Just Taxes Blog by ITEP

Action (lack thereof) on Economic Aid Reflects Longstanding Anti-Government Agenda

Action (lack thereof) on Economic Aid Reflects Longstanding Anti-Government Agenda

August 14, 2020

Amy Hanauer
Amy Hanauer
Executive Director

The debate in Washington over additional COVID-19 economic relief is bigger than this moment. It is a debate over the current and long-term role of government.

In the early weeks of the health and economic crisis, Congress came together to enact much-needed relief for families. It placed a moratorium on evictions and foreclosures to prevent mass evictions from deepening the economic free fall. It enacted paid sick leave so employees could stay home when they felt sick to avoid spreading a highly contagious disease. And through the CARES Act, it provided needed cash to families, small businesses and workers displaced by the crisis.

None of these measures were flawless. Paid sick leave didn’t include all workers. Fiscal relief to states was far too stingy and put ill-advised strings on how states could spend that money. Undocumented immigrants who pay their taxes with an ITIN number were ineligible for cash payments and unemployment insurance. And Congress tucked a controversial slush fund for corporations and a tax cut for millionaires into the CARES Act. But overall, lawmakers’ swift action demonstrated that government can work better on behalf of all of us. Studies found that the significant increase in federal assistance prevented millions of families from falling into poverty during the early months of a pandemic that catapulted tens of millions into unemployment.

But refusal to pay attention to scientists and comply with health advice meant that the United States did not successfully contain the coronavirus, even as other countries in Europe and Asia did. And now, similar refusal to accept economic truths threatens to do parallel damage to our economy.

The U.S. Senate failed to act on a $3.3 trillion proposal (the HEROES Act) that the House of Representatives passed in May, and, instead, released a $1 trillion package (the HEALS Act) that fails to live up to this moment. The Senate bill omitted one of the most essential components: federal relief to state and local governments. It slashed unemployment benefits and threw in more unnecessary breaks for business.

Republican leaders are trying to blame working people for a crisis that the administration worsened by rejecting science. Regarding the federal expanded unemployment insurance that expired at the end of July, Sen. Ted Cruz said, “the state government and federal government together are paying them more not to work than they were making working. And that is—the effect of that is keeping our economy shut down.” Sen. Chuck Grassley and Treasury Secretary Steve Mnuchin made similar statements.

So now here we are. The Senate adjourned until mid-September without doing its job. The White House issued convoluted executive actions that analysts said wouldn’t do nearly enough and that the president couldn’t explain or unite even his own party behind (for good reason).

The president has made conflicting statements on the details. One action defers payment of the 6.2 percent employee side of the Social Security payroll tax from Sept. 1 through the end of the year. This is not a tax cut (which the president cannot provide on his own), and any taxes deferred would come due eventually. Employers withhold these taxes and send them to the IRS, and logistical problems would likely prevent employers from participating or lead them to hold onto the money themselves rather than pass it on to workers. The president claims that if re-elected he would enact a law to waive the taxes so they never have to be repaid, and at one point claimed he wanted to eliminate the payroll tax entirely, which would obviously destroy the Social Security program that they fund.

Another of the president’s executive orders tries to deal with Senate Republicans failure to extend unemployment benefits despite staggering job loss. But it provides just $300 in weekly federal benefits (half of what was in the CARES and HEROES acts) and unrealistically demands cash-strapped states kick in $100 more.  

Meanwhile, this week the White House revealed its true agenda: to use this crisis to further enrich the richest. Treasury Secretary Mnuchin called for a cut to the capital gains tax, which would overwhelmingly benefit the very wealthiest households, leave out regular working people, and do nothing to address the current economic crisis. Analyses of similar past proposals found that more than three-quarters of the largesse went to the wealthiest one percent.

The biggest danger we face right now is that politicians will fail to get this health crisis under control and Americans will continue to get sick or die. The second biggest danger is that elected officials will fail to help families and communities, leading to foreclosures, evictions, and impoverishment—and also torpedoing the economy. With their inaction this week, the Senate seems determined to do both. Hold on everyone, we’re in for a sickening ride.