US President Donald Trump speaks at a factory in Clyde, Ohio, the US, August 6 2020. Picture: REUTERS/JOSHUA ROBERTS
US President Donald Trump speaks at a factory in Clyde, Ohio, the US, August 6 2020. Picture: REUTERS/JOSHUA ROBERTS

Washington —  President Donald Trump said he expected to sign orders on Friday or Saturday extending enhanced unemployment benefits and imposing a payroll-tax holiday as legislators have been unable to reach agreement on stimulus legislation that includes those measures.

Trump, speaking to reporters on Thursday before leaving on a trip to Ohio, said he also expected to sign orders on eviction protection and on student loan repayment. Unilateral action by Trump would probably set up a legal fight over presidential authority.

Trump made the comments after House speaker Nancy Pelosi said negotiations on a new virus relief package were making progress, though the two sides still have major differences as their self-imposed Friday deadline for a deal looms.

Pelosi and Senate Democratic leader Chuck Schumer are scheduled to meet later on Thursday with treasury secretary Steven Mnuchin and White House chief of staff Mark Meadows for another round of negotiations to try to bridge the gap on the cost and breadth of another stimulus plan.

The Trump administration has been discussing tapping unspent stimulus money from the $2-trillion stimulus passed in March to fund executive orders.

Eviction moratorium

Pelosi said on Thursday that she would support Trump extending the eviction moratorium for renters, but said additional funding must be approved by Congress. “I don’t think they know what they’re talking about” in looking to tap unspent stimulus money, she said.

After more than a week of negotiations with Mnuchin and Meadows, Schumer and Pelosi said they still have significant differences, including over the enhanced unemployment benefit that was in the last stimulus bill but now has expired.

The talks take on added urgency as time passes. The November general election is 89 days away and economic data show signs that the economy is still hobbling along. The labour department reported that applications for unemployment benefits fell more than expected, to the lowest since the pandemic started. But with claims still exceeding a million on a weekly basis, the job market has a long road to fully recovering.

Effectiveness questioned

Senate finance committee chair Chuck Grassley said that the payroll-tax suspension does not  make sense economically.

“For tax policy to make a big difference it’s got to be long term,” said Grassley, an Iowa Republican. “I’m not going to advise anything until I find out whether he thinks he’s got the legal authority to do it.”

Grassley said he doubts Trump is serious about signing the orders. “I assume he’s contemplating it to send a signal that he is sick and tired that Democrats are not negotiating,” Grassley said.

If Trump orders the Internal Revenue Service to temporarily pause collecting payroll taxes, companies will still be responsible for making those payments later. The president can’t unilaterally cut taxes, so Congress would need to forgive those payments before they come due — something that is far from certain in a divided Congress where even Republicans have been resistant to a payroll tax cut.

Authority issue

The executive branch has authority to delay tax due dates for as long as a year during a declared disaster. Trump’s order would likely face legal challenges because it’s unclear whether he has the authority to require employers to hand over the savings to their employees.

Employers are required to withhold and submit payroll levies on behalf of their workers. That makes them more likely to hang on to that money so they are not stuck trying to get it back from staff if the bill comes due. In that event, many would not even have seen relief, because the money would not ever have reached their pay cheques.

“To the extent that there is a chunk of money that has been appropriated to the states, that suggests there is some room under the law to proceed,” said Gordon Gray, director of fiscal policy at the American Action Forum.

Bloomberg

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.