Next Stimulus Package Released Today: $1,200 Stimulus Check, Reduced Unemployment Aid In HEALS Act

The Senate returned last Monday after weeks of speculation about what could be in the next stimulus bill, we have our first concrete signs of what Senate Leader Mitch McConnell (R-KY) is calling the HEALS Act – the Health, Economic Assistance Liability Protection & Schools Act. It had been previously called the Cares 2 Act and several Senators have referred to the bill as the Cares 2 Act in remarks.

To set the stage, remember that the Democrats in the House of Representatives passed the Heroes Act in May. It was largely seen as too expensive, costing over $3 trillion. The bill to be presented by Senator McConnell is expected to be around $1 trillion.

That’s a big gap they need to cross during a short window for negotiations. Early in the negotiation process, there was dissent between even the White House and Senate Republicans over many aspects of the bill.

For example, President Trump had been very supportive of a payroll tax cut and a second stimulus check. Senate Republicans concerned about the price tag of the bill have insisted that including both a payroll tax cut and a second stimulus check would be too high.

But in the first week of negotiations, it appears that an agreement has been reached in principle including financial assistance to schools, funding towards testing and tracing, and favouring a stimulus check over a payroll tax cut.

This, however, does not include the support of the Senate or House Democrats… yet.

The Proposal Was Presented by Multiple Senators

In a floor speech last week, Senator McConnell named eight of his fellow Senators and explained who would be presenting each component of the bill. It’s not clear yet if these will be separate bills or different parts of a single bill. Breaking up the stimulus package into multiple bills something that House Speaker Nancy Pelosi (D-CA) has said she opposes.

As for today, Senators are currently presenting different parts of the bill and you can watch along as the Senate broadcasts are floor proceedings online:

Senator Chuck Grassley (R-IA), Chairman of the Committee on Finance, will spearhead the aspects of the proposal that deal with jobs and the economy – including the next round of stimulus checks. This will also include how the next round of federal unemployment benefits will be implemented.

Senator Marco Rubio (R-FL), Chairman of the Small Business Committee, and Senator Susan Collins (R-ME) have presented a “sequel” to the Paycheck Protection Program (PPP). They previously proposed the Keeping American Workers Paid and Employed Act in March and that could give us a preview of what would be in a sequel to the PPP.

Senator Lamar Alexander (R-TN), Chairman of the Committee on Health, Education, Labor and Pensions, along with Senator Roy Blunt (R-MO) and Senator Richard Shelby (R-AL) would present the funding package for schools and universities.

Senator Mitt Romney (R-UT) would include a bill that would “help a future Congress evaluate bipartisan proposals for protecting and strengthening the programs that Americans count on.” This bi-partisan bill was recently sponsored by Senator Romney and is the S. 2733 – TRUST Act which establishes “congressional rescue committees to develop recommendations and legislation to improve critical social contract programs.” This is exactly what Senator Romney presented today.

Senator John Cornyn (R-TX) was named in the Thursday speech but Senator McConnell did not elaborate on his role in the proposals until Monday. Today, Senator Cornyn presented the liability shield for businesses, schools, and more.

Senator Tim Scott (R-SC) was not named by Senator McConnell last Thursday but in a floor speech on Monday, he presented a plan to increase the business meal deduction amount from 50% to 100%.

If you want to watch along, the Senate broadcasts all its floor proceedings online. You listen to Senator McConnell discuss this package on July 23rd at the 6 hour and 38-minute mark of the archived video footage.

Second $1,200 Stimulus Check

In a floor speech today, Senator Alexander explained that the next stimulus check will be a $1,200 one-time payment to all Americans who earn less than $75,000 including $500 for each dependent with no age restriction. This was confirmed in the proposed bill text. The Cares Act only allowed $500 per dependent for those under 17 years of age.

Joint filers would get $2,400 for those who earned less than $150,000. If you earn more than those amounts, your stimulus check will be reduced by 5% of your adjusted gross income above those limits. The check itself would be structured similar to the first one, as an advance on a refundable tax credit.

The bill would use a taxpayer’s 2019 tax return if they filed or 2018 as an alternative.

For insight on how Democrats would respond to this proposal, we can turn to the Heroes Act that was passed by the House of Representatives in mid-May.

The Heroes Act offered a similar check to the Cares Act – a $1,200 per person payment ($2,400 for joint filers) to those who earned less than $75,000 ($150,000 for joint filers) with a 5% phase-out for those earning more than the limit. It increased the amount for dependents to $1,200 and included all dependents, up to three per household.

Reduced Unemployment Benefits

The American Workers, Families, and Employers Assistance Act would continue $200 per week of enhanced federal unemployment benefits through September.

Then it would be replaced with a payment of up to $500 that, when added to the state unemployment benefit, would be limited to 70% of lost wages.

The National Association of State Workforce Agencies said that it would take more weeks 8-20 weeks to implement this type of system based on a percentage of wages, according to a memo obtained by NPR.

This is significantly lower than the $600 per week benefit offered in the Heroes Act, which was an extension of the unemployment benefits created in the Cares Act.

No Moratorium on Evictions

The Cares Act put a moratorium on evictions that applied to buildings with a mortgage backed by the government. Landlords of those buildings were also not allowed to initiate eviction proceedings or charge additional fees or penalties for nonpayment of rent. Renters are still required to pay rent during the eviction grace period and may face repercussions for nonpayment, including eviction after the moratorium ends.

That moratorium expired on July 24th and on CNN’s “State of the Union,” Kudlow also said that moratorium would be extended in the next package – but it was not mentioned by any Senator.

No Additional Aid to States

I expected the proposal will not add additional funding to state and local governments but instead offer flexibility to the funds already allocated by the Cares Act. It may allow state and local governments to use Cares Act funding to make up for those lost revenues with some restrictions – such as states cannot use the funds for pensions or retirement benefits, to replenish a “rainy day fund.”

This is what was included in a draft proposal shared by the New York Times – the proposal also said that they “expect to get some added in negotiations.”

In the Heroes Act, House Democrats included approximately a $1 trillion aid to state and local governments impacted by the coronavirus. With so many areas shut down, tax revenues have gone down sharply and this funding was meant to help deal with that shortfall.

Adding more funding was a top priority of Democrats and so this sets up a big showdown in the final bill.

School Aid

Senator Shelby outlined the parts of the bill that covered aid for schools.

Approximately $105 billion will go towards the Department of Education. $70 billion will go to K-12 and $29 to higher education. An additional $5 billion will go towards Governor’s funds to be designated for either K-12 or higher education.

Some of the funding would only be available to schools that physically reopen.

The Cares Act created an Education Stabilization Fund of $30.75 billion of which Congress set aside $3 billion for the Governor’s Emergency Education Relief Fund.

Student Loan Relief

The Cares Act provided student loan relief in the form of forbearance on federal student loans. From March 13th, 2020 through September 30th, 2020, all student loan payments to federal student loans were stopped and their interest rates were temporarily set to 0%. They were put in administrative forbearance.

This meant that during this period, your loan balance would not change, you would not be charged interest or assessed any penalties, and the Cares Act just pressed paused on your loans.

Senator Alexander returned to propose student loan relief to propose the Safely Back to School Act, which includes ideas he first proposed in Student Loan Repayment and FAFSA Simplication Act. The hallmarks of this bill, as it relates to student loans, is that if you have no income, you have no monthly payment. If you are earning an income, your monthly payment will never be greater than 10% of your income after necessities such as housing and food.

5-Year Liability Shield

Senator McConnell has said he wants to see a five-year liability shield for businesses, non-profits, schools, medical providers and professionals dating back to the start of the year. This would protect them from “frivolous” lawsuits arising from the pandemic as long as they made a “good faith effort” to comply.

Senator John Cornyn released the Safeguarding America’s Frontline Employees To Offer Work Opportunities Required to Kickstart the Economy (SAFE TO WORK) Act that you can read here. It would provide protections from December 1, 2019, through October 1, 2024.

The law would require that a plaintiff prove that the defendant was “grossly negligent” or “willful in their misconduct.” The plaintiff would also have to show that the defendant violated the relevant local public health guidelines at the time of the incident.

This won’t necessarily have a direct financial impact for many Americans but it does create a point of contention with Democrats, who called for more OHSA regulation in the Heroes Act and is another speed bump in getting the bill passed.

Return to Work Bonuses

Several Republican lawmakers proposed “return to work” bonuses, including Senator Rob Portman (R-OH) and Representative Kevin Brady (R-TX). They saw enhanced unemployment benefits as a disincentive to return to work and a “return to work” bonus was seen as a way to add stimulus without the moral hazard. Both proposals would pay the employee a bonus for returning to work.

The Cares Act created an Employee Retention Tax Credit equal to 50% of qualified wages paid to an employee until January 2021 with a limit of $10,000 in wages per employees. This means the tax credit is limited to $5,000 per employee.

The American Workers, Families, and Employers Assistance Act increases the percentage of qualified wages reimbursed from 50% to 65% and increased the limitation from $10,000 per employee per year to $10,000 per employee per quarter.

There is also a work opportunity tax credit that provides a credit to employers who hire individuals in one of ten targeted groups – it now includes qualified Covid-19 unemployment recipients.

It’s important to note that these are tax benefits offered to businesses, not directly to employees.

Payroll Tax Cut

President Trump had repeatedly called for a payroll tax cut and in a recent interview with Chris Wallace on “Fox News Sunday,” he said that he may not sign a stimulus bill if it doesn’t include a payroll tax cut.

The payroll tax cut was a priority for the White House but it didn’t have a lot of support from Republicans. It will not be included in the next stimulus package.

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