As Congress prepares to put together a new coronavirus relief bill, the Trump administration and congressional Republicans are looking to deliver aid more narrowly and limit the overall cost of the package.
Eyeing a $1 trillion package: Vice President Mike Pence’s top aide told Bloomberg News this week that the administration wants to limit the cost of the next coronavirus package to $1 trillion or less, about the same level that Senate Majority Leader Mitch McConnell (R-KY) reportedly is seeking. That target likely ensures a fight with Democrats, who want a much larger and broader aid package.
White House wants to change $600 enhanced unemployment benefit: Treasury Secretary Steven Mnuchin told CNBC Thursday that the administration opposes an extension of the $600 in weekly federal unemployment payments. Any extension would ensure that jobless benefits would be “no more than 100%” of what workers were earning, Mnuchin said. “We knew there was a problem with enhanced unemployment in that certain cases people were paid more than they made in their jobs,” he said. “We’ll fix that and we’ll figure out an extension to it that works for companies and works for those people who will still be unemployed.”
A National Bureau of Economic Research working paper by researchers at the University of Chicago found that 68% of unemployed workers who are eligible for unemployment insurance will get benefits exceeding their lost earnings and one out of five eligible jobless workers will get at least double their lost earnings. The overall median replacement rate of the enhanced benefits is 134%, the researchers said.
“Notably, replacement rates under the CARES Act are highest for the unemployed with the lowest prior earnings who are likely most vulnerable,” they wrote. “At the same time, replacement rates over 100% create distributional issues and may hamper efficient labor reallocation both now, and especially during an eventual recovery.”
Fewer stimulus checks: The eligibility threshold for the $1,200 relief payments approved by Congress in March was set at $75,000 in income for individuals and $150,000 for married couples, with payments phasing out above those levels. The Washington Post reports that congressional Republicans and White House officials are considering lowering those income levels, though talks are still ongoing and the exact number they may propose is still unclear.
McConnell said this week that any additional direct payments should be targeted to people earning $40,000 a year or less. Other Senate Republicans oppose sending out more payments altogether, with many conservatives saying they’re concerned by the trillions of dollars being added to the national debt.
“Limiting the next round of stimulus checks to those earning under $40,000,” the Post’s Jeff Stein and Erica Werner write, “would save lawmakers about $200 billion compared with the first round of checks, according to Ernie Tedeschi, who served as an economist in the Obama administration. It would also mean that 20 million middle-class Americans would not receive the financial lifeline.”
Mnuchin told CNBC that the administration does support another round of stimulus payments, but that he would discuss the “level and criteria” for those payments with senators after they return from their recess. (He also said the White House wants a “much, much more targeted” extension of the Paycheck Protection Program for small businesses.)
Efforts to scale back the next round of stimulus payments would likely face both political and logistical challenges. “One Republican tax expert, who spoke on the condition of anonymity to discuss private deliberations, predicted the GOP would probably back off plans to curb the payments because of the administrative hurdles in effectively targeting the funding,” Stein and Werner report. “The GOP will also face political pressure not to curb stimulus payments during an election year for middle-class households.”