Pedestrians in Washington pass a “We Are Open” restaurant sign during the Covid-19 outbreak on May 12.
Jonathan Ernst | Reuters
When it comes to the next coronavirus stimulus package and providing more direct financial aid, the question on the lips of most Americans is, “Will they or won’t they?”
A political analyst predicts that lawmakers are likely to opt for all three options on the table to provide direct financial aid to Americans, even when Washington politicians engage in a war of words on Capitol Hill.
“There will be a large amount of money, and it will go toward a combination of second-round stimulus checks, continued unemployment and return-to-work bonuses,” said Ed Mills, Washington policy analyst at Raymond James.
The reason, Mills said, is that the growing cases of coronavirus are in states that voted for Republicans in 2016 and could help pressure members of that party to provide more support, particularly because it is an election year. Democratic politicians have already voiced their support for further financial relief.
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The impending deadlines will also put pressure on lawmakers, Mills predicts. For 46 states, July 1 is the beginning of the fiscal year. Because 49 states cannot run a deficit, that will mean an increase in state and local layoffs unless something changes, he said.
Meanwhile, the additional $ 600 weekly in unemployment benefits will expire in late July. Those are so many states that they press the pause in the reopening plans as the coronavirus cases increase.
“To the extent that it really counts as a money jackpot for dealing with multiple issues, the easiest compromise is a lower dollar amount,” Mills said. “I think if I anticipated something that comes down first, it would be unemployment benefits.”
Congress is expected to return from its vacation break on July 20, at which time lawmakers will face pressure to take action.
“Sometime between the week of July 20 and the week of July 27, I expect a lot of pressure on Congress to do something,” Mills said. “And finally I hope they do.”
More stimulus controls
The federal CARES Act that was passed in March included $ 1,200 stimulus checks for millions of Americans.
President Donald Trump noted in a recent interview that he would be willing to send more checks to Americans.
“We will make another stimulus package,” Trump said. “It will be very good. It will be very generous.”
The House, led by Democrats, passed a law called the HEROES Act that includes a second set of stimulus controls, only this time the payments would be more generous. Families could receive up to $ 6,000, as dependents would receive $ 1,200, instead of $ 500, for a maximum of three children. Dependent and non-American adults would also be eligible for stimulus funds.
Still, some experts say stimulus controls don’t necessarily target those who need the money the most. For many Americans who don’t live on federal benefits, the amount they received was determined by their 2018 or 2019 tax returns, not by what they earn this year.
But the money had a stimulating effect on the economy, Mills said.
“There is a multiplier effect of fiscal stimulus controls that really stabilized consumer spending,” said Mills. “We saw that discretionary revenue increased year-over-year in April.”
Additional unemployment benefits
The additional unemployment benefits, $ 600 per week, were also implemented with the CARES Act and will expire in late July.
That has led many to ask Congress to continue those benefits. House Democrats outlined a plan to do just that in the HEROES Act, which would extend that extra money until January.
But this week, Senate Majority Leader Mitch McConnell called the cash a “bonus not to return to work.” Basic unemployment benefits should continue, he said.
Senate Democrats also unveiled a proposal to continue those improved benefits until states’ unemployment rates drop, at which point they would be phased out.
Lawmakers may have less room to negotiate on this than they think, Mills said.
“The question that members of Congress have not answered is that there are tens of millions of Americans who are unemployed,” Mills said. “There are not tens of millions of vacancies right now.”
Some economists have proposed reducing the additional $ 600 per week to up to $ 400 per week to remove the disincentive to return to work.
Back to work bonuses
Republicans have favored another advantage by giving Americans an incentive to work again.
These so-called return-to-work bonuses could take different forms.
Sen. Rob Portman, R-Ohio, has a plan to give returning Americans a $ 450 weekly bonus. Rep. Kevin Brady, R-Texas, has proposed giving returning workers a one-time payment of $ 1,200.
What hasn’t had enough discussion is the mechanics of how that plan will work, Mills said.
By choosing between one-time or weekly payments, lawmakers will likely opt for the easiest method to implement, he said.