Struggling households supported by previous direct federal payments can no longer receive money at any time. And extended unemployment benefits could drop substantially – even if Trump’s survival in court survives – while millions remain out of work. Trump’s tax cuts delay could also be difficult to implement and is, at least for now, only a temporary delay instead of a permanent cut.
All of this means that a fresh breakthrough is missing on another incentive bill, an economy cratered by historic proportions in the first half of the year amid the Covid-19 epidemic will have to continue to snap without much federal help, at least outside the policy with easy money put in place by the Federal Reserve.
“We are increasingly concerned that this best-they-can incentive from the White House will never complete it until the implementation stage and the economy will be left to sink or swim on its own,” said Chris Rupkey, chief financial officer at Financial group MUFG. “Washington is either not or not ready to provide a lifeline to those who cannot swim like the bankrupt state and local governments and the millions of unemployed who have no jobs to return to.”
White House officials reject this idea, saying the executive actions will do much to encourage recovery, while also putting Democrats on defense.
“In addition to adding some necessary assistance, I think this is the ball rolling for recovery,” National Economic Council Director Larry Kudlow said in an interview. “I’m the first to acknowledge that there is too much unemployment and that we really need to help people and we have come to a well-compromised way of doing that.”
Kudlow calls the payroll tax cut a $ 1,200 “pay rise for the heroes of this huge pandemic. And when wages go up after tax, that’s an incentive to work back. And politics can often make us negotiate after negotiations. ”
Trump moved on Saturday to embrace Congress with four executive actions that would seek to provide $ 400 a month in additional unemployment benefits by diverting existing federal money to help with disaster relief.
The order says states should get 25 percent of the money, but Trump later said the federal government would cover the entire payment if struggling states could not. Kudlow said the added benefit could be even higher – up to $ 800 – because the administration would work to reuse more funds and add to what the states can provide.
It is unclear when the benefit would take effect or how long it would last. States still sought guidance Monday, and some worried they would have to build a new system for benefits under this program. But Treasury Secretary Steven Mnuchin said on Monday that he thought states could begin spreading the new benefits “within the next week or two.”
The proposed tax cut for those making less than $ 104,000 a year would require employers to comply, but would only be a proposed tax that would later amount to a gigantic tax bill. And the eviction moratorium would actually do nothing for the vast majority of the landlords of the land.
“The direct economic effects are likely to be limited in scope, scale and duration,” said Mohamed A. El-Erian, chief economic adviser at Allianz. ‘And this is before you consider the important legal uncertainties. The indirect effects are uncertain, depending on whether the mandates facilitate or delay congressional compromises. ”
Trump’s own senior aides over the weekend acknowledged the shortcomings and possible legal challenges. ‘Maybe we’ll go to court about her. We will at least continue with our actions, “Kudlow said on ABC’s” This Week. ”
White House Secretary of State Mark Meadows acknowledged that major problems would remain unaddressed. “The downside of executive orders is that you can’t handle some of the small business incidents that are out there,” he said on Sunday on “Full Court Press with Greta Van Susteren.”
“You can’t necessarily get direct payments because it has to do with credits,” he said. ‘That’s something the president does not have the ability to do. So, you are missing out on those two key areas. You miss money for schools. You miss all the funds for state and local revenue needs that may be there. ”
On CNBC Monday, Mnuchin repeated what Trump himself proposed Sunday night and on Twitter on Monday: The White House wants an even bigger deal, despite major differences with Democrats over the price tag and what new legislation would include.
“The president is determined to spend what we have to spend,” Mnuchin said. “We are ready to put more money on the table.” But he did not say when he would be able to restart talks with Democratic leaders on the Hill, only that “if we can get a fair deal, we are ready to do so this week.”
Meadows is out of Washington this week, so talks could prove difficult to start right away. And many Republicans have expressed concern about spending much more federal money and have an ideological preference for forgetting the economy just for themselves.
If no deal is reached and with questions about Trump’s executive actions, the economy could recover without more fiscal support just as the recovery from the depths of the Covid-19 collapse seems to be flagging.
Job creation dropped from 4.8 million in June to 1.8 million in July as fresh virus outbreaks spread across multiple states and reopening plans had to be curtailed. So far, the US has added only about 9 million of the 22 million jobs lost since the crisis began.
