondary money would be conditional on returning to school. And that doesn't mean returning to five-days-a-week school."

The White House acknowledged that it dropped the payroll tax cut, something Trump blamed on Democrats. But most Republican senators indicated would it do little to stimulate the economy and drive up the bill's price tag substantially -- and called for the White House to drop that demand.

"Not a fan of that," said Senate Majority Whip John Thune of South Dakota of the payroll tax cut. "I've made it pretty clear. I don't think it's something that changes anyone's behavior and has trust fund implications," referring to the Social Security trust fund that would be impacted by a cut to payroll taxes.

And the White House agreed to ramp up testing to $25 billion after pushing back initially and arguing that there was already plenty of unspent money to use for testing and contact tracing. The GOP deal would provide $16 billion in new money, with an additional $9 billion redirected from the March stimulus law to spend on testing and tracing.

"We did get the $25 billion we wanted, but part of it was being sure they were gonna spend $9 billion that was not specifically allocated to testing on testing," Blunt said.

Asked about Trump's repeated claim that testing is "overrated," Alexander pushed back.

"I can give you my opinion on testing, which is that testing is essential," Alexander said. "And I think probably the most important activity we have going on in the government right now in terms of identifying the disease, containing it, and creating confidence to go back to school and that work is the work Dr. (Francis) Collins is doing in the National Institutes of Health to create new ways to get a quick test so you can get a result within an hour."

Alexander added: "You can do that, then you can test whole classes, you can test teachers, you can test employees, there'll be an oversupply of quick tests and I think all the discussions about testing will disappear."

Several Republicans pointed out that the White House had to move quickly in the GOP direction in order to get a deal together.

Sen. Thom Tillis, a North Carolina Republican up for reelection, contended he was not concerned that it took all week to get their party's proposal together, but noted the White House "moved in our direction."

"We had to resolve some of the conflicts with the administration," Tillis said. "They've moved in our direction, it's a normal part of the sausage factory."

CNN's Phil Mattingly and Rebecca Grandahl contributed to this report.