By Chris Mitchell, vice president, global government relations
Over the weekend, responding to unsuccessful negotiations with Congress, President Trump signed an Executive Order (EO) and three memoranda aimed at extending relief to Americans affected by the COVID-19 pandemic.
The executive actions stretch the bounds of constitutionality, and the size and speed of the aid is likely to be insufficient, keeping pressure on the President and Congress to strike a broader deal. Look for negotiations to resume in August and a deal potentially in September.
Until then, the President’s executive actions will continue to provoke applause by some and criticism by others.
Treasury Secretary Steven Mnuchin said in a statement, “These Executive Orders build upon on our ongoing implementation of the CARES Act, which is delivering meaningful results for the American people.”
However, Senate Minority Leader Chuck Schumer (D-NY) said the President’s actions were “unworkable, weak, and far too narrow.” House Speaker Nancy Pelosi (D-CA) called the President’s actions “absurdly unconstitutional” and said the payroll tax cut that Trump seeks would undermine Social Security and Medicare.
Here’s our rundown of the President’s announcement on Saturday.
Payroll Taxes
One of Trump’s actions was a payroll tax deferral, not a cut as some media reports suggest. It defers the due date for the portion of those taxes paid by employees through December 31 and applies to workers whose gross wages are less than $4,000 on a biweekly basis, or about $104,000 a year.
The action is akin to the Treasury Department’s decisions earlier this year to defer the employer’s portion of the payroll tax and defer the income tax due date to July 15 from April 15. However, the White House cannot forgive taxes without congressional approval, as the Constitution vests the spending and taxing powers in the Congress.
President Trump has said that, if reelected, he will seek to forgive the levy and make permanent cuts to payroll taxes. But to do so, President Trump would need the support of Congress, and Republicans and Democrats both have opposed cutting payroll taxes for not helping the unemployed and compromising the solvency of the Social Security and Medicare programs.
Without the likelihood of a retroactive payroll tax cut, “it is highly questionable whether firms would actually pass the money along to their workers, because it is the businesses that are on the hook for the taxes,” MarketWatch reports.
Unemployment Benefits
President Trump also announced that he was extending “an additional or extra $400 a week” in expanded unemployment insurance benefits. The details are more nuanced.
The previous unemployment benefit passed by Congress provided an additional $600 a week federal bonus on top of state unemployment benefits. Under the President’s action, the federal government would require states to cover 25% of the up-to-$400 benefit. However, most states are in fiscal straits and have drained their unemployment trust funds given the historic number of claims. States are pushing Congress to give them $500 billion in aid to shore up their budgets, so it is unclear how many states could support the 25% match.
Trump also is seeking to use leftover or unspent FEMA funds to pay unemployment benefits. But to leverage those funds, states would need to set up entirely new benefit programs. Because Congress has not authorized an extension of extra federal unemployment assistance, states cannot use those administrative systems to pay the new benefit. Setting up new systems could take months yet getting the $100 in aid from the state is a pre-requisite for tapping the $300 federal benefit.
For these and other reasons, some experts are dubious that the unemployment benefits offered by President Trump will help many people, especially in the immediate future. IPC supports congressional extension of the federal unemployment insurance bonus but has urged policymakers to modify it to promote a return to work among those who safely can.
Student Loans
President Trump also directed the Education Department to extend the student loan relief granted under the CARES Act through December 31. Currently, loan payments are paused, and interest is suspended on federally held student loans, until September 30.
The relief does not extend to private-sector loans, but there is no question that the President’s decision is squarely within his authority and will help millions of student loan borrowers.
Evictions
The President’s latest action does not reinstate the previous moratorium on evictions, which lapsed in July. The original ban covered mortgages backed by federal funds, or roughly 12 million households.
Instead, the executive action calls on the Secretary of Health and Human Services and the Director of the Center for Disease Control to consider whether measures temporarily halting residential evictions for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19. It calls on the HUD and Treasury Secretaries to try to identify “any and all Federal funds to provide temporary financial assistance to renters and homeowners” who have been affected by COVID.
Relief Package Outlook
Although the coronavirus relief talks are stalled for now, the Senate remains in session. The majority of senators are not in D.C., and they would have a 24-hour notice to return if a vote is scheduled. However, our sources on Capitol Hill and the White House are telling us it is unlikely that they will reach a deal within the next week and that a bill in late or September is more realistic.
As this situation unfolds, IPC will continue to advocate for your interests and keep you informed via our IPC communications channels. Stay tuned!