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Economist: Don't count on getting the $400 a week in unemployment aid from Trump's order — here's why

President Trump's executive order to temporarily give Americans up to $400 per week in additional unemployment benefits may not reach Americans.

Twenty/20

President Donald Trump signed a series of executive orders Saturday in an effort to provide economic aid to Americans struggling during the coronavirus pandemic. The orders establish a payroll tax holiday, defer student loan payments through 2020, extend the federal protections from evictions, and provide additional unemployment benefits for the nearly 30 million Americans out of work. 

The president's executive actions bypassed Congress, which has been deadlocked in negotiations to extend relief, particularly over enhanced unemployment benefits. Unemployed Americans had been receiving an extra $600 per week in supplemental aid under the CARES Act, but that benefit expired on July 31. 

Under the president's orders, announced over the weekend, enhanced benefits would be cut to $400 per week. That total includes federal unemployment benefits of $300 per week, plus state supplemental aid of up to $100 a week.

Hold off factoring that money into your budget, though, says Mark Hamrick, senior economic analyst at Bankrate: "Don't spend it before you see it. I think there's a real question as to whether these payments see the light of day." 

Joshua Gotbaum, a guest scholar at the Brookings Institution, who has worked in five administrations under presidents of both parties, agrees. Due to the work required at the state level, Gotbaum thinks it's unlikely the executive order will result in help for the unemployed anytime soon: "The odds that anybody will get a $400 check between now and the election are really low."

Here's why.

States are cash-strapped

"I think it would be a mistake to confuse the executive orders with serious government action," says Gotbaum. "The way I think of the executive order is, it's a complicated way to avoid taking the blame for not negotiating a deal to meet the needs of unemployed Americans." 

One of the issues with the president's unemployment order is that it puts states on the hook for funding 25% of the supplemental aid, which amounts to billions of dollars, Hamrick explains. Many states are already facing budget crunches as a result of the coronavirus pandemic and likely cannot afford to contribute. New York Governor Andrew Cuomo, for example, dismissed the plan on Twitter as a "nonstarter," adding, "States can't afford it."

"The president cast a quarter of the burden on already significantly strapped states, which just adds further uncertainty to an already uncertain situation," Hamrick says. 

The president addressed this concern Sunday, saying that if states can't afford their portion, the federal government may pick up the entire cost. "It will depend on the state," he told reporters before returning to the White House from his resort in New Jersey.

The way I think of the executive order is, it's a complicated way to avoid taking the blame for not negotiating a deal to meet the needs of unemployed Americans.
Joshua Gotbaum
guest scholar, Brookings Institution

On Monday, Treasury Secretary Steven Mnuchin said states shouldn't have a problem covering their share of unemployment aid, because it will come from money already allocated by the federal government. "The 25% isn't coming from the states because we're authorizing them to use money out of the $150 billion we just sent them, so in essence all 100% is coming from the federal government," Mnuchin said in an interview on CNBC's "Squawk on the Street." 

But that doesn't take into account all of the other expenses states have had to use that federal money for, Gotbaum says. "Some of the states have already spent the money, and if they haven't, they have plenty of things to do with that money. For example, reopen school," he says. "Where are you going to get the money to put dividers in classrooms, to operate and comply with public health safety?"

States are overloaded with unemployment claims

As we've seen since the onset of the pandemic, states aren't prepared to process the influx of unemployment claims, Hamrick says: "None of these systems were set up to handle the amount of traffic they're getting."

Many Americans are still waiting to receive the unemployment benefits allotted under the CARES Act. "In the early days of the pandemic, specifically in late March, we saw a huge spike in unemployment requests, or jobless claims jumping," he says. "In some cases, we're hearing anecdotally that some people still haven't gotten their checks."

Changing the mechanics of unemployment processing again will only lead to further delays, Hamrick says. "There is not a national system of unemployment insurance," he explains. "There's a crazy patchwork quilt of every single state and the District of Columbia, and here we are again changing the formula, assuming that [the president's order] stands." 

VIDEO2:1802:18
What happens after enhanced unemployment benefits run out?

Video by Stephen Parkhurst

Fewer Americans will meet eligibility requirements

Even if the president's executive order were to go into effect, many Americans would be priced out of the benefits.

That's because the CARES Act made assistance for unemployment more widely available through Pandemic Unemployment Assistance. This is a separate program from a state's traditional unemployment insurance system. The new program opened eligibility for unemployment benefits to many more workers, such as independent contractors, part-time employees, and gig workers.

"The executive order would only provide aid to Americans who are eligible for traditional unemployment insurance. So, for example, Uber drivers and gig workers were covered by the pandemic unemployment insurance under the CARES Act. They're not eligible, in most cases, for traditional unemployment insurance, so they don't get covered," Gotbaum says.

All of these unanswered questions and factors that the president's orders don't address only increase financial stress for Americans, Hamrick says: "At minimum there's a high degree of uncertainty, and that uncertainty adds insult to injury for unemployed Americans who don't have a high degree of confidence that they'll be able to pay their bills."

It's possible a solution that would better address the unemployment crisis is on the horizon, though, Hamrick says: "Congress might agree to something in the coming days that would supplant this."

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