This is a year America won't soon forget. The coronavirus disease 2019 (COVID-19) pandemic has wreaked havoc physically and financially. It's responsible for more than 142,000 deaths in the U.S., and has cost over 20 million Americans their jobs. Worst of all, this physical and financial shock has occurred over a span of just five months.
While resolving the physical toll of COVID-19 remains a challenge, lawmakers felt the most appropriate response to the financial hardships created by the pandemic was to throw a record amount of money at the problem. Thus, the Coronavirus Aid, Relief, and Economic Security (CARES) Act came into being.
Image source: Getty Images.
A necessary response to an unprecedented problem
The $2.2 trillion CARES Act is massive. It absolutely dwarfs the $831 billion relief package put together by the Obama administration during the financial crisis to support banks and prop up the U.S. economy. This $2.2 trillion offered a variety of purpose, with these funds used to support struggling industries, supply capital to small businesses, and boost unemployment benefits for tens of millions of Americans (i.e., add $600 per week to what unemployed beneficiaries receive, through July).
The CARES Act was also responsible for awarding over 160 million workers and seniors an Economic Impact Payment (as these stimulus payouts are officially known). Though $300 billion was apportioned, roughly $270 billion has been disbursed, thus far, according to the Internal Revenue Service.
Under the CARES Act, a worker or senior could receive a maximum payment of $1,200, or $2,400 for a couple filing jointly. A parent or household was also able to net $500 for each dependent aged 16 and under. This meant a married couple with three young kids could receive a $3,900 Economic Impact Payment under the CARES Act. Of course, there were strict adjusted gross income thresholds that single ($75,000), head-of-household ($112,500), and married ($150,000) tax filers would need to fall under to receive this max payment.
There's little question that the CARES Act was a novel and needed piece of legislation. Unfortunately, it didn't do much for the average American or family. Approximately three-quarters of stimulus recipients burned through their payouts in four weeks or less. This means the upcoming end of enhanced unemployment benefits on July 31, 2020, could spell trouble for rent, mortgage, auto, and credit card payments.
Image source: Getty Images.
Congress has a $2 trillion second stimulus quandary on its hands
For months, pundits and the American public have pined over whether or not lawmakers would work on another stimulus package, complete with a second round of direct stimulus payments. That debate looks to now be settled.
Over the past couple of weeks, President Trump, Treasury Secretary Steven Mnuchin, and Senate Majority Leader Mitch McConnell (R-Ky.), have all commented in favor of another round of direct stimulus payments to the public. With Democrats passing the HEROES Act in the House of Representatives in May, this meant both parties looked to be on the same page, at least in terms of desire to pass another round of stimulus.
But there's a problem -- a $2 trillion problem.
The HEROES Act that the Democrat-led House passed on May 15 came with a roughly $3 trillion price tag. It assigned $200 billion in hazard pay to frontline workers, offered $1 trillion to states in need, gave additional funding to hospitals to fight COVID-19, extended enhanced unemployment benefits through January 2021, and offered a second round of direct stimulus payouts, to name a few of its directives.
Meanwhile, Mitch McConnell commented last week that the Republican-led Senate's second stimulus bill will come in around the $1 trillion mark. It'll include $105 billion for the reopening of schools, another round of payment protection program loans for small businesses, and, of course, direct stimulus payments to working Americans and seniors.
The gap between these proposals is a whopping $2 trillion. That's not a difference that can simply be swept under the rug.
Image source: Getty Images.
An impossible task?
There are a number of issues that could keep Democrats and Republicans from finding common ground on the next stimulus proposal.
Maybe the biggest hurdle is going to be enhanced unemployment benefits. Democrats have been pretty steadfast in their demand that extra funding be apportioned to the unemployment program, especially given the slow pace of the recovery, and now a second wave of COVID-19 infections. Meanwhile, Republicans believe that high unemployment benefits are discouraging the unemployed from getting back to work. In some instances, folks are making more staying unemployed than they would be if they were working. Finding common ground between these two positions won't be easy, but it may take shape as a back-to-work bonus.
Another battle could be brewing over the HEROES Act's desire to expand who'll receive benefits and/or contribute to what a parent or household receives. Under the HEROES Act, dependents of all ages (limit three) would add $1,200, each, to what a parent or household nets. That's up from $500 each under the CARES Act. The HEROES Act would also allow undocumented workers with a taxpayer identification number to collect a stimulus payment. These stipulations are likely to be opposed by the Senate GOP.
Even President Trump presents as a second stimulus deal obstacle. He recently stated that he'd be unwilling to sign a new round of stimulus into law if it didn't contain some form of payroll tax cut. Though a payroll tax cut would result in higher take-home paychecks for working Americans, it's considered a highly controversial solution, especially considering the harm it could cause to the Social Security program.
And, as the icing on the cake, these differences, and the aforementioned $2 trillion funding gap, need to be ironed out within the next 13 calendar days. That's because the Senate goes on recess for a month after August 7.
If it sounds like an impossible task, that's because it just might be -- but only time will tell.
