- Trump proposes a payroll-tax cut to boost the economy during the coronavirus epidemic, but would this really work?
- What are payroll taxes?
- How much more money could I get?
- Who would benefit from a payroll-tax cut?
- Would such a move work now?
- Trump’s Big Turnaround: Cash Payments Instead of a Payroll Tax Cut
- What’s this about mailing out checks?
- Who’s afraid of a payroll tax cut?
- What about that airline bailout?
- What are other countries doing?
- The high-stakes fight over a coronavirus economic stimulus package, explained
- Democrats want to prioritize public health and relief for workers
- Trump is focused on tax relief. Republicans are still weighing their options.
- Time to pass a stimulus package is running out
- More checks? A payroll tax cut? Trump and Congress split on next coronavirus relief plan
- What could be in the next package?
- Hurdles and disagreements
Trump proposes a payroll-tax cut to boost the economy during the coronavirus epidemic, but would this really work?
Is a payroll-tax suspension the way to alleviate economic uncertainty?
President Donald Trump thinks it could be part of the solution as the stock market lurches amid concerns that the spread of COVID-19, the disease caused by the novel coronavirus, is hurting both businesses and consumer spending. On Tuesday, the Dow Jones Industrial Average DJIA, +1.39% recouped more than 1,100 points after shedding 2,000 points a day earlier.
Trump pledged “very substantial relief” for payroll taxes on Monday, speaking after the biggest one-day stock market selloff since 2008. However, Democratic lawmakers and even some Republicans have balked at the idea. A payroll tax cut, they say, wouldn’t help the unemployed and offers slim relief for workers. Would suspending the payroll tax work?
Trump previously considered reducing payroll taxes in August in order to head off an economic slowdown, but eventually turned away from the idea. However, the coronavirus outbreak and fears of a looming oil-price war between OPEC and Russia appears to have put the item back on his agenda. As lawmakers debate options for a financial plan, here are key questions to consider:
What are payroll taxes?
The money taken in payroll taxes go to three things: Social Security, Medicare and unemployment insurance. Every pay period, salaried workers pay 6.2% of their gross annual income up to $137,700 for Social Security. Their employer also pays a 6.2% tax. Overall, employers and employees pay a 12.4% combined Social Security tax.
Workers pay 1.45% for Medicare taxes and employers pay 1.45%. Combined, they pay 2.9% in Medicare taxes. Workers making $200,000 a year and above (or married couples making $250,000) pay an additional 0.9% in Medicare taxes. Employers also pay 6% on the first $7,000 of a worker’s wages; they may also have to pay state unemployment taxes, depending on the state.
Payroll taxes produced $914 billion in tax revenue for Social Security during fiscal year 2019, according to the Congressional Budget Office. The taxes also generated $278 billion for Medicare and $41 billion for unemployment insurance, the office said.
“ Payroll taxes produced $914 billion in tax revenue for Social Security in 2019. They generated $278 billion for Medicare and $41 billion for unemployment insurance. ”
Payroll taxes are separate from income taxes. Americans paid $64 billion less in income taxes during the first year of the Trump tax cuts, Internal Revenue Service figures show. The tax-code overhaul did not change rules on payroll taxes.
The Trump administration is considering whether to push back the April 15 income tax filing deadline as the coronavirus outbreak continues, according to the Wall Street Journal. The decision isn’t final and Treasury Department officials are still determining the date of any new deadline, the newspaper said.
How much more money could I get?
Researchers at the University of Pennsylvania’s Wharton School of Business calculated what it would mean if workers paid 4.2% in Social Security taxes instead of 6.2% for just one year.
“ A household making up to $133,330 a year would pay $2,435 less with a 2% payroll tax reduction, a Wharton School of Business study concluded. ”
A worker making up to $14,160 a year would pay $165 less in tax, the researchers concluded. A worker in the top 0.1% of earners, making $3.2 million a year, would pay $3,165 less in tax. In the middle, a household earning up to $133,330 a year would pay $2,435 less in tax, they added.
The federal government would forego between $141 billion and $151 billion on the one-year tax holiday, while gross domestic product would climb 0.3%, but the boost would be short-lived before gross domestic product edged down by 0.04% in 2050, according to the study’s estimates.
Another estimate from the Urban-Brookings Tax Policy Center said 121 million workers would benefit from a 2% cut in payroll tax, providing an average annual sum of $1,043. But wealthier families would see the biggest gains, the analysis said.
Who would benefit from a payroll-tax cut?
Payroll taxes take a cut wages, so any cut would apply to payrolls. As of February, there were 152.5 million workers on payrolls, according to the Bureau of Labor Statistics.
These workers could see a bump in their paychecks, said Nathan Rigney, lead tax analyst at the tax-preparation company H&R Block HRB, +1.56%.
Workers on paid leave would see a paycheck increase, but not those on unpaid leave, he said.
Gig workers — 9.5 million people who take on temporary assignments — could get some tax relief, but it could take a while, Rigney noted.
They are essentially paying both the employee and employer sides because they’re their own boss, he added. These workers often don’t pay off their estimated payroll taxes until tax season, he said.
“If gig workers are really diligent and calculate their taxes on a monthly basis, they could notice the benefits, but many don’t.”
Would such a move work now?
The idea has supporters, Rep. Jim Jordan, a Republican from Ohio.
But others say it’s much better to start cutting checks.
“A one-year payroll tax cut of 2% of income would provide up to a $5,508 tax cut to a high-income couple, only $500 to a single parent getting by on $25,000 a year, and nothing for a worker placed on leave without pay,” Jason Furman, chairman of the White House Council of Economic Advisors during the Obama administration, wrote on TWTR, +0.10%.
TWTR, +0.10% TWTR, +0.10% In 2011-12, the Obama administration cut the payroll tax to 4.2% from 6.2%. “I was a key part of the negotiation that resulted in the payroll tax cut in 2011 and 2012. I continue to think it was the best we could do at the time given the political constraints. But it was far from optimal then and would be even further from optimal now,” Furman added.
“Also, it is not accelerated enough — it just drips out with each paycheck so it is spread out over time,” he said. “Right now time is of the essence. I would much rather get people money sooner. Maybe they save it. Maybe they have flexibility to miss some work. Maybe they spend it.”
Trump hopes that payroll-tax cuts will put more money in the hands of consumers who will — in theory — spend it. However, Furman believes that suspending or cutting the payroll tax would simply put more money in the pockets of the rich.
“ ‘While a payroll-tax cut for employees ly doesn’t make sense, a payroll-tax cut for employers could.’ ”
— Nicole Kaeding, vice president at the National Taxpayers Union Foundation
Others agree with Furman. “The idea behind a payroll-tax cut is that individuals are not buying goods and services because of a financial constraint.
That’s not quite what’s going to happen here,” said Nicole Kaeding, vice president of the National Taxpayers Union Foundation.
“Individuals might buy less goods and services — not because of financial constraints, but because they’ve been told to go home.”
As COVID-19 spreads, it would be more effective to focus on helping businesses, especially small businesses, Kaeding said. “While a payroll-tax cut for employees ly doesn’t make sense, a payroll-tax cut for employers could,” she said. “It could provide needed short-term liquidity by lowering their tax liability. It also reduces their incentive to lay off workers.”
Trump’s proposal may never get off the ground. Treasury Secretary Steven Mnuchin, who is heading up the government’s economic response to the coronavirus outbreak, held a meeting Tuesday with House Speaker Nancy Pelosi (D-Calif.
) to kick-start discussions on a financial plan. “There’s a lot of interest on a bipartisan basis to get something done quickly,” Mnuchin said, according to The Wall Street Journal.
A payroll-tax cut, the paper added, was not one of the preferred options.
Trump’s Big Turnaround: Cash Payments Instead of a Payroll Tax Cut
The Trump administration, finally grasping the gravity of the coronavirus pandemic, is scrambling to craft an emergency economic rescue package, after the Federal Reserve threw the financial equivalent of the kitchen sink at plunging markets and a sputtering economy to no avail.
On Tuesday, just hours after the White House was reportedly preparing to present a new stimulus package heavy on the kind of tax cuts that U.S. President Donald Trump previously favored, the administration gave that up and now plans to just mail money to Americans in hopes of tiding them over.
U.S. Treasury Secretary Steven Mnuchin said that while Trump still prefers a payroll tax cut, they need something that can deliver relief to Americans now. “And when I say now, I mean in the next two weeks,” not six to eight months under tax relief, Mnuchin said.
The growing, if belated, effort by the administration to grapple with what appears to be a massive economic hit from the outbreak of the new coronavirus is ramping up after one of the worst weeks on Wall Street in history, wiping out nearly all the gains since Trump took office and sending U.S. government bond yields to near-historic lows—not a good sign.
The latest reports are that the administration is looking at a package of $1 trillion to $1.
2 trillion, which would include a big dose of cash payments, loan guarantees, and more—well beyond anything the Obama administration was able to deploy more than a decade ago during the worst financial crisis since the Great Depression, making crystal clear how quickly the virus outbreak has morphed in Trump’s view from a Democratic “hoax” to a life-or-death threat to the world’s biggest economy.
What’s this about mailing out checks?
The administration has leaped onto a bandwagon that has gained surprising momentum in recent days: the idea of offering direct cash payments to U.S.
citizens to act as a lifeline during what are expected to be weeks, if not months, of economic disruption, layoffs, lost wages, and mounting bills.
Mnuchin wouldn’t say how big his direct stimulus would be—though he hinted it would be bigger than most congressional proposals floating around, which amount to a $1,000 one-time payment.
The administration’s pivot addresses two concerns that top economists have been arguing for weeks: Any fiscal stimulus the administration undertakes needs to be quick and needs to target people who are going to be the hardest-pressed for cash to buy food, pay rent, and pay medical bills. Mnuchin promised a quick start to the program, assuming Congress is on board, and said it would be means-tested, so it would presumably benefit more than the uber-wealthy.
With many countries in Europe in near-total shutdown (France closed on Monday) and many U.S.
cities following suit, the economic consequences of the virus outbreak are becoming clear, even if the duration of the pain still isn’t.
Trump on Monday spoke of virus-related disruptions at least through the summer; some clinical experts figure a near-total shutdown for more than a year is the only way to avoid large-scale deaths from COVID-19.
The biggest questions surround the size of the payout. Many proposals in Congress, Republican Sen.
Mitt Romney’s plan for a $1,000 direct stimulus, are dismissed as “laughable” by experts who say they are far too small; other House proposals have discussed potential payments up to $4,000 for certain individuals.
Tentative plans from the White House reportedly include an initial tranche of $250 billion in direct payments, followed by another $250 billion as needed a month later.
Italy, in contrast, just unveiled as part of its latest, $28 billion stimulus package a 600 euro ($660) recurring monthly payment to workers and the self-employed.
Who’s afraid of a payroll tax cut?
Even last year, when the U.S. economy was the “strongest ever” in his words, U.S. President Donald Trump was pushing for a cut to the payroll tax—the amount that employers and their workers pay into Social Security every two weeks in their paycheck.
Still late Monday, it was the centerpiece of the White House’s $850 billion package. But as lawmakers from both sides of the aisle and economists of all stripes have pointed out, it’s a grossly inadequate tool to use for the job at hand; Democrats on the congressional Joint Economic Committee laid out all the reasons why.
The administration seemed to take those arguments on board with Tuesday’s surprising about-face.
First, a payroll tax cut only offers benefits to those with a job, and, as the Institute on Taxation and Economic Policy has extensively documented, it heavily favors higher-income workers—not the unemployed or the retired. So a payroll tax cut would do little or nothing for people who would be among the most vulnerable during a prolonged virus-related downturn.
Second, as Mnuchin acknowledged, since the benefits would come in the weekly or biweekly paycheck, they would be doled out in small amounts over time, rather than landing as a lump sum that could act as a true financial bridge to stave off foreclosures, debt collectors, or medical bills. (A full payroll tax holiday, which Trump floated last week, would have meant an extra $130 or so in every biweekly paycheck for someone making $50,000 a year; the current proposal would have been about half that.)
Third, the latest proposal, thanks to prompting by lobbies the U.S. Chamber of Commerce, included a partial payroll tax holiday for employers, too. The idea is to reduce some of the financial pressure on businesses facing a prolonged downturn, but there’s little evidence that those savings would benefit workers struggling with even greater financial pressures.
And finally, the whole reason the payroll tax exists is to provide Social Security with a dedicated funding stream that is free from the log-rolling and hostage-taking that makes up the rest of the congressional budget process.
Swiping $500 billion or so from the fund now to offer short-term tax cuts means that shortfall would have to be replaced later from somewhere else (even as deficits and the national debt soar)—or simply make it easier for politicians to argue they must cut Social Security benefits altogether, as Trump has advocated.
What about that airline bailout?
airlines are reportedly asking for a rescue package for their industry of about $54 billion to $58 billion, a mix of grants, loans, and tax relief that would enable them to survive a much bigger threat to commercial aviation than the terrorist attacks of Sept.
11, 2001. While Mnuchin, who has been in constant contact with U.S. airline CEOs, said loan guarantees were under consideration in the latest relief package, it’s not clear how much the administration has signed off on the industry’s wish list.
There are reasons for a too-big-to-fail bailout: The airline industry is undoubtedly of systemic importance, un other leisure sectors clamoring for support, from casinos to cruise ships. Aviation in North America supports about 2.
4 million jobs directly and 7.3 million in all, providing about $290 billion in direct GDP and more than $800 billion indirectly, through travel and tourism.
So letting them all go broke—as the industry now fears could happen globally by May—is hardly an option.
The problem is that a bail airlines would risk being a political replay of some of the Wall Street bailouts in the wake of the financial crisis.
U.S. airlines such as Delta just enjoyed a series of gangbuster years, raking in billions of dollars each year from increased business (and massive tax breaks thanks to the Trump tax reforms). Instead of saving even a portion of that firehose of cash flow to build a rainy day fund for the downturn that they all knew was inevitable, the U.S.
industry as a whole, Bloomberg calculates, blew 96 percent of their cash flow on share buybacks to benefit executives and shareholders.
Now that those billions of dollars have vaporized in the market downturn, taxpayers are being asked to take it on the chin, angering many who propose conditioning providing federal aid on securing public equity in the bailed-out carriers.
What are other countries doing?
the United States, which is angling toward including about $300 billion in loan guarantees in the rescue package, nearly every other major economy is racing to craft its second or third stimulus package.
France on Monday announced a war plan to deal with the downturn that includes about 45 billion euros ($50 billion) in direct support and more than 300 billion euros ($330 billion) in government loan guarantees for businesses threatened with a downturn; French President Emmanuel Macron has said bankruptcies will not be permitted to happen and nationalizations are not off the table as the crisis continues.
Italy, among the hardest-hit European countries, just wrapped up its second, $28 billion stimulus package with additional support for parents at home due to school closures, support for small businesses, and the outright nationalization (again) of the troubled airline Alitalia.
The United Kingdom, now working on its second bailout package in as many weeks, plans a loan guarantee package north of 300 billion pounds, and is talking of U.S.-style direct financial support for the threatened aviation sector, as well as other hospitality sectors. Japan is throwing another $15 billion into low-interest loans for small businesses.
But there is one looming problem for the worst-hit countries, such as Spain and Italy. Bond spreads—the difference between what investors demand for buying German, gold-plated, super-safe bonds, and riskier Southern European bonds—are creeping up again.
That happened in 2012, at the height of the European debt crisis, and nearly ruined Greece, Italy, and Spain. Memories of the repeated beatings the bond market inflicted linger long and are conditioning the response to this crisis.
And that is creating some bizarre—and potentially very counterproductive—ironies.
In Spain, where socialists with a further-left coalition partner are in power, there’s no Trump-style free-spending: Despite the urgency of providing some sort of shot in the arm to an economy where nearly all businesses are shut, the government is leery of widening the deficit and getting mugged again by the market.
The high-stakes fight over a coronavirus economic stimulus package, explained
President Donald Trump talks to reporters at the Capitol after attending the Senate Republicans weekly policy luncheon with Vice President Mike Pence (right) on March 10, 2020, in Washington, DC. Samuel Corum/Getty Images
The biggest thing standing in the way of a coronavirus-targeted economic stimulus package could be the Trump administration’s proposed payroll tax cut.
House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer would rather prioritizeexpanding benefits and delivering relief directly to American workers and families hit by the coronavirus, and making testing free, than imposing a tax cut that’s ly to benefit only companies and a subset of workers.
Some Democrats said they’re especially concerned a payroll tax cut could leave out workers who have already been laid off, given that coronavirus-related layoffs are already happening. Even Senate Republicans aren’t convinced it’s the correct course of action.
“One of the dilemmas with the payroll tax is if you’ve lost your job or you’re in the gig economy, you’re not going to get anything,” said Rep. Don Beyer (D-VA), vice chair of the US Congress Joint Economic Committee. “Or if you’re so many Americans — making $25,000 or less — it ends up being $10 a week, not enough to really do anything.”
Some Republicans are skeptical of the payroll tax cut idea, too, which could limit the administration’s leverage in negotiations. “I certainly want information on this. Obama did a payroll tax; I’m not sure how well that worked. I think this president is planning something more dramatic than that,” said Sen. Ron Johnson (R-WI).
Trump acknowledged this in a press conference Monday. “I was just with the Republican senators and they were just about all there,” Trump said. “There’s a great feeling about doing a lot of things, and that’s one of the things we talked about.”
Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, mentioned concerns about exactly who would benefit from these policies. “A payroll tax cut can be an effective tool, but it’s not the best answer in this case,” he told Vox in a statement. “A payroll tax cut would do little to help workers without paid sick days or those who have lost shifts and tips.”
Claudia Sahm, a former Federal Reserve economist who is now head of macroeconomic policy at the Washington Center for Equitable Growth, has been echoing Wyden’s concerns on social media for days, calling for direct payments to all individuals.
Similarly, “if we are doing stimulus too, per person checks much better than payroll tax cut,” tweeted Jay Shambaugh, a former member of Obama’s Council of Economic Advisers and now director of the Hamilton Project at the Brookings Institution.
“If people miss work, can’t do gig work, or are unemployed: no payroll tax cut.”
Pelosi is negotiating a stimulus deal directly with Treasury Secretary Steven Mnuchin; the two met Tuesday afternoon and Pelosi later told reporters Democrats are “ready with our legislation.” Senate Majority Leader Mitch McConnell said Pelosi and Mnuchin have worked well together in the past and he’s hopeful they can reach a bipartisan deal.
Congress and Trump have a very tight timeline. The House was already scheduled to be on recess next week, and members are scheduled to fly out on Thursday. The Senate, too, is slated to be on recess from March 16 to 20.
“Coming up with something is ly; having it voted on this week is going to be challenging,” said Rep. Dean Phillips (D-MN), adding that Congress could potentially stay longer or come back next week to vote on a package.
Democrats want to prioritize public health and relief for workers
Whether it’s paid sick leave or free coronavirus testing, there’s a common theme to Democrats’ proposals. They want to make sure cost doesn’t impede workers from getting the health care they need, or taking the time off from work to quarantine if they suspect they have coronavirus.
“For the families, we want to be sure from the standpoint of being tested if need be that there be no cost to the families,” Pelosi said at a press conference Monday night.
“If people don’t go for that — go for testing — if they can’t go to get tested and can’t go to get the treatment because they are afraid they can’t afford the bill, this will get worse,” Schumer added.
Here is what’s ly to be in Democrats’ proposal, what Pelosi and Schumer have so far outlined. Both have continued meeting with their members and are ly to release a full proposal in the coming days.
- Paid sick leave: Sick leave would be directed to those workers impacted by quarantine orders, or those who must stay home to care for their children. Some lawmakers expressed concerns that not doing so would result in those infected with coronavirus continuing to go to work, thus continuing to spread the virus.
- Enhanced unemployment insurance: Democrats want to expand unemployment benefits for workers laid off due to the coronavirus, which is already happening in the US.
- Expanding food security: Expanding access to programs SNAP, WIC, and school lunch programs throughout the coronavirus outbreak. Progressive economists have long believed that expanding existing safety net programs is a highly effective way of stimulating the economy because the sorts of low-income people who benefit from them are highly ly to immediately spend any extra money they get — helping stabilize economy-wide demand. The 2009 stimulus bill featured many provisions along these lines. Conservatives, who are critical of those programs in general, tend to be highly skeptical of putting more money into them.
- Free coronavirus testing: Democratic leaders are proposing making coronavirus testing free to increase access. Free testing is being offered in a number of states, but there’s no federal regulation mandating it so far.
- Increasing the capacity of the US medical system and ensuring affordable treatment: Pelosi and Schumer are calling for insurance providers to reimburse coronavirus patients for any non-covered costs related to coronavirus. Again, they’re hoping this gets more people treated and makes it so people don’t put off going to the doctor because they are worried about costs.
Trump is focused on tax relief. Republicans are still weighing their options.
Trump met with Senate Republicans during the party’s weekly lunch on Tuesday and presented a proposal featuring a couple of priorities, including a payroll tax cut. It’s a plan that Republicans have said they’re open to hearing, though many said that a lot of details still needed to be ironed out.
“The administration is seriously considering a fiscal stimulus. What that will be, I don’t think anybody has decided yet,” Sen. John Kennedy (R-LA) told reporters following the lunch.
The policies — which Trump first laid out in remarks on Monday — were just broad outlines, according to Republican senators. His statements this week, however, touched on a couple of areas:
- Payroll tax cut: A payroll tax cut would reduce the amount of taxes that both workers and companies contribute, putting money back in the pockets of both corporations and their employees in the near term. Given the lack of specifics we have so far, it’s unclear whether companies or workers would benefit more from this move. A payroll tax cut was used as part of a stimulus package the Obama administration negotiated in 2010, but Jason Furman, one of Obama’s top economic policy hands and lead negotiators on the stimulus deal, tweeted Monday that “it was far from optimal then and would be even further from optimal now.” The key drawback of payroll tax cuts is they dribble out slowly over time, bit by bit, in each paycheck and fail to reach the people most in need of help — those who have lost their paychecks entirely.
- Loan expansion to small businesses: Small businesses are among those that could be hit hardest by short-term changes in consumer behavior, and Trump has hinted that expanding access to such loans could help cushion some of these shortfalls.
- Aid for hourly workers: There’s some potential overlap between this idea and the expansion of paid sick leave that Democrats have proposed. Trump has signaled that he wants to ensure hourly workers have a safety net they can rely on if their wages and work are compromised by illness — which a paid sick leave program would specifically help provide.
Efforts this have historically faced Republican opposition, and those same roadblocks could come up again. “I the idea as long as it’s the choice of the company,” Sen. Mike Braun (R-IN) said, signaling that he wasn’t supportive of a measure that would mandate such benefits.
- Airline, cruise, and hotel industry support: We don’t know much about what this assistance would look , but Trump has said his administration intends to help these industries given the dips in travel that have taken place in the wake of the coronavirus. Sahm counters that what businesses really need is customers, so the right approach is to “help everyone” rather than trying to target particularly industries or companies.
Key gaps remain between what Democrats have proposed and what Trump put forth on Tuesday.
Working through these differences and the specifics of a potential plan will be a major challenge for lawmakers as they continue to grapple with the outbreak.
Multiple Democratic House lawmakers told Vox they want to see economic relief going directly to workers rather than benefiting big businesses and corporations.
“A lot of us are traditionally skeptical about stimulus, generally, but it depends on what it’s for, how much it’s going to cost, how we’re going to pay for it, and what it’s going to do,” Sen. Richard Shelby (R-AL), the head of the upper chamber’s appropriations committee, told reporters Tuesday morning.
Time to pass a stimulus package is running out
Congress is running against the clock; after the stock market appeared to recover from Monday’s dive — its worst day since the 2008 financial crisis — stocks fluctuated again as of Tuesday afternoon.
With coronavirus spreading to multiple US states, economists predicted a greater lihood that the US could experience a recession in 2020. “I think it is very difficult to avoid a recession,” Moody’s economist Mark Zandi told CNBC on Monday. “The depth of the recession will depend on how the [Trump] administration reacts.”
As Vox’s Emily Stewart wrote, “An old adage among economists is that [economic] expansions don’t die of old age; something has to happen to cause them.” Economists worry the coronavirus could be the thing to curb the expansion of a previously booming economy.
Recalling a recent trip to the port of Los Angeles, Rep. Jimmy Gomez (D-CA) told Vox the coronavirus outbreak means shipments of goods from China to California are halting, causing bookings for dock space to unload container ships to go down substantially. That could have enormous effects on local workers there.
“A lot of the longshoremen that work there are not as impacted, but some of the people who are more on contract are — the drivers, the teamsters, and the truck drivers who get paid by haul are impacted,” Gomez said. “We’re going to start seeing a ripple effect throughout our supply chain and our economy.”
Layoffs in other sectors of the economy are already happening. Some airlines are planning layoffs, and the parent company of Austin’s South by Southwest festival announced it’s laying off one-third of its staff after the annual festival was canceled due to coronavirus concerns. That could be the tip of the iceberg, unless Congress intervenes in time.
Matt Yglesias contributed reporting to this piece.
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More checks? A payroll tax cut? Trump and Congress split on next coronavirus relief plan
Small business owners share their difficult and confusing journeys in applying for the Paycheck Protection Program loan. USA TODAY
WASHINGTON – President Donald Trump and congressional leaders have pitched a number of proposals they argue are essential to a new coronavirus relief plan to combat the effects of the coronavirus. The result: A grab bag of ideas without a deal.
Trump wants a payroll tax cut that Democrats have flat-out opposed. Democrats are adamant about more funding for state and local governments. And some Republicans would rather wait and see how the nearly $3 trillion in already approved relief pans out before moving forward with more.
Pressure to reconcile the competing plans could intensify as Trump and lawmakers regroup after the country's unemployment rate reached nearly 15% last week, a grim indicator underscoring the virus' toll on American businesses and workers. Officials now predict unemployment could pass 20% in the coming months, approaching the 25% rate reached during the Great Depression.
Unemployment rate: Trump White House adviser says unemployment rate could pass 20% during coronavirus pandemic
However, discussions between the two sides are happening, White House economic adviser Larry Kudlow said on Sunday.
“We're collecting ideas for next steps,” Kudlow said on ABC’s “This Week With George Stephanopoulos.”
Kudlow, who described the talks as “informal,” said he and another Trump economic adviser, Kevin Hassett, held a conference call on Friday with about 50 House Republicans and Democrats. Another conference call with senators is set for Monday.
Senate Majority Leader Mitch McConnell said Tuesday it's time to push “pause” on more coronavirus aid. (May 5) AP Domestic
Despite the talks, House Democrats may march forward on a massive package that is expected to exceed $2 trillion, with a vote possible as early as this week. The legislation is not expected to be taken up in the Republican-controlled Senate.
Republicans, Democrats and the president have all drawn lines on provisions they say must be included in the next bill – mandates that will be major hurdles to getting more financial aid to workers, families, businesses and local governments.
House Speaker Nancy Pelosi of Calif., listens to a reporter's question during a news conference on Capitol Hill on May 7. (Photo: Manuel Balce Ceneta, AP)
What could be in the next package?
There are dozens of provisions that could make their way into the next package.
Democrats have said they want to move quickly on what they’ve called a second installment to the historic CARES Act, the $2 trillion package passed in March that sent relief checks to Americans, boosted unemployment benefits and created a loan program for small businesses. Republicans are touting liability protections for businesses and have also suggested a pause on additional legislation.
White House and coronavirus: Pence aimed to project normalcy during his trip to Iowa, but coronavirus got in the way
Here's what members of both parties have identified as key priorities in the next package:
- State, local and tribal funding: Democrats have highlighted additional funds for state, local and tribal governments as their No. 1 priority in the next package. They've proposed anywhere from $500 billion to $1 trillion to help address budget shortfalls. But Trump has said he has no interest in bailing out states that he thinks have been poorly managed.
- Payroll tax cut: Trump has repeatedly floated the idea of a payroll tax cut, saying “that’s going to really put people to work.” The size of the cut and other details have not been released.
- Cash payments: A number of Democrats are proposing additional relief payments to Americans, with one proposal including $2,000 monthly payments for at least six months. Trump has previously voiced support for additional payments but lately has shifted focus and emphasized the need for a payroll tax cut.Democrats have also highlighted the need to extend bolstered unemployment benefits as millions of Americans remain unemployed.
- Liability protections for businesses: Republicans are demanding that any new bill include protections for business from what conservatives have called frivolous and opportunistic lawsuits as states and companies begin to reopen, a proposition that Democrats say they oppose.
- Funds for hospitals, testing and hazard pay for workers: Democrats and Republicans have highlighted the needs for more testing, and liberals are pushing for billions more to rapidly expand testing as the country attempts to reopen. Bipartisan proposals have also been floated for increased funding for rural hospitals and hazard pay for front-line workers, something the president has embraced.
- More funds for small businesses: Congressional lawmakers in both parties have said they are watching the Small Business Association's Paycheck Protection Program, which Congress replenished with billions in April. Lawmakers have acknowledged more funding might be needed for the program.
- Infrastructure spending: Republicans and Democrats have repeatedly cited the need to repair the nation’s aging infrastructure and members of both parties have suggested a massive infrastructure could help in a recovery effort, while also creating new jobs for Americans.
While Democrats push for another round of relief, some Republicans are not in any rush to take up additional legislation addressing the pandemic.
Instead, many conservatives say they want to see how the funds already allocated are being used.
“Before we take up any new bill, let's have hearings. Let's have the information and data come back to us and see if there's a need. As states open up, there will be a difference of what's needed today than is needed tomorrow,” House Minority Leader Kevin McCarthy told USA TODAY.
Treasury Secretary Steven Mnuchin echoed those thoughts in an interview on Fox News on Sunday.
“We just want to make sure that before we jump back in and spend another few trillion of taxpayers’ money that we do it carefully,” Mnuchin said.
President Donald Trump speaks as Vice President Mike Pence listens at right during a meeting about the coronavirus response in the Oval Office. (Photo: Evan Vucci, AP)
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Democrats are stressing that help needs to come soon and are pointing to Friday’s jobs report – which showed the U.S. lost 20.5 million jobs in April – to make their case.
“No one could look at today’s jobs report, the highest unemployment since the Great Depression, and say we should hit the pause button on further government action,as (Majority) Leader (Mitch) McConnell, Leader McCarthy and the Trump White House have said,” Senate Minority Leader Chuck Schumer, D-N.Y., said in a statement Friday. “We need a big, bold approach now to support American workers and families.”
House Speaker Nancy Pelosi, D-Calif., views the report as a call to action.
“The dire job losses show the urgent need for a bold CARES 2 package that is equal to the crisis gripping the American people,” she said in a statement.
Pelosi said last week the House would move forward with its version of the bill, even though Republicans won't support it. As of last week, Pelosi said she hadn't spoken with the administration about the package.
The White House has sent mixed signals on what it wants in the next package. Eric Ueland, the White House legislative affairs director, who serves as the lead White House official on Capitol Hill implementing the president’s agenda, signaled there wasn’t a huge rush to pass additional funds.
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“In terms of a timeline, much of that $3 trillion has yet to actually be expended, and its impact has barely begun to be evaluated,” he said after a lunch with Senate Republicans.
White House spokesman Judd Deere stressed last week that “we are going to ensure that we take care of all Americans so that we emerge from this challenge stronger and with a growing economy, which is why the White House is focused on pro-growth, middle class tax and regulatory relief.”
Mnuchin said Sunday that the administration is willing to spend “whatever it takes” to boost the economy, “but whatever it takes needs to be done carefully.”
Hurdles and disagreements
While the administration, congressional Republicans and Democrats have yet to start formal negotiations on a next package, three main provisions have emerged as sticking points.
The president has mandated that Congress consider a payroll tax cut, something he's been advocating for weeks.
“We're not doing anything without a payroll tax cut,” Trump said at a Fox News town hall last week.
The idea, which Democrats consider a nonstarter, also lacks support from Senate Republicans.
“I’m not a particular fan of that,” said Senate Majority Whip John Thune, R-S.D. the chamber's No. 2 Republican.
(L-R) Sen. John Thune (R-SD), Sen. Roy Blunt (R-MO) and Senate Majority Leader Mitch McConnell (R-KY) leave a Senate Republican policy luncheon in the Hart Senate Office Building on May 5. (Photo: Drew Angerer, Getty Images)
Another hurdle: McConnell's request that further legislation must include protections for companies against lawsuits related to the coronavirus.
“If there’s any red line, it’s on litigation,” McConnell said Tuesday on these protections for businesses.
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Democrats have knocked the idea, arguing Republicans are attempting to protect big businesses instead of families.
“This idea of drawing red lines – particularly when they're not really related to what the needs of people are, particularly when they side with big corporate interests as opposed to individual workers, as Leader McConnell's red line – it’s not productive and it’s not going to work,” Schumer said.
Democrats have similarly highlighted funds for state, local and tribal governments as their priority, saying no bill will be taken up without additional funds for states who have seen their tax revenues devastated because of the pandemic.
“There will not be a bill without state and local” aid, Pelosi said late last month.
Many Republicans have expressed skepticism on this, with some airing concerns that states that have mismanaged finances will use the funds to fill budget holes. Instead, some have floated the option of offering more flexibility with how funds already approved can be used by states.
“This is not the time for states and cities … who have mismanaged their budgets over the course of many decades, for them to use this as an opportunity to see you, as a taxpayer in Arizona, as a cash cow,” said Sen. Martha McSally, R-Ariz., in a town hall event Thursday.
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