On Saturday, as New York City’s 192,000 out-of-work hospitality staffers were about to enter their second week without enhanced unemployment benefits, President Donald Trump issued a memorandum to partially restore those payouts. It’s unlikely, however, that any of the country’s 31 million people claiming jobless aid will see any of that money.
Critics are calling the president’s orders questionably legal and are casting doubt on the ability of states or employers to implement the measure.
Trump signed the action a day after the U.S. jobs market showed real signs of losing steam — and a day after White House officials and Congressional Democrats deadlocked over efforts to stimulate the economy, including over whether to renew a $600 jobless benefit. Democrats passed a bill months ago extending those weekly checks, a lifeline to workers and a boon to the consumer spending that keeps the U.S. economy afloat. Republicans, by contrast, argued for a much smaller benefit.
The president, unsurprisingly, opted for a much smaller benefit. Speaking from his private golf club in New Jersey on Saturday, Trump announced that he’d offer individuals up to $400 per week, provided that (broke) states chip in some of the money. White House economic adviser Larry Kudlow told CNN’s Dana Bash on Sunday — during an interview where one could objectively say he was barbecued on the air — that workers could see checks within weeks.
Trump also issued a toothless measure on evictions, a dangerous memo on payroll taxes, and student loan relief for distressed borrowers. House Speaker Nancy Pelosi has called Trump’s actions “absurdly unconstitutional” — taxation is the domain of Congress — but added that she’d be willing to continue stimulus talks.
What follows is a brief summary of Trump’s executive measures on unemployment and payroll taxes, along with an explanation of why they are unlikely to help workers.
Enhanced Unemployment Extension
Trump, in a memo, calls for a weekly benefit of $400 for unemployed individuals, tapping a fund originally designed for relief from hurricanes and other natural disasters. Actually administering that plan in full, however, could quickly prove to be untenable.
The federal government will only contribute 75 percent of the benefit, or $300 per person, with the remaining $100 coming from states. Under the program, states would be able to use allocated Coronavirus Relief Fund money to help pay the extra funds they’ll owe. Problem is, states are already in dire financial straits from the COVID-19 crisis.
New York Gov. Andrew Cuomo tweeted on Sunday night that states don’t have the money to implement the full benefit. For context, if New Yorkers were only able to receive the $300 federal portion of that benefit, on top of regular state payouts, an average cook in the five boroughs would receive benefits that barely constitute the local minimum wage on an hourly basis.
Still, even $300 a week assumes that states would be able to actually implement the policy. “Because Congress has not authorized an extension of additional federal unemployment assistance, the state will have to set up an entirely new system to deliver the additional aid, which could take months,” CNN reports. What’s more, that benefit could run out in as little as five weeks, per the New York Times.
Vulnerable workers who’ve been unemployed for 15-26 weeks, a class of individuals that more than tripled in the July jobs report, typically don’t have the resources to wait months for additional aid.
Payroll Tax Deferral
Trump’s memorandum directs Treasury Secretary Steve Mnuchin to defer the withholding, deposit, and payment of the taxes that fund Medicare and Social Security. The policy would apply to those earning less than $4,000 every two weeks, or $104,000 per year. It’s a policy that threatens the viability of the government’s signature safety net programs, and it’s also a policy that, in the words of the Wall Street Journal, has received “a lukewarm reception from economists and lawmakers in both parties.”
A payroll tax cut can theoretically put a few extra bucks back in the pockets of workers, particularly undocumented individuals who are often on payroll but who can’t normally benefit from state aid programs. The problem is, however, that the policy isn’t a tax cut but rather a deferral, meaning workers would have to pay everything back in 2021.
So in other words, the payroll tax deferment is a loan. Such a policy could prompt excess spending by workers who see extra money in their paycheck, followed by a financial shortfall in the new year. And while Trump has made clear he eventually wants those tax obligations forgiven, that political gamble is putting a lot of low-wage Americans on the line for a lot of money.
The only good news is that many employers likely wouldn’t actually return the payroll taxes to workers in the first place, leaving them less at risk, according to a CNN interview with Moody’s chief economist Mark Zandi this morning.
So to summarize: What Trump did on Saturday appears to be a whole lot of nothing.