For many Americans, 2020 is one of the most challenging years of their lives. The coronavirus disease pandemic 2019 (COVID-19) has led to a complete rise in social norms, sent the American unemployment rate to levels not seen in more than eight decades, and cost roughly 165,000 Americans their lives.
While the fight against the coronavirus in laboratories continues around the world, U.S. lawmakers felt that the best way to tackle the financial turmoil brought about by the pandemic was to raise a record amount of money. This is how the Coronavirus Aid, Relief, and Economic Security (CARES) Act came into being on March 27th.
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A well-intentioned incentive letter that misses the mark on the individual level
The $ 2.2 trillion CARES Act was a monster when it was signed into law. The price tag is almost three times that of what the Obama administration produced to rescue bad banks during the financial crisis. The CARES Act eventually provided $ 100 billion to hospitals to help fight COVID-19 infections, provided $ 500 billion to emergency companies, distributed close to $ 350 billion for small business loans, and provided $ 260 billion for an expansion of the program for unemployment for the four-month period ended July 31, 2020.
But most of all, the CARES Act puts money directly into the pockets of American workers, families, and seniors. Some 160 million payments were disbursed by the Internal Revenue Service, with about $ 270 billion of the $ 300 billion in direct incentives disbursed.
Maximum individuals and couples filing together could be eligible for an economic impact payment of $ 1,200 and $ 2,400, respectively, as long as their adjusted gross income (AGI) fell below certain thresholds. Dependents under the age of 17 could also add $ 500 apiece to what a parent or caregiver received.
It was a well-intentioned incentive plan that did a lot for companies, but did not really succeed in providing much assistance at the individual level. This is because most incentives receive their money in four weeks or less. Given how long the coronavirus pandemic could adversely affect the labor market, these CARES Act payments have not been sufficiently proven.
A second round of incentives is urgently needed, and that’s what legislators have been working on for the past few weeks.
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Five Reasons Incentive Action 2.0 will be held in Congress
Unfortunately, despite Democrats and Republicans both favoring a second round of direct incentives for workers and senior citizens, a deal on a second incentive package seems a long way off. Here are the five controversy points that currently hold Stimulation 2.0 in Congress.
1. Improved unemployment benefits
Probably the biggest difference between the HEROES Act of the Democrats and the GOP-backed HEALS Act is how you should treat improved unemployment benefits.
Under the CARES Act, approved unemployed supervisors received an additional $ 600 per week between April 1 and July 31, or until they found a new job. Democrats have been reluctant in their desire to see this critical improvement continue at the $ 600-a-week level, with the HEROES Act expanding this January 2021.
Meanwhile, Republicans consider this $ 600-a-week scholarship too high and a disadvantage for the unemployed to return to work. In Senate-proposed HEALS law, Republicans are asking for an improvement of $ 200 a week, as opposed to $ 600 a week. By October, this flat payment would switch to a 70% wage replacement model.
Bridging this gap will be the most difficult challenge for Capitol Hill lawmakers.
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2. Benefits for workers without documents
Another incentive 2.0 slaughterhouse is whether workers and / or their households as documented must qualify for a payment.
Under the HEROES Act, U.S. citizens, as well as undocumented workers with an individual taxpayer number (ITIN), would be eligible for a payout as long as their AGI was below the set thresholds. Workers with an ITIN pay federal taxes on their wages, despite the fact that they cannot be assigned a Social Security number because of their citizenship status.
Republican HEALS law makes it very clear that workers without documents are not eligible for a paycheck, even if they have an ITIN. Only persons with social security numbers would be eligible for incentive money.
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3. Funding for state and local governments
Legislators are also scratching their heads over what to do with state and local funding.
The HEROES Act, which costs a little north of $ 3 trillion, shares about $ 500 billion in funding for state and local governments dealing with massive budget deficits linked to the pandemic. This funding would be spread over two years, with highly populated states such as California, New York, Texas, and Florida for $ 49.4 billion, $ 34.8 billion, $ 34.2 billion, and $ 24.2 billion in respective proposed disbursements, according to estimates by the Center on Budgetary and Policy Priorities.
Republicans are vehemently opposed to the idea of using federal dollars as a budget stopgap for states – especially if a significant amount of that funding goes to “blue” states. It is unclear if the GOP will increase on this stance.
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4. Damage protection for liability
Keep in mind that it’s not just line items from the HEROES Act that keep the next incentive package up. A key component of the HEALS Act does not exactly have the support of the Democratic-led House of Representatives.
When the HEALS Act was introduced a little over two weeks ago, Senate Majority Leader Mitch McConnell was adamant about including a liability shield for businesses and other entities, such as schools and hospitals.
The proposed liability shield would protect companies from horrific pandemic-related lawsuits through October 2024. Although lawsuits could still be filed, the plaintiff would have to prove gross negligence or deliberate misconduct to win. This should block most COVID-19 lawsuits from even head to head and protect companies from a rapid rise in legal expenses.
Opponents of the liability shield argue that it would provide too much of an umbrella of protection for businesses and could make it even harder to control the pandemic.
Although Democrats are mostly focused on promoting benefits for the unemployed, it does not allow agreements with the GOP on the shield of responsibility.
President Trump talks to reporters. Image Source: Official White House Photo by Andrea Hanks.
5. Trump’s tax cuts
Finally, President Trump is partly responsible for working together.
You see, Trump’s incentive plan is completely different from what was proposed under the Republican HEALS Act. Last weekend, Trump signed a series of executive orders that would resubmit improved unemployment benefits at an additional $ 400 a week, as well as defer the tax service for tens of millions of American workers for the last four months of the year.
The problem is that any disruption to the tax service’s collection, which is the primary source of Social Security revenue, could do irreparable damage to the program. Even if this is just an extension of the state tax rate (that should be paid back in 2021), it could make Social Security even worse for it to bear.
Neither Democrats nor Trump’s own party supports the idea of a tax cut, which will create even more tension on Capitol Hill.
The point is, it may still take many weeks before we see real progress on the next incentive package.
