President Trump outlines executive actions to expand coronavirus economic relief, during a news conference in Bedminster, New Jersey, on August 8.
Photographer: Jim Watson / AFP via Getty Images
Photographer: Jim Watson / AFP via Getty Images
President Donald Trump issued executive action on Saturday that amounts to a thin lifeline of support for an already stagnant economic recovery after negotiations with Democrats over additional pandemic incentives broke down.
Trump’s diversion of funds for disaster relief would provide $ 300 a week in federal aid to the unemployed – down from the weekly $ 600 in the Cares Act that expired in July. That money is covered at $ 44 billion, which could fall out at the current level of unemployment in one to two months.
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Its other important action could potentially have a greater impact: it defends the tax service from September to the end of the year for workers earning as much as $ 8,000 a month, giving an extra $ 600, at most, in can put the pockets of employees. Economist Stephen Moore, an ally of Trump, says it amounts to a $ 300 billion tax cut that would help the economy. Other economists, however, said it is unlikely to provide as much stimulus as Trump can hope.
While the actions may have a complete setback in relief for Americans, the funds for the unemployed are much more limited than in previous months, and the proposed tax cut helps the tens of millions who have not lost their jobs. In addition, the legality of Trump’s actions is not entirely clear, and the moves do not include extending aid to small businesses running low on advance aid funds.
“It’s certainly better than nothing, but it’s not as good a solution as Congress coming to a clearer legal and logistical possible compromise in its fiscal negotiations,” said Ernie Tedeschi, an economist at Evercore ISI.
The impact of deferring wage compensation depends on whether employers will stop withholding money from Americans’ salaries, with voters putting pressure on Congress to finally pass legislation that forgets the amount collected .
Clawing Back
But employers may simply decide to do nothing in the face of uncertainty, for fear that if Congress does not act, they may be stuck trying to recover money from their employees to settle their obligations to the Internal Revenue Service.
“The idea of reducing payroll taxes and expecting companies to comply with an executive order, if they are required by their employees to return it later, unless the tax cut is made permanent, is simply not there. logic for, “said Diane Swonk, chief economist at Grant Thornton in Chicago. “And it’s not the people with the paycheck who are the problem, it’s the people without a paycheck.”
Trump said he approved a $ 400 payout because he saw the extra $ 600 extra pay weekly as too high and discouraged people from returning to work – a recent call for many Republican lawmakers. The text of the action says that $ 300 would come from the federal government, while the other $ 100 would come from states.
Andrew Husby, an economist with Bloomberg Economics, estimated that the new benefits would amount to a run rate of about $ 30 billion a month, meaning the money could recover in less than two months and the situation would likely be another fix from Congress. be necessary before The November elections.
Read more from Bloomberg Economics on Trump Stimulation
While $ 400 ”is still a fairly substantial amount, it is definitely a cut to feel in ascent, ”Husby said. Before postponing the tax service, ‘the net positive impact will be a little less than raw numbers may suggest’ given the uncertainty for companies over whether they should repay the taxes.
Another problem is that as unemployment starts to rise again, the new funds build up faster, “so you have more people for less money in less time,” said Joel Naroff, president and founder of Naroff Economic Advisors.
– With the help of Justin Sink
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