economy politics

Trump Virus Relief Edicts Seen As Inadequate. Unemployment Scheme Especially Tenuous

“Whether they’re legal or not takes time to figure out”, Nancy Pelosi said Sunday, speaking to CNN following Donald Trump’s decision to take unilateral action on unemployment benefits, payroll taxes, evictions, and student loan relief over the weekend.

Trump’s orders, signed on Saturday, introduce considerable uncertainty around the future of negotiations aimed at producing another virus relief package to bolster the US economy in the back half of the year.

Markets were working on the assumption that at least $1 trillion in additional stimulus was a virtual guarantee, with the final price tag likely to be considerably higher. Now, it’s possible the debate around the new package will drag on for weeks, perhaps becoming bound up with broader discussions around the renewal of government funding at the end of next month. That would be a logistical nightmare on the Hill and could introduce volatility in markets.

The extension of the federal unemployment supplement is actually just $300/week. States are expected to come up with the remaining $100. “It was unclear how quickly states, whose unemployment systems had already been overburdened by the record numbers of new jobless claims, would be able to adjust to a new system, or whether they will have the resources to supplement an additional benefit”, The New York Times notes, adding that “there is another catch — the $300 can only be paid to people who first qualify for $100 in aid paid by their state”.

The order itself taps $44 billion from the Department of Homeland Security’s Disaster Relief Fund. That’s a finite amount. It will run dry within a couple of months, at best. “The extra $400 unemployment payment is likely to last only a month”, Goldman warns.

On top of that, the run rate will quicken in the event unemployment stops falling and jobless claims pick up, which is a distinct possibility.

“Donald Trump is trying to distract from his failure to extend the $600 federal boost for 30 million unemployed workers by issuing illegal executive orders”, Senate Finance Committee Ranking Member Ron Wyden chided, calling the plan “a classic Donald Trump con: play-acting at leadership while robbing people of the support they desperately need”.

“This ploy… would throw already overburdened state unemployment insurance programs into chaos, making it harder to get benefits out the door”, Wyden went on to caution.

It’s also worth noting that Trump cannot (at least as far as anyone knows) mail out stimulus checks, which means the $1,200 direct payments that both Democrats and Republicans support, will be delayed until there’s a bipartisan agreement.

“We have to come to an agreement. We have to meet halfway”, Pelosi told Fox. Asked by CNN if a compromise is still possible, she said “of course”, but made it clear that real relief for the public can only come courtesy of bipartisan legislation.

 

For his part, Steve Mnuchin said the problem is funding for state and local governments. Trump on Saturday insisted that Democrats are attempting to secure “bailouts” for badly-run states. He also claimed, without offering evidence, that some Democratic proposals are ultimately designed to “steal the election” through “fraud”.

Mnuchin struck a less abrasive tone on Sunday. “On almost every other single issue we’ve reached an agreement”, he remarked, during his own interview with Fox. “Any time they have a new proposal, I’m willing to listen”.

As of Sunday, there was no set date on when talks between Mnuchin, Meadows, and the Democratic leadership might resume.

The payroll tax holiday is problematic for a number of reasons, with the most obvious being that it’s ineffectual for the jobless. But aside from that, employers may choose to ignore it given ambiguity around having to pay it back. “Employers may decide simply to do nothing in the face of uncertainty, fearing that if Congress fails to act, they could be stuck trying to claw back money from their employees to settle their obligations to the IRS”, Bloomberg writes.

“If Trump tried to make a payroll tax cut permanent, it would have a drastic effect on the funding of Social Security, which he has previously vowed not to cut”, the Times reminds you.

As far as the legality of Trump’s decrees is concerned, Pelosi called the edicts “absurdly unconstitutional”. Chuck Schumer branded them “unworkable, weak, and far too narrow”, in remarks to ABC.

 

Following Schumer’s appearance, Larry Kudlow suggested the president’s actions will provide “significant economic relief”.

While it’s probably true that what America got over the weekend is better than nothing, George Stephanopoulos challenged Kudlow’s assessment. It’s not clear, for example, that the eviction moratorium has actually been extended. Pressed by Stephanopoulos, Kudlow came up a bit short.

 

Stephanopoulos is correct, for what it’s worth. “The memorandum that Trump called a moratorium on evictions did not revive the expired moratorium that was part of the $2.2 trillion stimulus law passed in March”, the Times went on to say, in the same detailed rundown of the orders linked above.

Although Mnuchin said the orders are legal according to counsel, Kudlow admitted it’s possible the administration could be sued.

“Maybe we’re going to go to court”, he told Stephanopoulos. “We’re going to go ahead with our actions anyway”.

That sounds familiar. It’s generally consistent with the approach the administration has taken on virtually every controversial foreign and domestic policy issue since Trump’s inauguration.


 

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