- 1 What are the possible outcomes of the fourth round of aid?
The US economy was aided by the Congress’s decision to put trillions of dollars in the financial system to keep it afloat during the coronavirus pandemic. But that doesn’t seem to be the end of the financial crisis, as it is a long road to recovery, and coronavirus is still rampant across all states.
The decision to initiate another round of coronavirus stimulus checks would determine how the recovery phase pans out. The month of May showed surprising yet promising reports of improved employment rates in the retail and restaurants market. This strongly suggests that the worst is probably behind us.
However, many economists have attributed this rebound to the CARES Act aid, and warn that cutting off the aid prematurely could have adverse effects on recovery post coronavirus.
Many law and policymakers have voiced their concerns regarding the economic impact that another aid package will have on the country. Coronavirus stimulus checks program is the largest aid relief program in the modern history of the United States, and experts emphasize the need for critically examining the impact of a fourth check before Congress approves it.
The CARES Act provided Americans with at least $1,200 in direct cash installments, enhanced unemployment benefits, and established a pardonable small business loan program referred to as the Paycheck Protection Program (PPP).
The PPP served as a crucial supply of funding for the many small businesses harshly impacted by the coronavirus pandemic. It has been replenished twice, with almost $130 billion in aid. The extra $600 in weekly payments for unemployment is ready to expire by the end of July. The next round of aid isn’t set to be dispersed until September.
What are the possible outcomes of the fourth round of aid?
As the US Congress struggles to address COVID-19’s economic impact, it is plainly obvious that the new round of instant cash payments will have the greatest impact on US citizen’s wallets. The possibility of it is being discussed, but recovery is now the top priority. The new aid will be based on getting people back to work.
The Heroes Act of the house offers a more generous payment method. This includes checks of up to $6,000 per family, up to $2,400 per couple, and $1,200 per family of up to 3 children. Senators Kamala Harris and Bernie Sanders have put forward the proposal that recommends Americans with a monthly income of less than $120,000 to be paid $2,000 each month. Couples and parents with under-17 children would receive more funds.
Although aid in the form of a fourth stimulus check is possible, it’s not very likely to happen.
2. Enhanced unemployment benefits
Fearing that the unemployment rate will continue to rise for a long time, economists and lawmakers are concerned about the consequences of individual unemployment benefits and a weekly check of $ 600 in August.
Congress seems to be divided into two sides. Both these sides believe that Americans shouldn’t be left stranded if the CARES Act expires. But the Democratic Party has decided to support the reinforcement of the $ 600 grant, and the Republicans fear that it will pose a moral hazard by preventing Americans from returning to work. Meanwhile, the Trump administration is considering reducing this per-week aid from $600 to $250 in the second half of this year or limiting weekly grants based on workers’ regular wages.
3. Tax credits and other incentives
“To bridge this gap, a few Republicans have proposed to encourage more hiring by incentivizing businesses and employees through tax credits.” according to Esti Prager, “However, this system raises other concerns about the fear that people with the coronavirus pandemic could get mobilized to go back to work. White House is also reportedly thinking about offering a tax credit to people who agree to eat out or take a holiday in the next four to six months to get the economy going again.”
These proposals encompass a program termed as the “Explore America” tax credit, which could provide American households with as much as $4,000 in deductions. This suggestion by the President was initially made public in mid-May and was applauded by US travel agencies.
4. Tax cut from Payroll
The current administration’s most prominent proposal so far is to cut payroll taxes, despite opposition from Republicans and Democrats alike. The opposition criticized that tax cuts would not help much because thousands of people are unemployed and unable to take advantage of them. Proponents of the program say that the plan could deliver immediate tax cuts on the wages of American workers, and expenditures could be fed back to the economy.
The President and his assistants have some other suggestions too, including payroll tax exemption or capital tax relief for investors.
5. Relief for Local and State governments
It indirectly affects the US investment portfolio, but one of the other major challenges related to the coronavirus epidemic is mainly the aid of local and state governments. The loss of tax revenue has greatly reduced the budget while increasing health care spending and unemployment benefits. When the state’s balance sheet is already in danger, the threat of dismissal of many government employees is looming. Economists warn that this may regress the US economy, much like the Great Recession of 2007-2009.
The Fed has played many roles through its municipal credit plan, which will help states and local governments to fund their bond purchases. However, lawmakers of Capitol Hill demand more involvement. The Heroes Act funded about $1 trillion in this difficult time. Democrats will most likely ask for a similar aid for the future.
No matter what steps the government decides to take, it is certain that aid will have to be provided to sustain the economy and the unemployment crisis.