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This Is the Biggest Hurdle to a Second Stimulus Check

By Sean Williams - Jun 15, 2020 at 5:51AM

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If lawmakers can resolve their differences over this issue, the likelihood of another round of direct stimulus increases dramatically.

While some folks are likely tired of hearing about how these are "challenging" or "unprecedented" times, the language certainly fits the bill. Uncertainty surrounding the coronavirus disease 2019 (COVID-19) pandemic has caused more than 40 million people to file an initial unemployment claim in less than three months, and more than doubled the unemployment rate since February to 13.3%.

With most states enacting a multi-week, or in some instances multi-month, shutdown of nonessential businesses, the federal government was left with little choice but to step in and provide relief to ailing industries, small businesses, and working Americans. Thus was born the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

One hundred dollar bills and a partially covered U.S. Treasury check surrounded by a folded American flag.

Image source: Getty Images.

The CARES Act simply didn't do enough for most workers and their families

At a cost of $2.2 trillion, the CARES Act is the single-biggest piece of relief legislation ever to be passed by Congress and signed into law. It allocated $500 billion to struggling industries, gave nearly $350 billion to small business loans, handed $100 billion to help hospitals better combat COVID-19, and set aside $260 billion to expand the unemployment benefits program through July 2020.

But what most of the country will remember about the CARES Act is the $300 billion in direct stimulus payments to workers and senior citizens. According to the Internal Revenue Service, some 159 million Economic Impact Payments have been sent out, totaling more than $267 billion.

In an ideal scenario, stimulus recipients would receive a maximum payout of $1,200, or $2,400 for couples filing jointly, with qualifying dependent children under the age of 17 adding $500 each to what a parent or household receives. To net this maximum payout, single, married, and head-of-household filers simply needed to have an adjusted gross income below $75,000, $150,000, and $112,500, respectively.

While there's absolutely no question that these Economic Impact Payments were sorely needed, the fact is that they didn't do nearly enough for most Americans. An April 22 Money/Morning Consult survey found that roughly three-quarters of the 2,200 people polled had spent, or expected to spend, their stimulus payout in four weeks or less. Given that a slow rebound is expected in the U.S. economy, a second round of stimulus would certainly appear warranted.

The facade of the Capitol building in Washington, D.C.

Image source: Getty Images.

Here's the biggest obstacle to Americans receiving another stimulus payout

Of course, in order for Americans to receive a second stimulus check, lawmakers on Capitol Hill would first have to agree on what a next (and likely final) round of stimulus should look like.

In mid-May, the Democrat-led House of Representatives passed the 1,815-page Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. This $3 trillion piece of legislation would funnel an additional $1,200 payout to individuals and $2,400 to couples filing jointly, but would allow dependents of all ages to add $1,200 each to what a parent or household receives (with a limit of three dependents), rather than the $500 called for under the CARES Act. Thus, under the HEROES Act, households could receive a one-time payment of as much as $6,000.

Republicans, which hold a majority in the Senate, have suggested that the HEROES Act has no path forward as it's currently written. The GOP almost certainly disagrees with the $3 trillion price tag, the $1 trillion that would be apportioned to financially struggling states, and the addition of cannabis banking reform legislation.

But if there's one thing that stands out as the biggest hurdle to passing a second round of stimulus, it's the looming battle between Democrats and Republicans over the expansion of the unemployment benefits program.

A businessman holding up a cardboard sign that reads, Looking for a job.

Image source: Getty Images.

Under the CARES Act, approved unemployed beneficiaries are to receive an extra $600 a week through July 31, 2020, or until they have a new job. Democrats want to see this extra $600 a week extended through January 2021, as noted in the HEROES Act. There's certainly validity in wanting to see this benefit extended, especially with the Federal Reserve predicting that 15 million Americans will remain unemployed by year's end. Should this extra $600 a week stop after July 31, it's not out of the question that rent, mortgage, and loan delinquencies rise considerably.

Meanwhile, Republicans have dug in their heels and are against extending the expansion of the unemployment benefits program. In the view of the GOP, the expansion of unemployment benefits discourages those out of work from reentering the labor force, which will slow the speed by which the economy ramps back up. Considering the arbitrary nature of this $600/week payout -- i.e., it's given to the unemployed without a sliding scale based on earnings -- some folks are netting more from unemployment than they were when working full time.

The ability to get another round of stimulus passed will likely come down to whether or not a compromise can be reached regarding unemployment benefits. It's possible we could see this expansion shortened from the January 2021 timeline outlined in the HEROES Act, or possibly see the weekly amount of $600 reduced to lessen the perceived incentive of staying out of the workforce. When lawmakers can agree on what to do with the unemployment benefits program, the remaining obstacles should fall like dominoes.

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