Democrats and Republicans failed to reach a deal on a new coronavirus relief bill Friday, and you know what that means: It’s executive action time (cue soaring eagles, the Hannity theme, and gun fire). Donald Trump had suggested that, should negotiations stall, he could sign a series of presidential orders to unilaterally cut payroll taxes, continue the enhanced unemployment benefits that officially expired last week, extend the lapsed federal eviction moratorium, and pause student debt payments. And as of now, it looks the administration is going ahead with the plan.
Two of these ideas—the tax break and UI extension—are basically half-baked schemes that don’t seem likely to accomplish all that much due to practical limitations. The eviction moratorium and the break to student borrowers could be actually fine and useful, however, which is a somewhat odd thing to write about any aspect of Trump’s coronavirus response. Combined, they’re obviously not even close to an acceptable substitute for an actual aid bill, especially the more expansive version Democrats have pushed for, and so we can only hope they turn out to be temporary stop-gap measures.
Anyway, let’s take them in turn.
Unilateral payroll tax deferral: A very dumb idea
Trump has been fixated on the idea of cutting payroll taxes to stimulate the economy for months now. It has never made sense, and never will make sense, since by definition, cutting payroll taxes gives the most help to people who need it least right now (namely, people who still have well-paying jobs, as opposed to the unemployed). Even Senate Republicans, who typically see tax cuts as the solution to all of life’s various problems, were basically embarrassed by the whole concept and omitted it from the bill they slapped together last month.
But some conservatives, such as Trump’s outside economic adviser Stephen Moore, have nonetheless suggested that the president should just take command and give Americans a payroll tax break on his own. The idea is that the Treasury Department has power to delay tax collection dates in an economic emergency, which it used when pushing back this year’s filing day from April until July, so Trump could just announce that he’s pausing collections for the time being. The kink in this elegant plan is that Trump can’t actually rewrite the tax code, and employers are going to owe the money eventually. In all likelihood, that means they’ll continue withholding it from their workers’ earnings, and few people will actually see their take-home pay increase. “If you’re an employer and [Treasury Secretary] Steven Mnuchin says, ‘I don’t need to see that money for a year,’ what do you do?” University of Chicago tax law professor Daniel Hemel told CNBC. “You could give it to the employee, but then a year from now you might be on the hook for the money.”
In his Wall Street Journal op-ed about the payroll tax cut, Moore suggested that Trump could skirt around this issue by promising to pass a bill next year waiving any deferred payroll tax liability. But that’s pretty obviously not going to happen. It’s a dumb pointless plot. After talks broke down Friday, Mnuchin and White House chief of staff Mark Meadows told the press that they would recommend that the president sign orders on unemployment insurance, evictions, and student debt, and pointedly left the payroll measure off the list. Hopefully that means the administration is dropping the idea, but it’s not entirely clear yet that Trump has finally let it go. (Update, August 8: He did not, in fact, let it go. Trump announced on Friday evening that he’d be signing an executive order on payroll tax deferment, along with the three other actions Meadows and Mnuchin recommended.)
Unilaterally extending unemployment: A pretty iffy idea
Extending the unemployment insurance benefits that have recently lapsed would be a great help to out-of-work Americans. According to Politico, which published a helpful explainer of this plan, Trump is considering an order that would give states the ability to pay out an extra $200 to $600 a week in help. The administration would do this by raiding some of the money that Congress set aside for state aid in the CARES Act, which hasn’t been spent yet. The administration thinks it could probably funnel about $81 billion into UI this way, which is probably enough for about one month of benefits, at least going by the most recent monthly Treasury statement. (Update, August 8: On Friday evening, the Washington Post reported that, among other options, the administration is also considering trying to redirect unspent funds from the Federal Emergency Management Agency’s budget, even though we’re in the middle of hurricane season.)
But there are also reasons to question whether it would work. It’s not crystal clear whether the move would be legal, and Democrats are signaling they’d oppose it. As Politico notes, the CARES Act also requires the feds to distribute state and local aid according to a population-based formula, which could make things tough, and states might be required to pay any money back they weren’t entitled to, which could chill their enthusiasm for this plan. (Also, it’s probably going to take states a while to program any new payments into their system, by which point Congress may well have reached an actual deal that could require them to start all over again.
Unilaterally extending the eviction moratorium: A completely reasonable idea
It is honestly insane that every single city and state hasn’t put a freeze on evictions, given that we’re in the middle of a plague and kicking families onto the street is bound to exacerbate our public-health crisis. The CARES Act included a 120-day moratorium that protected tenants who either receive federal rental assistance or live in a property with a federally backed mortgage, which recently sunset. Bringing that back, at least as a stopgap, seems like a no-brainer right now, even if landlords will be upset about it. In the long term, it might be helpful to put together an actual rental assistance program, so small-time property owners don’t end up defaulting on their mortgages, but that’s not something the Trump administration can do flying solo.) Plus, the administration has previously acted on its own to help people stay in their homes; back in mid-March, the Department of Housing and Urban Development issued an eviction and foreclosure moratorium on single family homes with a Federal Housing Administration-backed mortgage.1
Unilaterally halting student loan payments: Also a completely reasonable idea
Does the federal government really need to be shaking down borrowers for their student loan payments right now? No, which is why the Trump administration stopped asking for interest payments early in the crisis and Congress paused collection entirely as part of the CARES Act. It’s not entirely clear what Trump plans to do on this front, but hopefully he’ll go maximalist here and keep them paused. It’ll help a few people on the margins.
With all of that said, the much more helpful move here would be to just reach a deal with Democrats on an actual relief bill. I mean, Chuck Schumer and Nancy Pelosi once again trying to bail out the economy in the middle of Trump’s re-election effort. A sane president would be thanking them for the offer.
1 Full disclosure: I am a small-time landlord, much to my own chagrin. (My wife and I rent out the apartment we used to live in in New York, which we failed to sell before moving to Washington, D.C., where we now rent while taking a fun little loss each month on our old place. There is a reason I’m nobody’s personal finance guru.)