Earning

Reduced unemployment assistance, a smaller check: What to expect from the GOP stimulus bill

The GOP on Capitol Hill is crafting the second stimulus bill. Issues they'll likely be weighing include PPP, unemployment assistance, and stimulus checks.

U.S. Senate Majority Leader Mitch McConnell (R-KY) leaves for the night after the day's efforts to wrap up work on coronavirus economic aid legislation to prevent the spread of coronavirus disease (Covid-19) in Washington, U.S., March 21, 2020.
Mary F. Calvert | REUTERS

Anxiety is building around whether America can expect another stimulus bill, especially since the enhanced federal unemployment insurance of $600 per week will expire on July 31. If there's no extension, most states will send out the final payments on July 25 or 26. The national unemployment rate was at 11% in June, and millions of Americans remain out of work.

It's up to the GOP-led Senate to propose the next course of action. The HEROES Act passed the House in May but has been languishing since. That bill includes a one-time $1,200 stimulus check for qualifying individuals, with a maximum household payment of $6,000 and an extension of the enhanced federal unemployment insurance past the current July 31 deadline, but the Senate has yet to vote on it. Instead, Senate Republications are putting together their own bill.

On Monday, President Trump met with Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy as GOP lawmakers begin talks about how to offer more aid to Americans. Here's what economists believe Republicans will propose.

Continued but reduced unemployment assistance

Some congressional leaders who objected to the fact that some people who got the extra $600 per week ultimately collected more money than they were getting from their jobs suggested instead giving people a "back-to-work" bonus of up to $450 a week through July. Bills including the provision have not passed, however.

Now the focus has returned to the enhancing unemployment assistance, especially since millions of Americans continue to rely on it to make ends meet. Still, many politicians, including the president, have balked at continuing the payouts of $600 a week, which they fear could provide a perverse incentive for workers to stay home.

"The GOP is not going to agree to extend the pandemic unemployment assistance beyond 100% of compensation," says Jamie Cox, managing director at Harris Financial Group. "There has been an enormous amount of push-back on the instances in which the [pandemic unemployment assistance] has provided people in excess of 100% of income weekly."

In a White House press briefing on Tuesday, President Trump said congressional leaders are considering ways to replace the $600 per week for unemployment benefits and they're aiming to provide "70% of the amount." That would come to $420 a week. On Wednesday, though, CNBC reported that Republicans are considering reducing it to $400 per month, or $100 per week.

The GOP is not going to agree to extend the pandemic unemployment assistance beyond 100% of compensation.
Jamie Cox
Managing director, Harris Financial Group

'A much more targeted PPP'

Since the onset of the pandemic, there have been several iterations of the Payment Protection Program (PPP). It offers small businesses loans to cover their payroll, with the possibility of those loans being forgiven in the future.

For their version of the bill, the GOP will offer "a much more targeted PPP" than previous programs, says Samuel Rines, chief economist at Avalon Advisors. "It's going to be restaurants, it's going to be bars. They're going to really tighten down on what they're targeting, because the first PPP was designed to help the leisure and hospitality sector, and the health-care and hospital sector was the number one recipient of PPP dollars."

Cox, too, believes that PPP will be part of the GOP bill but that instead of focusing on a certain industry or sector, "they're going to condition it based on revenue. If you have a certain decline in revenue, you will qualify."

A second, 'significantly smaller' stimulus check

Both Rines and Cox believe the GOP could put forth some proposal for another economic impact payment, also known as a stimulus check.

"We do think there's going to be a second check," says Rines, "but we think that second check is going to be significantly smaller or much more targeted in terms of income levels." Rines thinks the second stimulus check could be between $500 and $1,000 per person.

Cox expects that a second check would offer up to $1,200 per person, but with income phaseouts "there will be fewer people who get" one. Senator McConnell has suggested a second stimulus check could be targeted toward Americans with an income of no more than $40,000 per year.

Child-care assistance

Child-care assistance could also be part of the GOP bill, Rines says. "Without child care," he says, "it's going to be very difficult [for people] to get back to work." And, he believes, getting people back to work will be the GOP's "primary goal with the package."

Although Rines is not sure what kind of form this help with child care will take, he believes it's likely to be implemented through tax breaks: For example, he says, perhaps "child care can be 100% written off your taxes."

We think that second check is going to be significantly smaller or much more targeted in terms of income levels.
Samuel Rines
Chief economist, Avalon Advisors

A payroll tax cut: a 'reward' for high earners

Trump has also proposed a payroll tax cut, which would reduce the amount taken out of workers' paychecks to fund programs like Social Security.

"It's basically a reward for people who have been employed during the pandemic," says Rines. "The vast majority of that payroll tax cut would go toward [people making $150,000] or more."

Cox believes the GOP may use it as a "throwaway" tactic, meaning something Republicans put on the table as a way to negotiate but don't necessarily care too much about. The president has, however, threatened to veto any version of a stimulus package that doesn't include a payroll tax cut.

It's unclear how soon the GOP could present its bill. With Congress no longer in session starting August 10, and both parties holding national conventions later that month, experts say lawmakers will work to get a bill signed in the coming weeks.

"It's better to say, 'And we did this,' rather than, 'We're still working on it,'" Mark Mazur, director of the Urban-Brookings Tax Policy Center, told CNBC.

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