In a matter of months, the coronavirus disease 2019 (COVID-19) pandemic has killed more than 105,000 Americans, cost more than 41 million people their jobs, based on initial jobless claim filings, and completely upended the longest economic expansion in U.S. history.
It was this unprecedented physical and financial toll over the very short term that led Congress to pass and the president to sign the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law more than two months ago.
Image source: Getty Images.
More than 150 million Americans are eligible for CARES Act stimulus money
The CARES Act was (and still is) a groundbreaking piece of legislation that apportioned $2.2 trillion to aid hospitals, distressed industries, small businesses, the unemployed, working Americans, and even senior citizens receiving Social Security, face the economic hardships that come with shutting down nonessential businesses to limit disease transmission.
Without question, though, the allocation of $300 billion for direct payments to the public is what the CARES Act will best be remembered for. At their maximum, Economic Impact Payments (as these payouts are officially known) could total $1,200 for individuals and $2,400 for couples filing jointly. Additionally, $500 can be added to what a parent or household receives for each qualifying child aged 16 and under. To receive this maximum payment, a single, married, or head-of-household filer would simply have needed an adjusted gross income (AGI) below $75,000, $150,000, and $112,500, respectively.
Taking into account those folks who received a reduced payout — i.e., single, married, and head-of-household filer with AGIs below $99,000, $198,000, and $136,500, but above the maximum payout thresholds — more than 150 million people were eligible for stimulus money. According to the Internal Revenue Service, more than 140 million payments totaling $239 billion have been sent out, as of May 18.
While the stimulus money associated with the CARES Act was very much needed, it unfortunately proved to be nowhere near enough financial assistance for most Americans. An April 22 Money/Morning Consult survey found that nearly half of the 2,200 people surveyed had used their Economic Impact Payment in two weeks or less, with 74% expected to burn through their payout in four weeks or less. Based on these metrics, and the fact that economic activity isn’t going to go back to where it was in February at the flip of a switch, there’s a very real need for another round of stimulus from Washington.
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A radical new bill would send certain people $1,200, but there’s a huge catch
Since the passage of the CARES Act, well over a half-dozen second stimulus proposals have been introduced in the Senate or House of Representatives. We’ve also seen billionaires and academics weigh in on a solution. But this past week, we witnessed a truly unique idea introduced on Capitol Hill.
On Monday, June 1, the lead Republican on the House Ways and Means Committee, Kevin Brady (R-Texas), unveiled the Reopening America by Supporting Workers and Businesses Act of 2020 (sorry, no catchy acronym as with the CARES Act or HEROES Act). Under Brady’s plan, stimulus money wouldn’t simply be sent out to American households based on AGI from their most recent tax filing. Rather, it would involve paying what’s akin to a $1,200 hiring bonus to currently unemployed people who reenter the workforce.
As a reminder, the CARES Act expanded the unemployment benefits program, allowing those approved for unemployment benefits to receive an extra $600 a week for up to a four-month period, ended July 31, 2020. Republican lawmakers have grown increasingly concerned with the idea that this extra $600 a week in benefits is discouraging the unemployed from getting back to work, and therefore having an adverse impact on the restart of the U.S. economy.
Enter Brady’s new proposal. Under the Reopening America bill, people receiving unemployment benefits who reenter the workforce would receive two additional weeks of $600 payouts, working out to a hiring bonus of $1,200. It should be noted that Brady’s proposal would be in effect for a limited time, as these expanded unemployment benefits are set to end in less than two months.
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Brady’s bill also strengthens return-to-work reporting. In other words, it allows employers to report job refusals, thereby weeding out those unemployed people who would look to game the system to collect up to $1,200.
Of course, there’s a pretty huge flaw with Brady’s bill, too. Namely, it provides for those who’ve lost their jobs and are currently receiving unemployment benefits (up to 21 million people), but does nothing for the tens of millions of Americans who still have a job but have been struggling financially over the COVID-19 pandemic. It also does nothing for those folks who lost their jobs and filed for unemployment benefits, but were never approved to receive benefits. Without addressing some sort of funding for these other workers who’ve been adversely affected by COVID-19, Brady’s bill would have little chance of passage in the House.
Another stimulus package seems likely, but there are serious hurdles to overcome
Given the sheer number of second stimulus proposals we’ve seen from both sides of the political aisle, there’s certainly a growing likelihood that something will eventually get done. It’s pretty clear that the CARES Act didn’t do enough for most Americans, and with this being an election year, both parties are incentivized to do what they can to look good in the eyes of the public.
The thing to understand, though, is that a second stimulus package might be approved months down the line, rather than within the next few weeks, as hoped for by the public.
Senator Mitch McConnell speaking to reporters, with President Trump by his side. Image source: Official White House Photo by Shealah Craighead.
Senate Majority Leader Mitch McConnell (R-Ky.) has been pretty clear about wanting to take time to see what sort of impact stimulus money from the CARES Act has on the U.S. economy, and has also opined that the next stimulus package would be the last. Without having McConnell on board, legislation from the Democrat-led House won’t be able to reach the Republican-led Senate floor for vote.
As a refresher, House Democrats already passed the HEROES Act in mid-May, which would provide a one-time payment of up to $6,000 to households and come with a mammoth $3 trillion price tag. However, with no support from McConnell, and clear ideological differences between Senate Republicans and House Democrats, the HEROES Act looks to be dead in the water.
The impetus that might spur cooperation on Capitol Hill is the July 31 end to the unemployment program’s expanded benefits. Once these extra $600 a week payouts disappear, we could begin to see rental, mortgage, and loan delinquencies rise, which may pressure both sides into a final bipartisan relief COVID-19 relief package.
Time will tell if that’s the case, but my money is on one more stimulus package coming out of Washington before the end of the year.