Fiscal Initiatives to Respond to COVID-19

Proposed policy options to relieve the economic stress caused by COVID-19 are the subject of negotiations by the White House and on lawmakers on Capitol Hill.

Some of these options require congressional action, while others require Executive Order/Agency rule-making.

The menu of policy options are as follows:

Paid Sick Leave

  • PSL is quickly gaining steam, especially among Democrats, as a likely priority in any relief package.
  • Bipartisan legislative proposals have been introduced and are pending.
  • White House officials confirm they are considering paid sick leave as a response to COVID-19.
  • Today, Congressman Steny H. Hoyer (MD-05), Congresswoman Carolyn B. Maloney (NY-12), Congressman Don Beyer (VA-08), Congresswoman Jennifer Wexton (VA-10) joined with federal employees, workers’ rights advocates, and unions to introduce legislation that would provide 12 weeks of paid family leave for federal employees.
  • The Federal Employee Paid Leave Act (FEPLA) would guarantee paid leave for all instances covered by the FMLA, which currently only guarantees unpaid leave.  If the provisions will be paid for is not clear.  

Payroll Tax Holiday

  • The idea of a Payroll Tax Holiday is not new and stems from the financial crisis of 2008.  A Payroll Tax Holiday provides immediate relief to employees but will not help hourly employees who are missing work.
  • The payroll tax holiday, which was initially enacted by provisions in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, temporarily reduced the social security contribution rate for employees and the self-employed by 2.0 percentage points for January 2011 through December 2012.
  • President Obama in late 2011 proposed an expansion of the payroll tax holiday, cutting the Social Security payroll tax rate in half (from 6.2 to 3.1 percent) for 2012 and also for a similar payroll tax break for employers on the first $5million of payroll.

Cashflow Injections for Small businesses through the SBA

  • This option is reportedly being presented to the President this afternoon.
  • In a blog posting on the IMF’s website today, Gita Gopinath, Economic Counsellor and Director of the IMF’s Research Department, said her top recommendations involved putting cash directly into the hands of households and businesses.

Deferring Taxes on Specific Industries

  • The option of somehow deferring taxes on industries particularly hit by the coronavirus (travel, tourism, hospitality) will be presented to the President this afternoon.
  • Cash for Clunkers program from 2008 and 2009 is a potential model. This option is being considered by House and Senate Leadership and is currently focused on hotels and airlines.
  • Targeted tax relief measures could provide a timely and effective response to the coronavirus. 

Food Stamps (SNAP)

  • The current proposal to roll back SNAP benefits could be postponed.
  • The Trump administration has proposed a new rule tightening work requirements for the federal food stamp program, which would slash benefits for hundreds of thousands of people. The finalized rule, announced in December 2019, will restrict states from exempting work-eligible adults from having to obtain steady employment in order to receive benefits through the Supplemental Nutrition Assistance Program, which helps feed more than 36 million Americans.

Enhanced Unemployment Benefits

  • In a joint statement Sunday night, House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer offered a proposal including enhanced unemployment insurance benefits for those who may lose their jobs.

Affordable Treatments/No Price Gouging

  • House leadership is considering aid specific to the health care industry and workers.
  • Congressional Democrats proposed Sunday night new standards for the distribution of protective equipment for health care and other workers in contact with people exposed to the virus and widespread and free coronavirus testing.
  • Pelosi and Schumer insist patients are reimbursed for any non-covered coronavirus-related costs. The two leaders also want to ensure consumers are protected from price gouging for medical and non-medical essentials.

Loan Relief

  • The Federal Reserve and other regulators are expected to urge banks to work with people who have mortgages, credit card debt, and other loans and are facing the prospect of missing days or weeks of work as the virus spreads.

Further Federal Reserve Action

  • The New York Fed also announced Monday morning that it is expanding the amount of cash that it’s injecting into a central piece of the financial system where banks and other firms get short-term funding. The goal is to avoid an unwanted spike in interest rates that could then feed through to the broader economy.

Tariff Relief

  • While not yet officially proposed by the Administration, the President could suspend the recent tariffs imposed on multiple imports.

Negotiations are ongoing, so check back for more updates.

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