Friday, August 21, 2020

Trump's executive orders are not working

It has been almost two weeks since Trump announced his executive orders creating a new unemployment insurance program and a payroll tax deferment, and neither one seems to be working.  So far, 11 states have been approved to get the new unemployment insurance funding, and only one state, Arizona, is actually distributing the extra benefits right now. That means those people currently on unemployment have gone without the extra $600 a week in benefits since the beginning of the month, and are unlikely to get benefits for weeks in the states that have signed up, while people in states that have not gotten approved yet might have to wait even longer.  Even the states that do set up this new unemployment insurance program and do manage to distribute benefits, the people living there will still get only half of the $600 a week in extra benefits they previously got, since the federal government is only willing to fund an extra $300 a week in benefits under this program. The Trump administration has already had to backtrack by taking away the requirement that states provide an additional $100 a week in extra benefits in order to get the $300 a week from the federal government, but this process is taking so long and so few people are getting benefits that this whole approach to unemployment insurance appears to be more of a publicity stunt and negotiating tactic rather than a legitimate attempt to provide more unemployment benefits to people who need them.   

As far as the Trump's plan to defer payroll taxes, this plan also has become so complex and unwieldy that the US Chamber of Commerce and 30 trade associations wrote a letter to Congress and the Treasury Department declaring the plan to be "unworkable".  The problem is that Trump's executive order does not cut payroll taxes but only defers them, so people who decide not to pay might get stuck with a huge tax bill at the beginning of 2021.  This makes it very difficult to administer the payroll tax system under such uncertainty, and this means that a lot of businesses will decide to keep things the same and decline to defer the payroll taxes altogether.  Just to be clear, this is big business, usually a staunch supporter of Republican plans to reduce their tax bill, declaring a Republican proposal on taxes to be "unworkable" to the point they might refuse to participate.  If they cannot get their business allies on board, and no one actually defers their payroll taxes then this executive order would turn out to be a bust as well.  This executive order was probably a serious attempt to force Congress to cut payroll taxes down the road by letting people defer their taxes now and creating a political crisis for politicians if they do not cut payroll taxes later since otherwise people would have to pay back all the taxes they deferred in one lump sum. Ultimately, this executive order debacle represents just another example of Trump being unprepared to actually govern and makes it even more important to cut a comprehensive bipartisan deal with Congress to ensure we get a stimulus package that actually does work, but it still remains to be seen how quickly that might happen.

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