Wharton economist talks ensuing coronavirus stimulus bill

With countless Americans enduring job losses, foreclosures, bankruptcies, broken families, depression, and other illnesses during the coronavirus pandemic, along with civil unrest in numerous cities and the looming presidential election campaign, the COVID-19 relief packages currently being debating by both houses of Congress are one of the most important pieces of legislation in modern U.S. history.

Both Republicans and Democrats have now unveiled proposals to extend unemployment benefits and provide financial assistance to Americans during the coronavirus pandemic. Details about a potential second round of checks emerged July 27, when Senate Republicans outlined their fourth phase of federal coronavirus response efforts in the Health, Economic Assistance, Liability Protection and Schools, or HEALS, Act.

Republican lawmakers want to continue enhanced unemployment benefits, at a lower amount than Democrats propose, and send another round of stimulus checks to American households to help them weather the economic impact of the coronavirus pandemic. The financial assistance would be around $1,200 per eligible person, similar to the first round, which were issued through the bipartisan CARES Act beginning in April after its passage in March.

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As Congress continues to negotiate over another stimulus package, the country’s unemployment numbers keep growing: 1.4 million Americans have filed for unemployment this week, according to U.S. Department of Labor data released Thursday. The pace of the economic recovery is following the pace of the virus, says Richard Prisinzano, director of policy analysis at the Penn Wharton Budget Model.

“The fact that there are 1.4 million new claims this week suggests that the economy is losing the momentum it had shown over the last few weeks,” he says “The uptick in claims is certainly related to the increase in virus cases over the last few weeks, and highlights that the economic recovery is tied to the pandemic.”

Another massive round of stimulus checks could help the moribund economy rebound this fall, says Prisinzano.

“While it’s being sold as a stimulus, I think these checks are about people not being able to go back to work, because the economy is still shut down,” he says. “And here’s money to help people get through the next few months. It’s not a fix to the pandemic.”

More than 53 million people have applied for unemployment benefits since the coronavirus reared its ugly head, according to the Department of Labor.

Here’s what the GOP proposal for stimulus checks means:
•    All single U.S. citizens and U.S. residents with adjusted gross income up to $75,000 would receive $1,200.
•    Married couples would be eligible for $2,400 as long as their income is less than $150,000.
•    To qualify, you’ll need a work-eligible Social Security number.
•    Dependents of any age would receive $500 each.

Payments would be lowered for single people earning more than $75,000 and married people earning more than $150,000, with the payments phasing out entirely for singles earning more than $99,000 and married couples with income above $198,000.

The GOP bill differs from the first round of checks primarily through its treatment of dependents, says Prisinzano.

“I do think it’s an important change in the stimulus checks to include dependents of any age, as that was not the case in the first round,” he says. “I think it was more of an oversight to get the first round of checks out as quickly as possible.”

The CARES Act excluded “adult dependents” from the $500, which meant that millions of college students and adults with disabilities who are claimed as dependents didn’t qualify for stimulus payments. But the Republican proposal makes it clear that college students and other adult dependents would be eligible for the payments in a second round.

“For someone who is caring for an elderly parent or disabled adult, they probably can’t send them to care, because the adult care facilities have closed due to the pandemic,” Prisinzano says. “So it’s a bigger burden on those that are staying home. The extra money for those dependents puts less pressure on the caretakers to go out and maybe try to work an extra shift.”

The Democrats’ rival proposal, the Health and Economic Recovery Omnibus Emergency Solutions, or HEROES, Act, is more expansive than the GOP proposal by comparison, says Prisinzano.

“The bill is more generous by definition, such as $1,200 per dependent rather than $500 per dependent,” he says. “The HEROES Act also provides for $1 trillion in state and local aid that the HEALS Act does not. Ultimately, states are hurt as well as tax revenue is lower. The HEROES Act attempts to alleviate some of that burden. The HEROES Act also provides additional funding for welfare programs like SNAP.”

Here’s what the Democrats’ proposal for stimulus checks means:
•    A one-time stimulus check payment of $1,200 per person up to $6,000 per household.
•    Individuals earning up to $75,000 would get a one-time $1,200 check. Couples earning up to $150,000 would be eligible for $2,400.
•    $1,200 for each dependent (up to three dependents), and allows adult dependents.
•    To qualify, you’ll need a social security number or a taxpayer ID number.

Most likely, fewer immigrants would receive checks under the Republicans’ bill versus the Democrats’ bill, since the latter proposes sending money to people who have a “taxpayer identification number”—a number used by immigrants to pay taxes—rather than a Social Security number. Both the first round of checks and the Republicans’ latest proposal require recipients to have a Social Security number.

“If the idea is to get a check to as many people as possible,” Prisinzano says, “then using tax payer identification numbers well as Social Security numbers reaches the widest group. The requirement to have a Social Security number excludes certain tax filers from receiving checks, like recent immigrants or resident aliens.”

Even though the stimulus check proposals aren’t all that different, the Democrats and Republicans are far apart on other issues, such as extra unemployment aid, with the Republicans proposing major cuts to the $600 in extra federal jobless benefits that had been paid through this month. The Democrats want to extend the $600 until at least January 2021.

The White House floated plans to cut the additional aid back to $100 a week, while Senate Republicans preferred $200 per week, with general agreement about phasing out the flat boost in favor of one that ensures no more than 70% of an employee’s previous pay.

“The overarching theme is that Republicans think the extra $600 a week discourages people from going back to work,” Prisinzano says. “Recent work has found this to not be true. Any disincentive to work is more likely due to safety concerns surrounding the pandemic.”

Some of the questions to be answered moving forward:
•    Will there be student loan forgiveness?
•    Will the $600 supplement for unemployment continue or be modified?
•    Will there be a fund dedicated to hazard pay for people working in jobs deemed essential during the coronavirus?
•    Will there be money for renters and homeowners who lost their job because of COVID-19, and couldn’t meet their monthly rent or mortgage payment?

With negotiations now beginning between Democrats and Republicans, analysts expect a final stimulus package to be passed in August.