6 things to look out for as Congress begins negotiating on the next round of stimulus
Congress is working on a new stimulus/relief package to address the devastating effects of the coronavirus pandemic.
The House of Representatives and the Senate will have to pass the trillion dollar-plus relief package by August 7, before Congress goes on a 4-week recess.
This is the 5th stimulus package negotiated during the pandemic. With federally-funded unemployment insurance benefits scheduled to end in the coming week, the bill is necessary to keep small businesses, workers, and the economy moving forward. The administration is targeting $1 trillion dollars in additional assistance, but the House of Representatives are looking for more funds.
1. Extending unemployment benefits
The $600 weekly federal unemployment benefits boost is open for discussion, which expires on July 25.
The administration is looking to continue some form of the benefit, but are concerned that the high amount is a de-incentive to return to work. Proposals vary: one includes a $450 a week cash return-to-work bonus for a few months.
Other proposals reduce the amount of federally-funded unemployment insurance from $600 to as low as $200. Senate Minority Leader Charles Schumer’s proposal keeps the additional $600 until a state’s 3-month average unemployment rate falls below 11%. From there, the benefit would decrease by $100 for every percentage point decrease in the unemployment rate, until it falls below 6%.
Larry Kudlow, director of the United States National Economic Council, suggests a cap on unemployment insurance benefits at approximately 70% to 75% of wages to create incentives to work, not disincentives. He agreed there should be some type of re-employment bonus included in the package.
It’s unclear which proposal, if any, will be adopted. But business owners are having difficulty rehiring staffers, as many employees are earning more in unemployment benefits than they would on the job.
2. Second round of stimulus checks
Senate Majority Leader Mitch McConnell supports another round of one-time stimulus payments to taxpayers. The original $1,200 provided to workers who earned less than $75,000 under the CARES Act may shift.
Up for discussion: Whether to adjust the income cap to workers who earned less than $40,000 in 2018 and who have been hit the hardest.
3. Coronavirus liability protection
One proposal high on the Trump administration’s “must-have” list is protection for business from coronavirus lawsuits. McConnell’s proposal provides a 5-year, retroactive protection from 2019 to 2024 to shield business, schools, and hospitals from lawsuits from students, employees, and customers as they reopen.
Senator John Cornyn, who is drafting the liability language, says employers will be allowed to choose which government coronavirus safety guidelines to follow to be shielded from lawsuits if customers, students, or workers contract the virus. Businesses and local governments agree some form of protection is necessary to assure they can reopen.
4. Reopening of schools
The administration believes economic recovery hinges on parents being able to work, which often requires children to be back in school. One proposed stimulus package could include funds to schools that intend to reopen. Approximately $70 billion will help elementary and secondary schools, and $20 billion or more for colleges and universities. The March stimulus package included $13.2 billion for K-12 schools.
Up for discussion: Making funding conditional on schools reopening or holding in-person classes on college campuses.The funding could be earmarked to assist with the costs of increased cleaning services, providing masks, and additional school busses.
5. Funding for state and local governments
In May, the House of Representatives passed its own version of stimulus, titled the HEROES Act. It was not taken up by the Senate. In it, they proposed $875 million in funding for states, municipalities, and tribal communities hit with revenue losses due to the pandemic.
Some estimate governments have laid off or furloughed more than 1.5 million workers due to the pandemic. Congress appropriated $150 billion in March to state and local governments.
The administration is arguing against providing additional funding to states, particularly those they feel have been subject to financial mismanagement pre-pandemic. Any funding provided to states and localities will go toward COVID-related losses, rather than pension bailouts or conditions that existed before the pandemic.
Up for discussion: Requiring governments report on how the funds are being allocated.
6. More help for SMBs under the new package
High on the list for the administration is payroll tax relief for businesses as the pandemic continues. President Donald Trump is requesting a full payroll tax repeal through the end of this year, which he believes will stimulate the economy. Republican leaders suggest only a partial repeal may be forthcoming.
Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows met with GOP leaders July 21 to discuss the administration’s push to incentivize return to work and provide credits to help cover the cost of protective equipment.
Mnuchin said the PPP (Paycheck Protection Program) could be extended under a new stimulus bill, but with a particular focus on help for the restaurant, hotel, travel, and hospitality industries. This could include additional funding for loans to small businesses with 500 or fewer employees. Sole proprietorships and independent contractors in these industries may be eligible for extensions, but details have not yet been developed.
Extension of the PPP could also include allowing small businesses who have already applied for and received a loan under the PPP eligibility to do so again. The priority, said Mnuchin, would be given to businesses hit hardest by the pandemic, based on lost revenue and the size of the organization.
If Congress cannot reach a bipartisan bill by the August 7 deadline, there may be only 2 options:
- Congress to delay their August break and remain at work until a deal can be reached, or
- Table any stimulus until they resume session after September 7