Health & Science

Unsanitized: The Return of Checks Checks Checks

Unsanitized: The Return of Checks Checks Checks

This article is adapted from Unsanitized: The COVID-19 Daily Report put out by The American Prospect. You can find the original publication here.

First Response

With three days to go before government funding expires, the leadership in the House and Senate finally got in a room together to discuss a year-end deal that packages an omnibus spending bill and coronavirus aid. Mitch McConnell has said that the Senate will not leave Washington without a deal, and both sides cited progress and sounded optimistic this morning. Sen. Steve Daines (R-MT) said the deal could be announced as soon as today.

Multiple outlets have reported that there would be a deal along the contours of what I suggested yesterday, using the bipartisan relief bill as a baseline and leaving off the more contentious elements shunted into a second bill, namely the $160 billion for state and local government aid and the corporate liability shield. That left a roughly $750 billion package, and I suggested that, if the Republicans were willing to go to $900 billion, that left some headroom for the return of the long-awaited second stimulus check. (It’s not a stimulus check, it’s an emergency survival check, but everyone calls it a stimulus check so what can you do.)

A stimulus check at $1,200 per person and $500 per child is typically scored at $300 billion. Cut it in half and you’re at $150 billion, which paired with the bipartisan relief bill would get you to $900 billion. That appears to be precisely what’s going down. So adults would get a $600 check, and children $250, if that holds.

One issue, of course, is that the stimulus checks in March were means-tested, and if you’re keeping the total cost to $150 billion they would likely be means-tested in this bill to the same degree. That means that any individual making over $75,000 would see the $600 reduce, and phase out completely at $100,000/year income. For couples it would be $150,000, and a total phase-out at $200,000.

This was problematic in March, because the means test was based on 2019 (or, for those who hadn’t paid taxes yet, 2018) tax data. So someone who lost their job in March but made a good living previously would not get the check. This problem is even WORSE now. Basing the means test on 2019 tax data wouldn’t capture any of the COVID-related job loss and the wild swings in people’s incomes since the virus hit.

That’s insane. Someone who made $100,000 in 2019, lost their job in February, and never found new work would then get nothing. (They would get unemployment insurance, depending on their state, if it hasn’t run out already.) I know people in this position. It’s true that most of the job loss has occurred at the low end, but even if only one-tenth of workers still unemployed by the virus had higher wages, you’re talking about a million people who clearly are in the desperate need category who would not get a stimulus check.

The Wall Street Journal’s smart tax guy Richard Rubin noted that you could make the checks a 2020 tax return event. The stimulus checks were bizarrely structured as a tax refund. If you structure the latest check that way too, then people get the $600 ($1,200 for couples and $250 for each child) as part of their 2020 tax refund. That would delay the receipt of funds until February at the earliest, as people do their tax returns. By this point, nobody would get a check until January at the earliest, so you’re talking about one month. Of course, at this point a month is a lot given the desperation out there. This would be a huge bonanza for H&R Blocks’ “revenue anticipation loan” product, which gives people an advance on their refund for a small fee. You can actually get a version of these, sometimes called “the Christmas loan,” before tax season starts. So you’d see mass borrowing and a lot of money flowing to tax preparation companies instead of the people who need the checks.

The other, superior way to handle this is to send out the check to everyone ASAP, regardless of income, and then claw back from those who are ineligible in the 2020 tax returns. In other words, if you made $100,000 this year, you’d get the check now, but whatever you owe in tax, you’d add the value of the check to it. The government would only be put out for a matter of a few months for the extra funds, which they’d get right back. Yes, tax cheats who don’t file would get away with a free $600. Of course, they’re tax cheats, they’re getting away with a lot more than $600. And the loss there is minimal compared to having a million families or more screwed.

But then someone will get to say “this bill gives millionaires an interest-free loan” (for like a month! And it’s a whopping $600!) and anger will crest. Anything intelligently designed in policy is a nice thing we can’t have.

So What Would You Do?

What we’re hurtling toward, then, is a relief bill of $900 billion, with half the unemployment boost relative to the CARES Act, with half the stimulus check relative to the CARES Act, with no money for state and local governments to cover budget shortfalls, with not enough for schools as schools say they need, not enough for vaccine distribution as public health experts say they need, and with a bunch of other worthy but maybe slightly less than needed odds and ends. I broke down everything in the bipartisan bill here, and this will fall along similar lines.

Should progressives vote for it? I think they should try to limit the obvious giveaways that were in the bipartisan bill, and plow all of that into individual relief. Chambers of commerce and other 501(c)(6) organizations, venture capital and private equity-backed companies can get PPP loans, though investors (and VCs) enjoyed a bonanza in 2020 from the backstopping of capital markets. There’s a good argument to cap PPP loans at $500,000, and move that money into unemployment and checks. There’s no extension of paid leave, returning the country to a rare global Grinch on letting sick workers stay home. There’s a provision allowing PPP-receiving businesses to use the forgivable loan as a tax deduction, which could be worth at least $100 billion to pass-through companies mostly composed of rich people. I would zero in on that last one. Eliminating this “double-dip” provision could allow more money to be put into boosted unemployment or stimulus checks. (This giveaway is a Richie Neal special, by the way.)

But what you’re left with is that most of this $900 billion is legitimate relief for small businesses and individuals, and it cancels the corporate bailout facilities that are really no longer necessary, given the propping up of markets throughout the year and the expectation of vaccine-led boom times in the future. This is emergency aid where each dollar is better than the nothing on offer right now, and the horrors that would result.

The lack of state and local aid is a huge mistake that will have long-lasting effects, and clinching an omnibus spending bill along with this means that no must-pass bill will be around until next September. But that mistake was baked in long ago. This is a bill that’s bigger than the 2009 stimulus, and it’s going mostly to people who need it. Fight to remove the giveaways and expand relief. But there’s a deal worth taking.

Days Without a Bailout Oversight Chair


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David Dayen

David Dayen is the author of Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud, winner of the Studs and Ida Terkel Prize. Follow him on Twitter: @ddayen.