August 11, 2020
Over the weekend, President Trump signed four executive orders to bridge the coronavirus relief gap, while lawmakers fail to reach an agreement on Capitol Hill. Each of the orders addresses a different area of economic relief: one relates to student loan repayment, another extends a payroll tax deferment, the third creates a $400 per week unemployment fund, and the fourth establishes some protections against evictions. “We’ve had it,” Trump said Saturday. “We’re going to save American jobs and provide relief to the American worker.”
Trump signed each of the orders Saturday at his golf course in Bedminster, New Jersey. “So, that’s the story,” he said. But it’s not clear exactly how the four decrees will play out, and whether they might offer any real, immediate relief to struggling Americans. Additionally, some Democratic legislators have criticized the move, with House Speaker Nancy Pelosi calling the orders “absurdly unconstitutional.” Per the founding document, Congress has the power to dictate spending. Still, if congressional negotiators could strike a deal for a relief package, it would render parts of Trump’s orders moot.
In the meantime, txperts have serious doubts about whether the executive actions can accomplish what they claim to — or if they’ll withstand a legal challenge.
Student loan repayment deferral
This executive order is likely to be the most effective of the bunch, given that it builds on a program already established by the CARES Act. The relief bill negotiated by Congress this March deferred loan repayment until Sept. 30, and also halted interest accrual. Trump’s new order directs the Department of Education to defer loan repayment further, until Dec. 31.
Analysts note that the student loan order also has the highest chance of accomplishing what it aims because it requires no federal spending, no state spending, and no compromise between the two. It’s merely a furtherance of an existing policy — no bureaucratic machinations required.
Payroll tax deferment
This order directs the Treasury Department to permit employers to defer payroll taxes for employees making less than $100,000 per year. The idea is that it would lessen workers’ tax burden at a time when they need all the cash they can get, but CNN noted that the deferment could actually harm the lowest-earning taxpayers given that the payroll tax funds public benefits like Social Security and Medicare.
The order also merely delays, but does not eliminate, the payment of payroll taxes. It extends the deferment period until the end of the year — which means, as CNN explained, that “companies may not want to stop withholding the employees’ share of the taxes from their paychecks” given they will eventually have to pay those taxes. It begs the question of whether a short-term benefit in exchange for possible financial hardship down the line is worth it.
The executive order regarding unemployment benefits sought to strike a balance between the Democrats’ plan of $600 per week and the Republican’s proposal of about $200 per week in extended federal benefits. The previous program under the CARES Act had enabled unemployed workers to seek $600 in extra benefits, on top of whatever their state already offered.
Trump’s version of a compromise was to establish a $400-per-week benefit that would be funded partially by federal money and state money. And that’s why some experts predict this order will fail — it keeps states on the hook for 25% of the unemployment benefits.
In other words: The federal government will only fund $300 of the possible $400 in extra relief. Less wealthy states, like Alabama or Mississippi, likely didn’t have the funds to support this kind of economic need even before coronavirus, so they almost certainly won’t now. With unemployment at an all-time high thanks to the pandemic, many states are in debt or have already dug into their rainy day funds to pay for state-level unemployment benefits.
And here’s the catch: The executive order says that states must put in a quarter of the funds for their residents to receive the remaining 75% in federal support. On Sunday, Trump said that he’d be open to negotiating on that point with states, claiming that “We have a system where we can do 100% or we can do 75%, they pay 25%, and it will depend on the state … We will look at it, and we’ll make a decision.” Per Forbes, Treasury Secretary Steven Mnuchin indicated that Trump might be willing to waive the 25% contribution requirement from states, but he’s yet to do so, and it’s unclear whether the details of executive orders can be negotiated retroactively — or who exactly will be doing the negotiating.
It is clear, however, that Trump might not have been aware that one of the reasons discussions on the Hill faltered in the first place was because states made it clear that they didn’t have the capacity to provide that kind of money, and hoped that the federal government would pick up more of the slack.
This executive order directs the Department of Health and Human Services and the Centers for Disease Control to look into potential solutions to the impending housing and evictions crisis. It also demands that the Federal Reserve and Department of Housing and Urban Development look into potential sources of funds to support renters during the course of the pandemic.
Of course, a directive to evaluate solutions and identify potential funding streams to support those solutions isn’t the same as, well, actually offering a solution. The previous halt on evictions passed by Congress after the onset of coronavirus, which ended in July, had only applied to renters living in properties that are either subsidized or tied to federally backed loans — which leaves out tens of millions of renters.
In the executive order, Trump,e wrote, “With the failure of the Congress to act, my administration must do all that it can to help vulnerable populations stay in their homes in the midst of this pandemic.” But he does not offer concrete relief ideas — no money is apportioned and no moratorium is extended in this order.