The House Democrats’ coronovirus economic package is generous, and complex.
How should the federal government mitigate the economic effects of the emerging pandemic’s disruption? The White House has not yet provided a specific package of legislative proposals, but for its suggestion of a cut in the payroll (FICA/Social Security) tax which The Hill and Politico both report has been poorly received both by Democrats and Republicans.
In fact, earlier today on Twitter, Trump complained that Speaker of the House Nancy Pelosi objects to the payroll tax cut now but supported it under President Obama. Of course, it’s trivial to say, “that was then, this is now” — but recent analysis at the Washington Examiner explains that not only would the 2011 and 2012 tax cut not be effective now, but “saw only mixed success” at the time. The article also pointed to a Congressional Research Service analysis which found that payroll tax cuts may be more effective than other types of tax cuts, but that “well-targeted direct government spending may be still more cost effective.”
Which all seems like common sense.
So why would a payroll tax cut even be under consideration? A look at the Democrats’ alternative proposal makes one thing clear: effectively targeting aid at those who are most directly affected is a lot more difficult to achieve. To say, “don’t send us your employees’ FICA taxes this month, m’kay?” is easy-peasy, no? But, hoo-boy, the Democrats’ proposal is far more complex.
Here are the broad outlines, based on the materials posted as of yesterday (March 11th) of H.R. 6201, the Families First Coronavirus Response Act.
- Boosts in spending to WIC and aid for local food banks.
- Extra SNAP assistance to families whose children would have been receiving free or reduced-price lunches, but for their schools being closed.
- Extra grants for nutrition assistance to Puerto Rico, American Samoa, and the Northern Mariana Islands.
- Extra grants for the Senior Nutrition program.
- Suspension of SNAP work requirements.
- Allow states to provide additional money to SNAP recipient families.
Health Care Worker Protection:
- Creates a new OSHA standard for healthcare workers, and any others at elevated risk of being exposed to the virus.
- Applies this standard to facilities receiving Medicare funds.
Emergency Paid Leave Benefits:
- Creates a new Social Insurance/Social Security benefit, that of “emergency paid leave.” For as many as three months, in each of which months an individual has been unable to work for “qualifying COVID-19 related reasons for 14 calendar days, that worker will receive from the government a benefit of 2/3rds of “average monthly earnings” (based on, it seems, Social Security records), up to a maximum of $4,000.
- The program would last for a year after enactment and be specific to COVID-19.
- Benefits to be paid retroactively as needed.
- Benefits reduced dollar-for-dollar by any private or state leave benefit (but not by partial earnings during that month), but the offsets due to amounts paid by states would be refunded back to those states.
- Benefits nontaxable.
- Benefit administered by the Social Security Administration but with no impact on the Social Security budget/Trust Funds.
- Individuals would apply by phone or online and would attest to the veracity of their need, with no documentation required.
- Individuals covered would be those with COVID-19, those under mandatory or self-imposed quarantine, and those providing caregiving for a sick or quarantined person or for a child or other individual “unable to provide self-care” in the event of school or daycare closure.
Expansion of Family and Medical Leave Act requirement:
- “Public health emergency” added as an additional reason for leave job guarantees, with the same specifics as for the federal paid leave.
- For COVID-19 reasons, all employers are covered (vs. only those with 50 or more employees for the standard FMLA law) and nearly all employees are covered (30 days of employment rather than one year).
Emergency Unemployment Insurance:
- Grants to help states with administrative costs due to increased unemployment insurance claims.
- Additional funds for states with at least 10% increases in unemployment, contingent on easing work search and other requirements.
- No-interest loans to help states pay for UI benefits.
- 100% federal funding (rather than 50%) of Extended Unemployment Compensation.
Mandatory Paid Sick Days:
- Regardless of COVID-19, mandates that all employers provide employees with 7 days of paid leave per year (accrued at a rate of 1 hour for each 30 hours worked), to be used for one’s own sickness, or for the care of a family member, or various other reasons.
- In addition, specifically for COVID-19, requires employers provide an additional 14 days of paid leave, to be reimbursed by the government for businesses with 50 or fewer employees.
Health Coverage Requirements:
- Private insurers, Medicare, Medicare Advantage, Medicaid, CHIP, TRICARE, Indian Health Service/tribal health care facilities, and insurance for veterans and federal workers, to cover COVID-19 testing with no out-of-pocket cost.
- For the uninsured, the National Disaster Medical System to reimburse their costs.
In total, the bill comes to 124 pages, and that’s without the inevitable regulations needed to implement it. In other words, these provisions, meant to address the human needs that we will inevitably see as a result of the disease and the measures meant to counter it, are far more complex than a payroll tax cut (or a loan package to airlines, for example) — especially when it comes to administering the centerpiece program which cuts checks based on recorded past monthly earnings with offsets for other benefits. And the mandate on employers to fund leave, however compassionate towards blue-collar workers, could well have unforeseen consequences.
There’s a lot we don’t know about how this will all play out, but we shouldn’t forget that there is a trade-off to be made here.
As always, reader comments are invited at JaneTheActuary.com!