President Donald Trump released Saturday’s executive action, which means a sparse support bailout for an economic recovery already stalled, as negotiations with Democrats on additional pandemic stimulus broke down.
Rearranging aid funds from the Trump disaster will provide $ 300 a week in federal unemployment assistance – down from $ 600 a week in the Care Act that expired in July. This money is caught at $ 44 billion, which at the current level of unemployment could end within one to two months.
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His next big action could have a bigger impact: he pushes the payroll tax from September to the end of the year for workers earning as much as $ 8,000 a month, which could put in an extra $ 600, at most. , in the pockets of employees. Economist Stephen Moore, a Trump ally, says he amounts to a $ 300 billion tax cut that would help the economy. However, other economists said it is unlikely to provide as much stimulus as Trump could hope.
While the actions may hurt the full relief for Americans, funding for the unemployed is much more limited than in previous months, and deferring the payroll tax will not help the tens of millions who have lost their jobs. Beyond that, the legitimacy of Trump’s actions is not entirely clear, and the moves did not include an extension of aid to small businesses that are earning little funding for advance aid.
“It’s certainly better than nothing, but it’s not a good solution for Congress to come to a clearer legal and logically possible compromise in their fiscal negotiations,” said Ernie Tedeschi, an economist at Evercore ISI.
The impact of the payroll tax deferral depends on whether employers will stop holding money from American checks, with voters in turn pressuring Congress to eventually pass legislation to forgive the accumulated amount.
But employers may simply decide to do nothing in the face of uncertainty, for fear that if Congress fails to act, they may get stuck trying to raise money from their employees to pay their debts to the Internal Revenue Service.
“The idea of lowering payroll taxes and waiting for companies to execute an executive order when they will need their employees to provide it later, unless the payroll tax cut becomes permanent, makes no sense. for him, “said Diane Swonk, chief economist at Grant Thornton in Chicago. “And it’s not the payroll people who have the problem, it’s the unpaid people.”
Trump said he was approving a $ 400 benefit because he saw that the $ 600 weekly extra pay was too high and discouraged people from returning to work – a final cry for many Republican lawmakers. The text of the action says $ 300 will come from the federal government, while the other $ 100 will come from the states.
Andrew Husby, an economist with Bloomberg Economics, estimated that the new benefits would reach a flow rate of about $ 30 billion a month, meaning the money could run out in less than two months, and the situation is likely seek another adjustment by Congress ahead of the November Elections
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While $ 400 “is still a considerable amount, it is certainly a hindrance that will be late in spending, “Husby said. For the payroll tax deferral,” the net positive impact will be slightly less than raw numbers can suggest “given the uncertainty for businesses if they will have to pay taxes.
Another difficulty is that if unemployment starts to rise again, new funds are used up faster, “so you have more people receiving less money for shorter periods of time,” said Joel Naroff, president and founder of Naroff Economic advisors.
– With the help of Justin Sink