3 Things to Know About the Second Round of Stimulus Checks

Politicians continue to hammer out the details of the second round of stimulus checks. Here's what we know so far.

After weeks of political posturing, Senate Republicans have responded to the HEROES Act -- the ambitious $3 trillion stimulus program passed by the House of Representatives in May. The Senate calls its version the HEALS Act (an acronym for Health, Economic Assistance, Liability Protection, and Schools). According to Senate Majority Leader Mitch McConnell, the act is "tailored and targeted." It is certainly a lighter version of the bill proposed by Congress, coming in at approximately $1 trillion.

Given the debate surrounding the newly named HEALS Act, McConnell's claim that the Senate can have details ironed out in the "next two to three weeks" sounds ambitious. There are those, like Sen. Chuck Schumer of New York, who claim the HEALS Act does not go far enough. Schumer called the Republican version a "half-hearted, half-baked legislative proposal," and worried that it is too little, too late for American families who need it the most. Also opposing the plan – albeit for different reasons – is Sen. Ted Cruz of Texas. Cruz believes the government has spent more than enough on mitigating coronavirus-related damages, and said on Monday that he anticipates "significant resistance" to the stimulus bill from his side of the aisle.

As opposing sides slug out the details, here is what we know, what we suspect, and what we hope to hear more about in the coming days.

1) Second checks are definite, and likely a mirror image of the first

According to Treasury Secretary Steven Mnuchin, we can expect the second round of stimulus checks to be the same as the first. As a reminder, this is how the first checks were calculated:

• Single filers earning less than an adjusted gross income (AGI) of $75,000 received $1,200, plus $500 for each dependent child under the age of 17. Single filers earning more than $75,000 still received a check, although it was reduced by 5% of the amount earned over $75,000, up to $99,000.
• Head of household filers who earned $112,500 or less received a full $1,200 check, plus $500 for each dependent child under the age of 17. The payment was reduced by 5% for income earned over $112,500, up to $136,500.
• Joint filers earning less than a combined $150,000 AGI each received a check for $1,200 (for a total of $2,400), plus $500 for each dependent child under the age of 17. Their checks were reduced by 5% of the amount earned over $150,000, up to $198,000.

2) Like stimulus checks, unemployment is considered crucial

Republicans have argued for months that the extra $600 per week added to unemployment benefits (a CARES Act benefit that expired on July 25) discouraged employees from returning to work. As part of their HEALS Act announcement, Republicans revealed their intention to reduce the weekly bump from $600 to $200 for two months. During that time, they expect states to transition their unemployment systems to provide approximately 70% wage replacement. For example, a laid-off employee who worked full-time at $15 per hour ($600 per week) will be eligible for $420 per week in benefits ($600 x 0.70 = $420) under the new system.

According to The Century Foundation, an estimated 25 million Americans have received an extra $600 payment on top of state unemployment benefits. It is that bump that pumped an additional $15 billion back into the economy. Politics aside, the deepening recession is likely to worsen once this infusion of cash goes away. Given the human and economic cost of discontinuing the program, unemployment benefits are likely to be one of the most fiercely debated topics of the stimulus bill.

3) Stimulus checks are part of a larger package

Senate discussions regarding stimulus are wide-ranging, and while some proposals may not impact you directly, it is possible they will trickle down to you and your family. Here are other stimulus-related negotiations currently on the table:

Ramped-up testing: Depending on how you measure it, the U.S. is somewhere between four and six months into the COVID-19 crisis. Testing is still limited, and wait times are long. The Senate stimulus plan includes $16 billion earmarked to states for testing, with an emphasis on employers, schools, day care facilities, and nursing homes. Another $26 billion is allocated for the development of diagnostics, vaccines, and therapeutics.

Continuation of the Payroll Protection Program (PPP): The much-lauded PPP offers forgivable loans to small businesses as an inducement to keep employees on the payroll rather than laying them off. Thus far, PPP has not been demonstrably effective. According to a Brookings Institute study, small businesses that accepted PPP loans were as quick to lay their employees off as other businesses. The new Senate Republican version allows small employers (300 or fewer employees) whose revenue has declined by 50% or more to receive a second forgivable loan.

A new freeze on foreclosures and evictions: For those in need of housing assistance, the HEALS act addresses foreclosure and eviction. The Act would extend protections to homeowners with a federally backed mortgage, allowing them to pause or lower payments without penalty. Federally backed mortgages include FHA, VA, USDA, Fannie Mae, and Freddie Mac.

Oddly, after announcing that their act would extend eviction protection to renters, the White House (and shortly thereafter, Senate Republicans) withdrew support for that provision. They did include $100 billion in rental assistance.

There is tremendous variation in approaches to the stimulus bill. McConnell and others insist upon sweeping liability protections for schools and businesses to protect them from pandemic-related lawsuits. Others want more money to help schools reopen, or a new round of low-interest business loans.

Once the Senate concludes its initial work, leaders from the House will negotiate details with the Senate. The Democratic House majority is likely to request compromise on issues like extended unemployment benefits, hazard pay for essential workers, funding for food stamps, and stricter measures to protect renters from eviction.

Despite current grandstanding, these proposals are like handprints in wet concrete.

We won't know what the final bill looks like until the arguing ends and the cement dries. Until then, we will keep you updated.