President Trump’s effort to relieve the pressure he and Senate Republicans have been feeling over the expiration of enhanced unemployment benefits is a failure on every level. It provides too little in aid. It will miss many families in need. It will expire very soon. It likely cannot be implemented in some states. And it is transparently unlawful.
Unemployment Assistance in the Recession
The CARES Act that
Congress enacted in March did many things, including provide the Administration
hundreds of billions of dollars to direct to businesses it favored. From the perspective of combatting the
hardship resulting from the recession, its most important provisions by far
were those expanding the country’s decrepit unemployment compensation (UC) system. All these improvements were temporary, with
varying expiration dates.
The two most
significant UC changes were an eligibility expansion (Pandemic Unemployment
Assistance or PUA) to cover several kinds of unemployed workers (such as those
in the “gig economy” and those with medical or child care problems) whom the UC
system ordinarily leaves out and an increase in the often-minimal weekly
benefit amount (Federal Pandemic Unemployment Compensation or FPUC).
Because decades of
neglect have left most states with brittle, inflexible automated systems for
their UC programs, FPUC could not provide a percentage increase to individuals’
benefits, as some might have preferred.
Instead, it added a flat $600 per week to the benefits of UC and PUA
recipients. This resulted in some of the
lowest-paid workers receiving somewhat more than they previously had earned. Research is now emerging
suggesting that the disaster relief provided, critically PUA and FPUC, staved
off the sharp increase in poverty that ordinarily accompanies a major
recession. It also kept consumer spending
high enough to avoid large secondary economic effects beyond those caused by
the pandemic itself.
The Political Context
Although PUA
continues until the end of the year, FPUC effectively expired two weeks
ago. The House passed legislation over
two months ago to extend FPUC (and to extend PUA through January). As I previously noted,
Senate Majority Leader McConnell made clear that he wanted to wait until the
last minute to discuss any extension of FPUC.
When he finally did share his draft legislation, he faced rebellions
both from his own caucus and from the Trump Administration. By the time these differences were papered
over, FPUC had already expired and tens of millions of people saw their UC or
PUA benefits drop precipitously.
Senator McConnell ultimately
released legislation that much of his own caucus declined to support and that
President Trump called “semi-irrelevant.” With his caucus splintered and apparently
despairing of forming a common strategy with the White House, he then dropped
out of negotiations. House Speaker Nancy
Pelosi and Senate Minority Leader Chuck Schumer have been negotiating with
White House Chief of Staff Mark Meadows and Treasury Secretary Steven
Mnuchin. This group reportedly took
several sessions just to negotiate about what subjects they would discuss.
Although
Republicans have sought short-term extensions of FPUC (typically at reduced
levels and sometimes with unrelated poison pills added), Democrats have insisted
on a comprehensive package. Democrats
remember their experience in April, when they agreed to move extra money for
the Payroll Protection Plan (PPP) on an emergency basis, with promises that a
broader measure would soon follow, only to see Republicans lose all interest in
further relief legislation for two months.
In particular,
Democrats are anxious to get substantial fiscal relief to local and especially
state governments, whose revenues the recession has crushed. Many states have passed highly unrealistic
place-holder budgets as they wait to see if further federal fiscal relief will
be forthcoming. If it is not, they will
have to make draconian cuts to basic services just as those services are most
needed. Despite the public and private pleas
of many Republican governors, both the President and Senator McConnell have expressed
vehement opposition to the level of fiscal relief needed to fill states’
revenue gaps.
Democrats also
seek a (relatively inexpensive) fifteen percent increase
in the basic Supplemental Nutrition Assistance Program (SNAP) benefit to
respond to rising
food prices and low-income families decreased ability to shop around. Republicans have repeatedly rejected that as
well.
The President’s Actions
Today, the
President announced four executive actions.
One,
on preventing evictions and foreclosures, has essentially no substance: it just tells various federal officials to do
what they can. Curiously, this is an
area where the Federal Emergency Management Agency (FEMA) actually does have
legal authority
to make a positive difference with the funds available to it (unlike on
unemployment compensation, as discussed below).
A second action, deferring (but not reducing) payroll taxes, seems destined
to become a lesson in unintended consequences for years to come. I lack the expertise to comment on the third,
concerning student loans.
I wish to focus on
the fourth action,
purporting to offer unemployment assistance.
This is by far the most consequential, practically, politically, and
legally. If the President can persuade
the electorate that this “takes care of” the unemployment compensation problem,
he can relieve the pressure on him and Senate Republicans to agree to some of
the Democrats’ legislative proposals.
The President
directs FEMA to create a new program using $44 billion in Disaster Relief Funds
that would allow states to send an additional $400 per week to people receiving
UC, PUA, or other public unemployment benefits.
To participate in this program, states – which already face $555
billion in budget shortfalls as well as demands to help struggling local
governments – would have to pay one-quarter of benefit costs as well as,
apparently, the full administrative cost.
The President arbitrarily disqualifies the poorest of the unemployed: those receiving less than $100 per week in
regular benefits. Once the program has spent
the $44 billion, it would shut down.
With roughly 25
million people receiving unemployment benefits, the $300 federal share of the
new weekly benefit would last about six weeks, or until mid-September. In practice, many states’ antiquated
unemployment automated systems will take a considerable length of time to be
programmed to provide these benefits, to exclude workers with benefit amounts
below $100, and to account for them so that the state can be charged its
matching share. Some states took as long
as two months to get PUA fully operational this Spring. Because the funds are not allocated by state,
this likely means that the states that can start this program sooner will be
able to draw down the full amount before some states with greater obstacles are
able to get started. Realizing this, some
states likely will conclude that spending several weeks on a major computer
reprogramming project that, once finished, with allow them to pay only a few
weeks of aid is not viable.
Finding the required
matching funds also will be difficult for states, both fiscally and
legally. In some, this will require action
by a legislature that has adjourned
for the year. And with state budgets already
in a holding pattern hoping that federal fiscal relief will avoid the need for
deep cuts, many may have difficulty locating these matching funds. Although the President states that $80 billion
of the fiscal relief CARES provided is unspent, the great majority of that has
been committed
in state and local budgets in ways that cannot be undone without creating a further
hole or reneging on commitments to local governments (which the Administration
has pressed
states hard to make).
The one-third
reduction relative to FPUC, is likely to increase
hardship
and shrink consumer spending significantly.
So is the complete exclusion of workers with histories of working at or
near the minimum wage, particularly in states that pay smaller fractions of
prior wages as benefits. Families that
were living hand-to-mouth when they were working will not have room in their
budgets to absorb these cuts. The
reduction is likely to cause more people to fall behind on their rent,
mortgage, and utility bills, deepen shortages
of food, and force heart-wrenching decisions to take jobs that endanger the
health of the worker or her or his family members. The impacts
on African-American, Latinx, and immigrant households are likely to be
especially dire.
Last, and
certainly not least, the President’s actions are unlawful. The Stafford Disaster Relief and Emergency
Assistance Act does provide
for spending Disaster Relief Fund to pay “Disaster Unemployment Assistance” (DUA). That section, however, comes with two
conditions that the President’s program violates. First, FEMA may only provide DUA to those who
are not eligible for any other form of unemployment compensation. The President’s program, by contrast, is
limited to those who are receiving other unemployment benefits. And second, the statute caps DUA benefits at
the amount that state UC programs would allow.
The whole point of the President’s program is to pay $400 per week more
than those (inadequate) benefits. Thus,
DUA would probably be a plausible means of replacing PUA should it expire at
the end of the year (if any funds remain) but it cannot replace FPUC.
To get around this
problem, the President claims he is acting under a different section
of the Stafford Act that allows the President to “provide financial assistance
under this section to an individual or household … to address personal property, transportation,
and other necessary expenses or serious needs resulting from the major
disaster.” If this provision existed in
isolation, one might try to stretch it to allow unemployment benefits granted without
specifying the “necessary expenses” being reimbursed. But as Congress has provided clear
instructions for how the Disaster Relief Fund may be used for unemployment
benefits, the President’s action effectively reads those conditions out of the
statute.
More broadly, this
action is deeply disrespectful both of Congress’s power of the purse and that
of state legislatures. In a single
stroke, he undermines both the separation of powers and federalism. Members of Congress from both parties long have
had reservations about granting the President large “slush funds”. Weaponizing the Disaster Relief Fund in a
political struggle with Congress all but assures that similar funds will not be
appropriated in the future – with the result of slower disaster responses and
more unnecessary hardship. And if, as
seems likely, few “deficit hawks” and “constitutionalists” in Congress object
to the President seizing the power of the purse in this manner, we will be even
farther from being able to set fiscal procedures for the broader national
interest.
@DavidASuper1