What a year it has been, and it’s not even July.
While you’re likely tired of hearing the 2019 coronavirus disease pandemic (COVID-19) described as “unprecedented” or “challenging,” this is exactly what it has been like for the typical working American. In four months, the unemployment rate in the United States soared from a 50-year low of 3.5% to levels (13.3% in June) that had not been seen since the Great Depression, nearly nine decades ago. Even after record growth in retail sales in May, more than 20.5 million people were still receiving unemployment benefits, as of June 18. By context, only 1.7 million people were receiving unemployment benefits at the end of February.
It has been an unprecedented and challenging time for many Americans, which is why Congress passed, and President Trump signed, the Coronavirus Aid, Relief and Economic Security Act (CARES) on March 27.
The CARES Act provided a much-needed stimulus, but not enough.
Priced at $ 2.2 trillion, the CARES Act is the most expensive piece of aid legislation passed on Capitol Hill. With the understanding that closing non-core businesses was going to wreak havoc on the economy, lawmakers felt the best idea was to launch much of money in the problem.
The $ 2.2 trillion CARES Act provided $ 100 billion to help hospitals fight coronavirus, distributed $ 500 billion to struggling industries, and delivered nearly $ 350 billion through small business loans. It is also responsible for allocating $ 260 billion to expand the unemployment benefits program. This expansion provides an additional $ 600 per week to those receiving unemployment benefits, through July 31, 2020 (or until they get a job).
But what most people will remember is the CARES Act for the $ 300 billion intended for direct stimulus payments to working Americans and older people. According to data from the Internal Revenue Service on June 4, 159 million Economic Impact Payments were sent (as these stimulus controls are officially known), for a total of $ 267 billion.
Although this money was very necessary for Americans, the economic impact payments simply did not do enough for most people. An April Money / Morning Consult survey found that 74% of the 2,200 respondents had spent, or expected to spend, their stimulus payment in four weeks or less. Considering that the US economy is slowly recovering, many workers and their families seem to need additional stimulus.
The question, up to this point, has been whether or not another round of stimulus would come. But according to a recent interview with President Trump, a second stimulus package now appears to be a sure thing.
Trump: “We will make another stimulus package”
In an interview last week with Joe St. George, Scripps’ national political editor, Trump was asked directly about whether struggling Americans would receive a second stimulus check. This is what Trump had to say:
We had this [the U.S. economy] going better than anyone has ever seen before. We had the best job numbers, the best economy, the best economy we’ve ever had, and then the virus came from China. Now we are rebuilding it again. We will make another stimulus package. It will be very good … it will be very generous.
VIDEO: President Trump commits to the second stimulus. He says details will be announced in the coming weeks. The President did not tell me how much check Americans will receive. pic.twitter.com/Abd5E8P3Au
– Joe St. George (@JoeStGeorge) June 22, 2020
It should be noted that Trump specifically used the term “stimulus package” in his response to Saint George here, but a moment before this statement he claimed that the Americans would receive “a second stimulus check” when Saint George prompted it. However, the president did not elaborate on details, such as the dollar amount, only saying that he believes a second stimulus package will happen in the coming weeks and that it would be bipartisan in nature.
The fact that the White House has changed its tone to be enthusiastic in a second round of encouragement should really come as no surprise. After all, we are in an election year, and none of the parties wants to be seen as the one that did not fight for the American worker during these difficult times. It is in the best interest of both parties, as well as Trump’s, to ensure that Americans have a sound financial base before the November election.
Plus, the upcoming end of enhanced unemployment benefits (meaning the extra $ 600 a week) is the perfect catalyst to force a bipartisan deal. These additional $ 600 have played a key role in preventing mortgage, car and rental defaults from skyrocketing. Without some sort of secondary stimulus package, a day of reckoning could await the American financial sector.
What would the next stimulus round be like?
With President Trump noting that a second stimulus bill is preferred at this point, the real question is, how could it be?
One possibility is that it is very similar to the CARES Act. In other words, it is a stimulus agreement that puts money directly in the hands of working Americans and older people who earn below a defined threshold. By context, maximum payments for the CARES Act were limited to $ 1,200 per person and $ 2,400 for couples filing a joint return. To qualify for this maximum payment, single, married, and head of household filers needed an adjusted gross income (AGI) below $ 75,000, $ 150,000, and $ 112,500, respectively.
On May 15, the House of Representatives, led by Democrats, passed the 1,815-page HEROES Act, which in many respects applies after the CARES Act in the direct stimulus department. The near-partisan vote of 217 to 189 that allowed this $ 3 billion bill to go into the House would again limit payments to $ 1,200 per person and $ 2,400 for couples, with the same AGI thresholds used in the CARES Act. However, a big difference is that dependents (limit three) are worth $ 1,200 each for parents or a household, above $ 500 with the CARES Act, with no age limit associated with the definition of dependent.
The other possibility is that a second stimulus package is passed, but it does not contain a direct stimulus component. Senate Majority Leader Mitch McConnell (R-Ky.) Has been critical of further increasing the federal deficit, and some of his colleagues share this concern. This could lead Republicans in the House or Senate to favor other types of stimulus.
For example, Kevin Brady (Republican of Texas), the top Republican on the House Ways and Means Committee, recently proposed the United States Reopening Act by supporting 2020 workers and businesses. Instead By issuing stimulus checks, Brady’s law would allow unemployed workers to return to work to collect an additional two weeks of the additional payment of $ 600 / week. Essentially, Brady’s proposal equates to a $ 1,200 hiring bonus.
President Trump has also thrown his hat into the ring by suggesting that a payroll tax exemption would be preferable. Most working Americans pay 12.4% in the Social Security earned income program, and employers and employees divide this responsibility 50-50 (6.2% each). Providing a payroll tax exemption would be one way to allow workers to keep more of their income with each paycheck. The downside is that payroll tax is the main source of financing for Social Security, and the country’s largest social program is already on shaky ground.
The point is that while a second round of stimulus is likely to occur, both sides will have to work, which is not an easy task. This could mean an expansion of who qualifies for the stimulus to appease Democrats and a concerted plan to get people back to work for Republicans. Either way, the clock is ticking up improved unemployment benefits, meaning there is likely to be a deal within the next five weeks, IMO.