The new stimulus package may be introduced next week and could look like this.
Here’s what you need to know.
Senate Majority Leader Mitch McConnell (R-KY) is expected to present draft stimulus legislation next week when Congress returns from recess. Senate Republicans, with input from the White House, drafted the stimulus proposal. Since Republicans control only 53 seats in the U.S. Senate, McConnell will need bipartisan support for his stimulus proposal. Given this bipartisan construct, the new stimulus is likely to contain “wish list” items from both Republicans and Democrats, particularly on issues of mutual importance.
New Stimulus: what’s included
What’s included in the new stimulus? While there is no guarantee which issues make the final cut, here’s one likely scenario of what gets included in the new stimulus based on bipartisan overlap:
Second stimulus checks
Second stimulus checks or some form of direct payment likely will be included in the next stimulus bill. Members of both parties and the president support second stimulus checks. However, the amount and eligibility criteria are up for debate. How big is the second stimulus check? How many people will qualify for a second stimulus check? There are countless proposals about second stimulus checks, including keeping the same $1,200 one-time stimulus check to $2,000 a month second stimulus checks. If there is a second stimulus check, it won’t be a recurring payment. McConnell also suggested that second stimulus checks may only be available to Americans who earn up to $40,000 a year. However, McConnell has not clarified whether this is the actual eligibility criteria to receive a second stimulus check, or whether it is the criteria to receive the full amount of the second stimulus check. It’s also possible that $40,000 is not the cut off for second stimulus checks. In comparison, to receive the entire first stimulus check of $1,200, a recipient had to have adjusted gross income of up to $75,000. Above $75,000, individual recipients could receive less than $1,200 up to $99,000 of adjusted gross income. It’s also possible that second stimulus checks are less than $1,200.
State and local aid
Both parties in Congress understand that state and local governments have been adversely impacted by the Covid-19 pandemic. Without federal support, some cities and state will face dire financial circumstances, budget cuts and potential bankruptcy. Congress likely will approve state and local aid, although the dollar amounts may differ between parties. State and local aid also will include financial support to schools, colleges and universities to ensure they can open safely this fall (if they open). Republicans want $30 billion to open schools, while Democrats are targeting $430 billion (although these numbers can change).
Smaller unemployment benefits / return-to-work-bonus
Most Democrats want to extend the $600 a week unemployment benefits due to high unemployment and rising Coronavirus case numbers. Many Republicans believe that the $600 a week unemployment benefit is too generous and creates a disincentive for recipients to return to work. While extended unemployment benefits and a return-to-work bonus are functionally different and may create different incentives, they both provide a financial benefit to people who have lost their job or been furloughed. Senate Republicans and the White House have rallied around Sen. Rob Portman (R-OH), who proposed a $450 a week cash return-to-work bonus. If Congress agrees to extend these unemployment benefits, Congress could reduce the amount from $600 to $450 (or a lower amount).
Liability protections for businesses
Liability protection for businesses, hospitals and schools are a must-have provision for McConnell. He has made liability protection a centerpiece of the new stimulus, and wants five-year, retroactive protection from 2019 to 2024.
New Stimulus: what’s not included
These issues likely don’t have bipartisan support and, given other financial priorities, may not be included in the next stimulus:
Payroll tax cut
President Donald Trump has championed a payroll tax cut as a pro-growth plan to help stimulate the economy.
Student loan forgiveness
House Democrats passed a weakened student loan forgiveness plan in the Heroes Act that would provide $10,000 of student loan forgiveness only for borrowers who are “struggling financially.” While the Heroes Act provides for an extension of these benefits, Senate Republicans (or Senate Democrats) have not made student loans a top issue of the next stimulus.
Trump and Senate Democrats both agree on the need for a new infrastructure plan. However, given the cost and other financial initiatives, it’s unlikely the new stimulus will include a large-scale, comprehensive infrastructure plan.
$4,000 travel bonus
This proposal would give each individual a $4,000 tax credit to take a vacation at least 50 miles from home.
Senate Republicans are targeting the new stimulus closer to $1.3 trillion in total spending. House Democrats proposed $3 trillion for the Heroes Act (which hasn’t passed the Senate). While the numbers likely will change, the final stimulus package could be in the $1.5 – $2.0 trillion range. Congress breaks for summer recess on August 7, which means that the new stimulus could be finalized later this month or in early August.