President Donald Trump signs the executive order extending student loan repayment relief, Aug. 8, 2020.
Photo by Shealah Craighead, courtesy The White House.Congressional Democrats thought they had President Donald Trump and Senate Republicans over a barrel, having taken the fiscal high ground with their House-passed $3 trillion pandemic spending package.
But Trump seems to have more barrel-rolling talent than his opponents anticipated. Now it is Democrats who are running for political cover.
The legislation the House passed in May – which its backers dubbed the HEROES Act – was never meant to become law. It was designed as a political marker that Trump and Senate Republicans would reject. This would allow Democrats to portray them as callous and stingy in the face of pandemic-induced economic calamity. The bill cleared the chamber with just a single GOP vote (from New York’s Peter King), while many of the 14 Democrats who defected (mainly from swing districts) decried the missed opportunity for bipartisanship. It was, of course, dead on arrival in the Senate, which in any case preferred to wait to see what else was needed after four prior relief bills had more time to produce results.
The key date, which was obvious when the House acted, was Aug. 1 – when a federally funded unemployment bonus of $600 per week would expire. (In practice, the benefit expired for most recipients slightly before that date.) The House bill would have extended that benefit through January, ensuring that many recipients would continue to be financially better off collecting unemployment than going back to work. This, in turn, would likely keep the unemployment rate elevated past the November elections. Even with the enhanced benefits in place, a rebounding economy produced more than 9 million net new jobs between May and July.
Events unfolded according to the Democratic script – until they didn’t. The enhanced benefits expired. Senate Republicans unveiled their own $1 trillion package, which would have curtailed but continued the enhanced benefits. House Speaker Nancy Pelosi and Senate Minority Leader Charles Schumer dismissed the GOP legislation and negotiated with Trump’s advisers through last week. They demanded that Republicans meet them in the middle, because what’s a trillion dollars or so among frenemies? By that logic, Democrats could have obtained their entire $3 trillion wish list by simply setting their opening offer at $5 trillion. Lesson learned for next time, I suppose.
But rather than cave, Team Trump told the Democrats to take a hike. On Saturday the president issued a package of executive orders – four in all – that would accomplish some of the most pressing GOP objectives, as well as some of Trump’s personal objectives that pretty much nobody else cares about. Democrats were left sputtering their outrage.
They did, liberally (pun intended), over the rest of the weekend. Pelosi scorned the presidential actions as “meager, weak and unconstitutional.” Schumer criticized the president’s use of previously appropriated emergency funds to meet the pandemic economic emergency, because it is hurricane season and there could be another meteorological emergency. (Of course, Congress will still presumably be in the appropriation business if that should happen.) And presidential hopeful Joe Biden fired off an email statement from his basement to denounce Trump’s payroll tax deferral as a “reckless war on Social Security.” This notwithstanding that, when Biden was vice president during the last economic downturn, the Obama administration signed on to an extended cut – not just a deferral – to Social Security taxes. Trump likewise wants to forgive the taxes he deferred, but he will need congressional assent to do so.
Like most observers in both parties, I don’t think Trump’s obsession with creating a payroll tax holiday – temporary or permanent – is a particularly effective way of dealing with the pandemic’s hardships. Most of the government’s attention ought to be on helping people get back to work and helping them to pay their bills until they do. By definition, Trump’s payroll tax holiday only helps people who already are on payrolls. And if it is just a deferral of those payments, any economic (as opposed to political) benefit it might yield would inevitably be transient.
Most of Trump’s other measures, however, are logical and reasonable. He is extending the federal unemployment supplement, but at a $400 weekly rate, rather than $600. This would be paid out of those federal emergency funds. States would have to contribute $100 of that amount, but Trump specified that they could use previously appropriated but unspent assistance from the earlier coronavirus legislation.
The president extended a previous moratorium on payments for federally held student loan debt until the end of the year. He also instructed federal officials to look for funding to help renters avoid eviction. Critics could legitimately call this last measure weak, but perhaps it is the most the president can do without congressional authorization and funding.
Despite histrionics from Pelosi and others on the political left, there is nothing blatantly unconstitutional about anything the president ordered. Whether his actions are legal and could withstand court challenges is another question. It boils down to how much leeway the executive branch has under prior appropriations to repurpose unspent money from the $3 trillion Congress has already authorized to deal with the pandemic.
That is the question that will be litigated – maybe. It will be interesting to see who, exactly, brings such litigation, and whether courts will view them as having standing to sue. The obvious candidate would be Pelosi and her fellow House members, who jealously guard their appropriations power. But, as Treasury Secretary Steven Mnuchin observed, House Democrats occupy a rather awkward position. Challenging the executive order would mean depriving unemployed Americans – the same people whom the House voted to grant $600 per week in their proposed extension of supplemental benefits – of $400 in weekly benefits from funds that have already been approved.
“They’re going to have a lot of explaining to do,” Mnuchin told Chris Wallace of Fox News.
Indeed they will – or they would, if they chose to publicly attack the relief the president granted on his own authority. My guess is that allied groups, rather than congressional Democrats, will lead the legal assault. The politicians are more likely to return, perhaps somewhat less arrogantly, to the negotiating table. They can do that as soon as they finish running from the barrel that the president is rolling down Capitol Hill at them.
Posted by Larry M. Elkin, CPA, CFP®
President Donald Trump signs the executive order extending student loan repayment relief, Aug. 8, 2020.
Photo by Shealah Craighead, courtesy The White House.
Congressional Democrats thought they had President Donald Trump and Senate Republicans over a barrel, having taken the fiscal high ground with their House-passed $3 trillion pandemic spending package.
But Trump seems to have more barrel-rolling talent than his opponents anticipated. Now it is Democrats who are running for political cover.
The legislation the House passed in May – which its backers dubbed the HEROES Act – was never meant to become law. It was designed as a political marker that Trump and Senate Republicans would reject. This would allow Democrats to portray them as callous and stingy in the face of pandemic-induced economic calamity. The bill cleared the chamber with just a single GOP vote (from New York’s Peter King), while many of the 14 Democrats who defected (mainly from swing districts) decried the missed opportunity for bipartisanship. It was, of course, dead on arrival in the Senate, which in any case preferred to wait to see what else was needed after four prior relief bills had more time to produce results.
The key date, which was obvious when the House acted, was Aug. 1 – when a federally funded unemployment bonus of $600 per week would expire. (In practice, the benefit expired for most recipients slightly before that date.) The House bill would have extended that benefit through January, ensuring that many recipients would continue to be financially better off collecting unemployment than going back to work. This, in turn, would likely keep the unemployment rate elevated past the November elections. Even with the enhanced benefits in place, a rebounding economy produced more than 9 million net new jobs between May and July.
Events unfolded according to the Democratic script – until they didn’t. The enhanced benefits expired. Senate Republicans unveiled their own $1 trillion package, which would have curtailed but continued the enhanced benefits. House Speaker Nancy Pelosi and Senate Minority Leader Charles Schumer dismissed the GOP legislation and negotiated with Trump’s advisers through last week. They demanded that Republicans meet them in the middle, because what’s a trillion dollars or so among frenemies? By that logic, Democrats could have obtained their entire $3 trillion wish list by simply setting their opening offer at $5 trillion. Lesson learned for next time, I suppose.
But rather than cave, Team Trump told the Democrats to take a hike. On Saturday the president issued a package of executive orders – four in all – that would accomplish some of the most pressing GOP objectives, as well as some of Trump’s personal objectives that pretty much nobody else cares about. Democrats were left sputtering their outrage.
They did, liberally (pun intended), over the rest of the weekend. Pelosi scorned the presidential actions as “meager, weak and unconstitutional.” Schumer criticized the president’s use of previously appropriated emergency funds to meet the pandemic economic emergency, because it is hurricane season and there could be another meteorological emergency. (Of course, Congress will still presumably be in the appropriation business if that should happen.) And presidential hopeful Joe Biden fired off an email statement from his basement to denounce Trump’s payroll tax deferral as a “reckless war on Social Security.” This notwithstanding that, when Biden was vice president during the last economic downturn, the Obama administration signed on to an extended cut – not just a deferral – to Social Security taxes. Trump likewise wants to forgive the taxes he deferred, but he will need congressional assent to do so.
Like most observers in both parties, I don’t think Trump’s obsession with creating a payroll tax holiday – temporary or permanent – is a particularly effective way of dealing with the pandemic’s hardships. Most of the government’s attention ought to be on helping people get back to work and helping them to pay their bills until they do. By definition, Trump’s payroll tax holiday only helps people who already are on payrolls. And if it is just a deferral of those payments, any economic (as opposed to political) benefit it might yield would inevitably be transient.
Most of Trump’s other measures, however, are logical and reasonable. He is extending the federal unemployment supplement, but at a $400 weekly rate, rather than $600. This would be paid out of those federal emergency funds. States would have to contribute $100 of that amount, but Trump specified that they could use previously appropriated but unspent assistance from the earlier coronavirus legislation.
The president extended a previous moratorium on payments for federally held student loan debt until the end of the year. He also instructed federal officials to look for funding to help renters avoid eviction. Critics could legitimately call this last measure weak, but perhaps it is the most the president can do without congressional authorization and funding.
Despite histrionics from Pelosi and others on the political left, there is nothing blatantly unconstitutional about anything the president ordered. Whether his actions are legal and could withstand court challenges is another question. It boils down to how much leeway the executive branch has under prior appropriations to repurpose unspent money from the $3 trillion Congress has already authorized to deal with the pandemic.
That is the question that will be litigated – maybe. It will be interesting to see who, exactly, brings such litigation, and whether courts will view them as having standing to sue. The obvious candidate would be Pelosi and her fellow House members, who jealously guard their appropriations power. But, as Treasury Secretary Steven Mnuchin observed, House Democrats occupy a rather awkward position. Challenging the executive order would mean depriving unemployed Americans – the same people whom the House voted to grant $600 per week in their proposed extension of supplemental benefits – of $400 in weekly benefits from funds that have already been approved.
“They’re going to have a lot of explaining to do,” Mnuchin told Chris Wallace of Fox News.
Indeed they will – or they would, if they chose to publicly attack the relief the president granted on his own authority. My guess is that allied groups, rather than congressional Democrats, will lead the legal assault. The politicians are more likely to return, perhaps somewhat less arrogantly, to the negotiating table. They can do that as soon as they finish running from the barrel that the president is rolling down Capitol Hill at them.
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