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Unemployment/Stimulus check

What Went Wrong And Where Do We Go From Here?



Update: Earlier today President Trump signed four executive orders regarding enhanced unemployment, a payroll tax holiday, student loan relief, and an eviction moratorium.

As negotiations over a second stimulus package collapsed, many are wondering what went wrong and where we go from here. Enhanced unemployment benefits expired at the end of July, and many continue to wait for a second stimulus check. The moratorium on evictions has expired, and the popular Payroll Protection Program ends today.

To understand what happened in Washington and what will come next, we need to begin with the HEROES Act.


House Democrats passed the $3.4 trillion HEROES Act in May. To put the cost of the bill into perspective:

  • The CARES Act cost $2 trillion
  • 10 years ago the total public national debt was 13.5 trillion
  • As of September 30, 2019, the total public national debt stood at $22.7 trillion

As such, the HEROES Act’s cost would amount to about 15% of the total public debt.

The bill would extended the $600 enhanced unemployment benefit to January 2021. It called for a second stimulus check of $1,200 ($2,400 for joint filers) plus another $1,200 for dependents, regardless of age. It also allocated $915 billion to fund state and local governments. And it extended the suspension of federal student loan payments for another 12 months.


Senate Republicans introduced the $1 trillion HEALS Act in July. Senator Chuck Schumer described the timing as “callous inaction & cynical delays.” Senator McConnell explained the timing as necessary to understand how the implementation of the CARES Act would unfold. By the end of July, more than $1 trillion authorized under the CARES Act had not been spent.

The HEALS Act called for a second $1,200 stimulus check and removed the age limitation on dependents. It also provided for a reduced unemployment benefit of $200 a week, which would later be changed to a benefit designed to pay enhanced unemployment benefits that, in conjunction with state unemployment insurance, would cover 70% of a worker’s prior income. The HEALS Act, however, did not provide additional funding for state and local governments or an extension of the eviction moratorium.

Second Stimulus Package Negotiations

Negotiations over the competing proposals began after the HEALS Act was introduced. White House Chief of Staff Mark Meadows and Treasury Secretary Steve Mnuchin negotiated on behalf of Republicans, while Speaker Nancy Pelosi and Minority Leader Chuck Schumer negotiated on behalf of Democrats.

Late in the process Mrs. Pelosi said Democrats were willing to decrease the cost of their $3.4 trillion proposal by $1 trillion if the Republicans would increase their $1 trillion bill by another $1 trillion. From there they believed the parties could reach agreement on the remaining $400 billion divide.

Democrats would reduce the cost of the HEROES Act by reducing the time period over which benefits would be paid out. For example, if a benefit under the HEROES Act would be in place until September 2021 (a date Mrs. Pelosi specifically mentioned in a press briefing), they would reduce the overall cost by expiring the benefit sooner.

Importantly, what the Democrats would not do is reduce the amount of the benefit. They would keep the benefit amount the same, but shorten the time that the benefit was paid out. As Mrs. Pelosi explained: “Can we cut back on our number? Not cut back on the number of children who are fed, but for how long the legislation lasts.”

The offer was rejected for both fiscal and policy reasons. First, Republicans balked at a package that would cost $2 to $2.4 trillion. Some Senate Republicans are unwilling to support even the $1 trillion HEALS Act. Second, the proposal was rejected on policy grounds. Here there are at least two critical issues—funding for state and local governments and enhanced unemployment benefits.

During negotiations, Republicans offered to include $150 billion for state and local governments. They also offered to increase enhanced unemployment benefits from $200 in the HEALS Act to $400 a week through the end of the year.

The Democrats wouldn’t budge on either issue. According to Mr. Meadows, the Democrats haven’t changed their position of giving $915 billion in aid to state and local governments. Mr. Mnuchin has said they offered a compromise on enhanced unemployment benefits, which Democrats also rejected.

Temporary Or Targeted Relief

During negotiations, Republicans proposed either temporary or targeted relief. For example, they proposed extending the enhanced unemployment benefit a short time to get needed relief to the unemployed while both sides continued to negotiate. They also proposed a targeted bill on issues, such as the stimulus check, where the parties could reach agreement. Democrats rejected both of these proposals.

President Trump to Issue Executive Orders

Following the collapse of the negotiations, President Trump said he is planning to issue a number of executive orders. Specifically, he is preparing executive orders covering enhanced unemployment benefits, a payroll tax suspension, student loan repayment relief, and extension of the moratorium on evictions.

Enhanced Unemployment Benefits

Mr. Trump would implement enhanced unemployment benefits through the end of the year. He didn’t provide specifics on either the amount of the benefit or how it would be funded through an executive order. He did say that they have the funds to provide the benefit, but didn’t offer specifics. He also wouldn’t commit to a $600 weekly benefit.

Payroll Tax Suspension

President Trump wants to defer the payroll tax to at least the end of the year. The deferment would be effective retroactive to July 1st. At the end of the year, it may be extended. A payroll tax suspension has been a hot button topic. Many point out that it does nothing to help the unemployed. Critics also note that it’s expensive and won’t create incentives for more hiring. Finally, it raises questions of whether employees will owe these taxes when the suspension ends.

Student Loan Repayment Relief

On student loan relief, Mr Trump said he would defer payments and interest “until further notice.” The current relief from student loan payments authorized by the CARES Act is set to expire on October 1st.

Eviction Moratorium

Mr. Trump said he would also extend the moratorium on evictions. Without funding to support rental payments or relief for landlords, however, such a measure may create as many issues as it solves. It puts landlords in a precarious financial position, and adds to the back payments tenants will owe when a second moratorium expires.

What’s Next

Mr. Trump has said his executive orders could be ready “by the end of the week.” During that time, the parties could continue negotiations on a second stimulus package. Whether that will happen is unclear. When negotiations ended without a deal, both sides said they would be willing to consider a proposal from the other side.

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