After the approval at the end of March of the largest economic stimulus package in history of the United States, under the CARES Act, much has been said about the possibility of approving another great relief plan for Americans, seriously affected by the coronavirus pandemic.
On both sides of the Senate bench, bills are being cooked aimed at boost the national economy, in general, and the pockets of citizens, in particular.
Promoted by the Democratic Party, the HEROES Act is one of them; However, given its exaggerated scope of three billion dollars, a final consensus on this matter has not yet been reached.
As an alternative to that plan, the Republican Party advocates one more consistent with the times that run, that is, instead of allocating the amount proposed by the Democrats, the Republicans are inclined to approve one for a smaller amount, taking into account certain important factors that, clearly, must be considered.
Priorities for a next package
It may be that, in fact, another economic aid package is approved, but if it happens it would not arrive until next July or August. According to the Trump administration, the priorities for this possible plan will have to be directed to the following:
- Reduction of payroll taxes.
- Cash bonus for returning to work.
- Possible extension of unemployment benefits.
- Tax deductions.
- Civil liability protection for companies.
Advantages of a new economic relief plan
If another package were definitively approved, Americans would benefit from a new stimulus check, perhaps another of $1,200 for singles and $2,400 for married people, as already happened with the CARES Act (some proposals speak of higher amounts, but a figure similar to the previous one seems to be the most probable).
Be it one amount or another, the money would represent help, especially if one takes into account that almost a third of citizens used their checks to pay rents and mortgages; one in 10 used it to buy food and hygiene products (mainly aimed at avoiding contagion by COVID-19) and around 15% saved it in case an emergency arises, mostly related to the pandemic.
The small businesses would also benefit, because those who have not yet been able to obtain financing from federal loans and grants could apply for financial assistance, either through the Economic Injury Disaster Loan (EIDL) or the Paycheck Protection Program (PPP), for example.
Disadvantages of another financial stimulus plan
Aside from the advantages mentioned, approving another economic aid package also has its disadvantages:
- Firstly, it would represent a large new spending bill for the Government.
- Secondly, it would curb the interest of the more than 40 million unemployed in seeking employment.
- Third, it would discourage the economy when the opposite is essential.
Current economic outlook
Many are wondering why that next financial relief package has not already been approved. Regardless of the fact that all proposals on the table must be approved with a bipartisan consensus, other reasons for the postponement related to the way the economy is developing must also be considered.
Contrary to what was thought, the unemployment rate in the US It fell to 13.3% in May after it was 14.7% in April. Just between those two months, and also contrary to expectations, 2.5 million new jobs were created.
The gradual reopening of the economy in several states and the change in product purchasing patterns by Americans confined at home gave a boost to the labor market and, today, the outlook looks different.
Obviously, we must also take into account that, more than a financial relief package, what is most urgent right now is to reactivate the economy itself. We have plenty of reasons.
According to the National Bureau of Economic Research (NBER), we entered a recession phase since February. And while the unemployment rate has fallen, it is still higher than in any other recession. Added to this is the World Bank's prediction that our country will contract by 6.1% this year, clearly, if we do not do what is necessary to prevent it.
Alternatives to promote the economy
For all the reasons mentioned above, proposals such as the following have been made known:
- Provide a weekly return-to-work bonus of $450 dollars, apart from salary, to all those who return to work, instead of continuing to give $600 dollars a week for unemployment insurance.
The author of this proposal, Republican Senator Rob Portman, said in an interview with Fox News that ““Those $600 dollars a week discourage the unemployed from returning to their jobs, because many of them are earning more currently than they did while they were working.”
- Provide a payroll tax exemption.
President Donald Trump has expressed interest in seeing something like this included in a possible next aid package. The measure would eliminate Social Security (SS) and Medicare taxes, usually collected when processing payrolls.
SS taxes are equal to 6.2% of salary up to the first $137,000, while Medicare taxes are 1.45%. If this proposal is approved, labor costs for both employers and employees would be lower and workers' checks would be larger.
- Provide a tax credit for training through the implementation of the Skills Renewal Act.
With bipartisan support, this Reskills Act would provide a $4,000 tax credit to employees who lost their jobs due to the coronavirus.
These workers could access two- or four-year online training (such as certain certifications and specialized internships) until the end of 2021. The idea is to help them obtain skills that are in high demand in the coming years.
Which way will the balance tip? We will have to see it. Particularly, I am in favor of approving measures and laws in favor of the reactivation of the economy and, if another package is approved, that it does not exceed one billion dollars to strengthen us economically within a period of six months.
The current administration has already passed enough financial relief measures that have helped millions of businesses and citizens, and continue to do so, not to mention states and counties, which have also done their part.
What do you think?
SEE COMMENTS (2)Filed in: