President Trump End-Runs Congress to Provide Covid Relief and How This May Affect the U.S. Economy

I waited a while to write this post in hopes that congressional Democrats and Republicans would come back to the negotiating table after President Trump’s end-run to provide Covid relief to financially struggling Americans. Alas, that hasn’t happened.

Prior to the expiration of the $600 per week enhanced federal unemployment benefit on July 31, 2020, I wrote that I expected some resolution, even a short-term fix, to be implemented by our congressional representatives just before or very soon after that end-date.

I, obviously, underestimated the level of political rancor and positioning at play so close to the November election.

It’s sad to see the political gameplay in full action when so many Americans have been negatively affected by the pandemic and the government shutdown orders that have been implemented.

I could get into the blame game, but I’ll let that be for now and focus on the current situation.

Current Unemployment Numbers

The current (August 13, 2020) initial unemployment claims number was 963,000, a decrease of 228,000 from last week’s revised initial claims level.

The positive is that this past week is the first week in the previous 21 weeks that the U.S. did not see over 1 million initial unemployment claims filed.

The negative, whether it’s 900,000, 1 million, whatever, these unemployment numbers are enormous.

During a good economy, typical unemployment claims numbers are in the 200,000 – 400,000 range, taking into account normal job churn.

So we’re well above a normal level.

The continuing claims number is now approximately 15.5 million, a slight decrease from last week’s 16.1 million.

And, the July jobs report showed an increase of 1.8 million jobs, dropping the U.S. unemployment rate to 10.2%.

As with the unemployment claims numbers, better, but by no means good.

President Trump’s Executive Orders

This past weekend, in an effort to break-loose the congressional negotiating stand-off and provide a positive talking point for his re-election efforts, President Trump signed four executive actions focused on providing relief to unemployed Americans as well as to the overall economy.

The four executive actions include:

Enhanced Unemployment Payments

A $400 per week enhanced unemployment payment would be added to a state’s unemployment insurance payment.

$300 of that $400 would be paid by the federal government, the remaining $100 would be paid by the state in which an individual has filed for unemployment benefits. States are encouraged, but not required, to pay the additional $100 per week.

If a state elects not to pay the additional $100 per week, those receiving unemployment benefits would receive $300 per week over and above the state’s regular unemployment payment.

This would amount to a $300 per week decrease from the $600 per week federally enhanced unemployment payments that were provided up to July 31, 2020.

The federal monies for this enhanced $300 per week payment would come from the Disaster Relief Fund…an estimated total of approximately $44 billion.

State and local governments currently have approximately $80 billion still available from earlier Covid-19 aid packages from which the federal government has approved use for the state’s $100 per week share.

The extra weekly benefit would be available until December 6, 2020.

Eviction Moratorium

The departments of Treasury and Housing and Urban Development are directed to identify funds to provide temporary financial assistance to renters and homeowners struggling to make monthly rent or mortgage payments.

Additionally, language directs Housing and Urban Development to “promote the ability of renters and homeowners to avoid eviction or foreclosure.”

This executive action does not take direct steps to keep evictions from occuring as the eviction moratorium provisions in the Cares Act did prior to its expiration July 31.

Rather it nudges federal regulators to look at and develop options for renters, homeowners and landlords facing financial hardships that will affect their ability to make full and timely payments.

Payroll Tax Holiday

The Treasury Department is directed to defer the 6.2% Social Security tax on wages for employees making less than $104,000 per year.

The suspension would begin September 1, 2020, and run through December 31, 2020.

This move would effectively give a number of employed individuals a 6.2% increase in pay for the four months it’s implemented.

There are a few issues surrounding the payroll tax holiday, though.

Both pertain to the fact that the payroll tax suspension is not permanent, and thus, at this point, would be required to be paid back at some point in the future.

While an employee would be required to pay back the amount of the payroll tax that was suspended, so too would the employer.

So, some employers may be reluctant to stop the withholding, concerned they would be liable for the suspended payments of its employees if they didn’t/couldn’t make the payments.

The political reality is, Congress would all but be backed into a corner to make the payroll tax holiday an actual tax cut, eliminating the need for repayment of withheld payroll tax monies.

The last thing politicians would want is angry constituents blaming them for requiring significant payments of monies that were supposedly “given” to them.

Unfortunately, considering the legislative stalemate currently at hand, there is no guarantee that the payroll tax holiday would become a tax cut.

Which makes this provision somewhat in limbo as to whether it will be implemented or not.

Student Loan Payments

In the Cares Act, most federally backed student loan borrowers received six months of deferred payments, interest free.

President Trump signed an executive action that extends the payment moratorium with zero interest until the end of the Covid-19 crisis.

Keep in mind, as with the student loan provision in the Cares Act, the moratorium only applies to borrowers whose loans are held by the federal government.

If a borrower is one of approximately 8 million whose loans are held by private lenders with a government guarantee, this action does not apply.

Executive Action Implementation?

It’s important to understand, a president’s ability to implement what may be considered legislative action is limited, especially when it comes to appropriating and spending money.

As you may have heard numerous times now, Congress is the sole authority when it comes to appropriating and spending federal funds.

But, there is some wiggle room.

And that’s where President Trump is likely able to take some action.

With regard to the increased $300 per week federal enhancement to unemployment benefits, since the monies are being “moved” from the Disaster Relief Fund, this action will likely stand.

The action regarding evictions is more of an order to federal government departments to consider options to help those struggling to make rent or mortgage payments, not necessarily a funding source for those efforts, so it will likely remain.

The Treasury secretary has the authority to delay tax filing and collection, so the payroll tax holiday could stand as signed with the caveats I discussed above in mind.

The president doesn’t really have the authority to extend the student loan moratorium, especially the interest payment portion, established in the Cares Act, but it very well may slide through, too.

For all of these, implementation by federal departments and agencies is needed.

Until the specifics are worked out between the administration and these federal governing bodies, we’ll just have to wait and see if these executive actions truly come to fruition.

Congressional Action

Which is why it would be much more effective for our elected officials in the U.S. House and Senate to come together and negotiate a deal that will help struggling Americans now.

Many of the provisions that will directly assist individuals and the economy are agreed upon.

It’s provisions that fall outside of the “absolutely necessary” category on which there is disagreement.

Which is all the more reason for Republicans and Democrats to enact the provisions on which they agree…and that will help now…and leave the other provisions for later debate.

The problem is, congressional Democrats see the expiration of Covid-19 relief as a bargaining chip to enact a variety of policy provisions that are only loosely-tied – if even that – to pandemic-related assistance.

Speaker Pelosi publicly states that Democrats are willing to come down $1 trilion in spending if the Republicans come up $1 trillion for the next relief bill.

The problem is, the total funding amount isn’t the issue, it’s the specifics of what exactly those amounts will be spent on that matter.

And therein lies the problem.

With a significantly consequential election less than three months away, the heels are dug in.

All to the detriment of the citizens to whom these elected officials are supposed to represent.

Keep these actions in mind come Election Day.

The Economy

Here we stand, roughly two weeks since the expiration of the federally enhanced unemployment benefits, as well as the lapsing of other codified relief measures, with little effort – aside from President Trump’s executive actions – to address the financial issues facing many Americans.

One of the reasons for this may rest with the fact that a large number of Americans haven’t truly felt any economic pain as a result of the pandemic.

Rest assured, though, a large number is by no means all.

A look at the unemployment numbers is all that’s needed to highlight that fact.

But even those who’re unemployed, have been made relatively whole thanks to the federal government’s extra $600 per week unemployment payment.

Those individuals were likely able to continue making rent/mortgage payments, buy food and other necessities and keep up with most monthly expenses.

That will now change.

Even if President Trump’s executive order regarding unemployment payments stands, it’s still a reduction from what unemployed individuals were used to.

And that reduced $1,200 per month in spending power ($800 if states kick in their share) will be felt.

Felt not only by the individuals receiving the unemployment benefits, but by the overall U.S. economy.

Less money for dining out, various extraneous expenses, and possibly not-so-extraneous expenses like being able to pay in-full rent, car payments and credit card bills.

All of which, when paid, keep an economy humming along.

But, when not paid, can easily begin a snowball effect that may have disastrous effects on the bigger U.S. economy.

Which is why, even in light of the massive deficit spending that’s being done at the federal level, Congress needs to act now on policies that will directly help those in need and debate the remaining Covid-19 relief-related efforts in the coming months.

If you feel the same, a quick email or call to your U.S. Representative and/or Senators may be in order.

Constituent contacts won’t guarantee action, but when received in any sizable numbers can encourage movement in the direction being requested.

And for the sake of many currently unemployed Americans, and the larger U.S. economy, a request for action on Covid-19 relief by our congressional representatives can’t come soon enough.