After stimulus discussions between ground to a halt on Friday, President Donald Trump announced four executive actions on Saturday. The president’s four orders extend unemployment benefits, provide a payroll tax holiday, defer student loan payments through 2020 and extend the federal moratorium on evictions. Although the legal challenge seems obvious, several analysts also raised concerns about the effectiveness about Trump’s Executive Actions:
1- The administration is directing states to use a portion of the $150 billion Coronavirus Relief Fund (CRF) to pay augmented jobless benefits, covering 25% of a $400 weekly top-up to regular claims. To cover the remaining 75%, the federal government will repurpose $44 billion of the existing $70-plus billion in the Disaster Relief Fund (DRF). Even if a solution is better than none, using cash from the CRF and DRF doesn’t add extra stimulus.
2- According to Bloomberg, if the DRF is paying $300 a week to claimants, that amounts to around $30 billion per month (if employment situation remains broadly the same). As noted above, that money is capped at $44 billion, which at the current level of unemployment could run out in one to two months. Goldman Sachs economists said in a research note on Saturday that “The extra $400 unemployment payment is likely to last only a month.”
🇺🇸 Struggling U.S. Economy Gets Limited Lifeline From #Trump Actions – Bloomberghttps://t.co/0F3J5bWdBg
— Christophe Barraud🛢 (@C_Barraud) August 9, 2020
The money for the new $300 federal boost to unemployment would last Into September…around the time for the big fight on the stopgap spending bill needed to avert Oct. 1 government shutdown
— Erik Wasson (@elwasson) August 8, 2020
3- The 6.2% collected from workers’ paychecks for social security would be deferred, not canceled as confirmed by Larry Kudlow yesterday. It means that both firms and workers will be on the hook for payments at a later date capping any boost to spending. Furthermore, the payroll tax holiday applies only to those making less than $100,000 a year and excludes the 20-plus million that are unemployed or exited the labor force in recent months.
🇺🇸 Kudlow says Trump ‘did not mean that he was eliminating the Social Security tax’ – The Hillhttps://t.co/yu7geYTcHR
— Christophe Barraud🛢 (@C_Barraud) August 10, 2020
To recap:
1/ Evictions: No eviction moratorium or new rental $, asks HUD to “consider” if evictions should stop
2/ Unemployment: Uses $44B from FEMA to cover $300/week benefit for ~5 more weeks
3/ Taxes: Option to defer payroll tax payment, but w/o new law they’ll still be due
— Jeff Stein (@JStein_WaPo) August 9, 2020
4- The order also directs HUD to take action to “promote the ability of renters and homeowners to avoid eviction or foreclosure.” The WSJ highlighted that “It doesn’t reauthorize the eviction moratorium set in the Cares Act that expired at the end of July. That applied only to properties with government-backed mortgages, covering just one-third of renters.”
🇺🇸 What’s in #Trump’s Executive Actions on #Coronavirus Aid—and What’s Not – WSJhttps://t.co/KKqnLX8T2O
— Christophe Barraud🛢 (@C_Barraud) August 10, 2020
🇺🇸 One-Third of American Renters Expected to Miss Their August Payment – Bloomberg
*Link: https://t.co/eA2LbQgQzi pic.twitter.com/BYyDblT1fW— Christophe Barraud🛢 (@C_Barraud) August 10, 2020
5- Missing supports: Small-business aid is not an area where the White House has wiggle room to add additional funds while the actions also did not include another round of the checks that have been widely credited for helping to cushion the blow from the coronavirus pandemic.
🇺🇸 $1,200 Stimulus Checks Not Included In Trump’s Executive Measures. Here Is What You’d Get – Forbeshttps://t.co/NCx3ISaaBT
— Christophe Barraud🛢 (@C_Barraud) August 10, 2020
