Where we stand on the next stimulus package

Why it hasn't been passed and what's next for Trump's executive action

Aug 10, 2020 | Editorial | The economy | Politics | Taxes
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As key CARES Act provisions expired at the end of July...

Republican Senators raced to draft a proposal for another stimulus bill that would provide Americans with much-needed financial support. Ten days later, there's been more bickering than bargaining as deal talks between divided Democrats and the Trump Administration fell apart on Friday, followed by executive action from the president over the weekend. With a potential wave of evictions imminent and the unemployment benefits of millions at stake, it's fair to wonder: why are we stuck in negotiations when a bill should've been passed weeks ago?

What's dividing negotiations?

In a single word: budget. While Senate Majority Leader Mitch McConnell and the White House have been insistent on a $1 trillion-or-less price tag for the next stimulus round, Democratic legislators are equally deadset on making sure Americans receive aid comparable to March's $3 trillion relief bill. When it comes to issues like state and municipal relief, COVID treatment, and safely reopening schools, Democrats believe the proposed plan falls hundreds of billions short as two vastly different perspectives on government spending clash.

Why do the Democrats want a bigger budget?

The stimulus provided this spring was by many measures successful in keeping millions of Americans financially stable during an incredibly uncertain time. Households saw record savings, increased incomes driven by stimulus checks, and even their largest drop in debt since 2013. While decreased spending played a big role in each of these outcomes, it could be argued that the provision of benefits and protections allowed spending to decrease without sending millions into poverty. But government aid carries a hefty price tag, and the Democrats believe it'll take far more than $1 trillion to make it happen.

Why do the GOP and White House want a smaller one?

The Republicans believe that the last stimulus may have gone too far with some of its protections, namely the $600/month unemployment benefit that cost the federal government $15 billion/week to implement. With nearly two-thirds of its recipients making more on unemployment than at their old jobs, the White House fears continuing the benefit will demotivate people from returning to work, and at great expense to taxpayers. With the US already in an unprecedented $3.7 trillion deficit for the fiscal year without any additional relief, they argue for limiting spending with a $1 trillion plan that will still provide stimulus checks and unemployment benefits (albeit at a reduced rate).

What's the deal with these executive actions?

The stalled negotiations prompted President Trump to sign four executive actions on Saturday to provide financial relief in the interim. Each action implements a major relief measure, including deferred payroll taxes, an extension of the student debt interest and eviction moratoriums, as well as a new round of unemployment benefits. But these actions differ from the CARES Act in some key respects: while that unemployment benefit was fully federally funded, this executive order is calling for the states to individually cover at least 25% of the costs and maxes out at $400/week. The drastic nature of these moves has caused Democratic lawmakers to question their constitutionality and it's likely that court challenges attempting to block their implementation will soon follow.

What could happen next?

For now, it's a bit wait-and-Pelosi: both parties left negotiations for the weekend without a set date to return. Pelosi said that the Democrats have offered to reduce their stimulus plan's budget by $1 trillion if the Republicans can in turn increase their budget by $1 trillion. As of this weekend, the Trump Administration has refused to accept that proposal, and even a miraculous Monday agreement would likely mean at least another week until the bill is formally passed. In the meantime, Trump's executive actions could offer relief, but impending legal challenges make it unclear when money will actually reach the unemployed.



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