Will There Be a Second Round of Stimulus Payments?

Summary

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WSJ Your Money Briefing: Will There Be a Second Round of Stimulus Payments?

Date: May 19, 2020
Host: J.R. Whelan
Guest: Richard Rubin, Wall Street Journal Tax Reporter

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Episode Overview

This episode delves into the debate over a potential second round of stimulus payments in response to the ongoing economic impact of COVID-19. Host J.R. Whelan and WSJ tax reporter Richard Rubin break down where negotiations stand on Capitol Hill, the key differences in the latest House-proposed stimulus bill, and the political and economic implications of additional direct payments to Americans.

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Key Discussion Points and Insights

1. Status of the New Stimulus Proposal

• The House, led by Democrats, has passed a $3 trillion stimulus package with provisions for another round of direct payments to Americans.
• The bill faces “tough odds” in the Republican-led Senate due to policy disagreements, especially regarding the structure and intention of further aid.
  • Notable Quote:

    “A chunk of the money would go toward helping Americans pay their bills, but the GOP feels those payments could actually slow down a recovery.”
    — J.R. Whelan (00:37)

2. Republican Concerns and Alternatives

• Richard Rubin explains that Republican resistance centers on the belief that additional payments and generous unemployment insurance could disincentivize a return to work.
• Republicans prefer aid that is tied directly to employment, such as incentives for businesses to retain or hire workers.
  • Notable Quote:

    “…they're really trying to tie additional aid to work, whether it's incentives for companies to keep paying people as they have reduced hours or hiring bonuses...”
    — Richard Rubin (00:56)

3. Economic Health and Political Implications

• The decision to offer a second round of payments would indicate Congress expects a prolonged economic downturn, resembling a “swoosh-shaped” rather than a “V-shaped” recovery.
• Lawmakers’ willingness to approve further stimulus is closely linked to their reading of the economic outlook.
  • Notable Quote:

    “If there's another round, that's really a signal from Congress that they think we're in for a much longer haul of recession and recovery here... It's almost sort of an indicator of where the political mood is about the economy.”
    — Richard Rubin (01:57)

4. Key Differences in the House’s Proposed Bill

• The new House bill would:
  • Provide $1,200 per adult, as in the first round.
  • Increase per-child payments from $500 to $1,200 per child.
  • Extend eligibility for dependents to college students and adult dependents, excluded previously.
  • Increase total cost to around $400+ billion (from the first round’s $300 billion).
  • Notable Quote:

    “This next round would be in all, maybe 400 and some billion as opposed to about 300 billion from the previous round. So that's a pretty significant jump...”
    — Richard Rubin (03:33)

5. Retroactive Provisions

• Eligibility changes (for adult dependents and college students) would apply retroactively, entitling those left out in the first round to payments.
• The second round of checks would cover new periods going forward.
  • Notable Quote:

    “…those changes to allow adult dependents and college students, those changes in eligibility would be retroactive.”
    — Richard Rubin (04:10)

6. Lack of Precedent and Policy Intent

• The legislative process is complicated by the unprecedented nature of the pandemic recession, unlike 2008.
• Policymakers struggle with defining the primary aim: plugging budget holes, boosting spending, or incentivizing work.
  • Notable Quote:

    “Yeah, it's really about trying to figure out what it is that Congress is trying to do... Congress, you know, so far has really tried to do all of that.”
    — Richard Rubin (04:39)

7. State and Local Tax (SALT) Deduction Debate

• The Democratic bill includes a repeal of the SALT deduction cap.
• Republicans strongly oppose this change, making it unlikely to survive in final negotiations.
  • Notable Quote:

    “That's not gonna happen... That's certainly something that is not attracting a lot of support among Republicans.”
    — Richard Rubin (05:14)

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Memorable Moments & Noteworthy Quotes

• On the higher payments for dependents:

  “It would have 1,200 per child as opposed to 500 per child. And it also allows those dependent payments to go for college students and adult dependents...”
  — Richard Rubin (03:33)

• On the challenge of crafting effective policy:

  “When you're trying to evaluate a particular policy, then you're trying to think about, well, what are we trying to do here? And these payments can serve some of those ends but not necessarily all of those ends.”
  — Richard Rubin (04:39)

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Important Timestamps

• 00:37 — Description of the House’s $3 trillion stimulus package and Republican concerns
• 00:56 — Discussion of GOP preferences: tying aid to employment
• 01:57 — Interpreting the economic signal Congress would send with another round of payments
• 03:33 — Details of new stimulus proposal: adult, child, and dependent payments
• 04:10 — Explanation of retroactive eligibility changes
• 04:39 — Challenges in policy objectives and lack of historical precedent
• 05:14 — Status of the state and local tax deduction cap in negotiations

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Conclusion

In this episode, J.R. Whelan and Richard Rubin provide a thorough update on the debate over a second wave of stimulus payments. Listeners learn how the political and economic landscape—along with intricate policy shifts—affect the likelihood, design, and timing of more direct payments. Rubin’s analysis highlights not only the divisions within Congress but also the evolving understanding of federal aid's purpose during an unprecedented crisis.

Transcript

[Deel Representative]

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[J.R. Whelan]

Here's your money briefing for Tuesday, May 19th. I'm J.R. whalen for the Wall Street Journal. The $3 trillion stimulus package passed by the Democratic led House last week faces tough odds in the Republican Senate. A chunk of the money would go toward helping Americans pay their bills, but the GOP feels those payments could actually slow down a recovery.

[Richard Rubin]

Yeah, that's part of the Republican concern, partly about these payments and partly about unemployment insurance that's larger than what people can get from working is that they're really trying to tie additional aid to work, whether it's incentives for companies to keep paying people as they have reduced hours or hiring bonuses or something that sort of is related to work.

[J.R. Whelan]

So what should you expect from a second round of stimulus payments, if anything? Coming up, Wall Street Journal reporter Richard Rubin will explain where negotiations stand on Capitol Hill. Many Americans have already used up the $1,200 stimulus payment and lawmakers are preparing a new round of checks. But an aid package passed by Democrats in the House last week is a long shot in the GOP led Senate. Wall Street Journal tax reporter Richard Rubin joins us to explain why. So, Richard, for Americans, a new round of payments could definitely come in handy, but what would it say about the health of the economy?

[Richard Rubin]

Well, and I think it's what it would say about the health of the economy that's making it unclear whether there's going to be another round. If there's another round, that's really a signal from Congress that they think we're in for a much longer haul of recession and recovery here, the sort of swoosh shaped recovery that you hear people talking about as opposed to the quick bounce back V shape where you kind of wouldn't need more payments because people are going to go back to work and have jobs and spend money and everything's going to kind of be more back to normal by the fall. So it's almost sort of an indicator of where the political mood is about the economy. And that's what you're seeing as Congress talks about whether to have more payments.

[J.R. Whelan]

So Republicans in the Senate feel that more stimulus would not only paint a picture of a still ailing economy, but could in reality slow down a recovery.

[Richard Rubin]

Yeah, that's part of the Republican concern, partly about these payments and partly about unemployment insurance that's larger than what people can get from working, is that they're really trying to tie additional aid to work, whether it's incentives for companies to keep paying people as they have reduced hours or hiring bonuses or something that sort of is related to work. And this policy, you know, has been money just going to people all over the place regardless of whether they're working or not. And it's not that Republicans are necessarily opposed to another round of payments. They're, they're not dead set against it. I wouldn't discount it maybe happening, but it's, it's certainly not the, you know, most popular thing right now among Republicans.

[J.R. Whelan]

Under the stimulus proposal that so far has been approved by Democrats, how would the dollars differ from the first round?

[Richard Rubin]

So that bill that passed, passed the House last week, would have 1,200 per adult again, but then it would have 1200 per child as opposed to 500 per child. And it also allows those dependent payments to go for college students and adult dependents and who were both sort of excluded from the first round of payments. And so this next round would be in all, maybe 400 and some billion as opposed to about 300 billion from the previous round. So that's a pretty significant jump in terms of the size of what we're talking about here.

[J.R. Whelan]

Now, this proposed stimulus package is retroactive. What exactly does that mean?

[Richard Rubin]

Well, sort of, I mean, those changes to allow adult dependents and college students, those changes in eligibility would be retroactive. So there'd be additional payments that the people would be eligible for. If you're in those groups and didn't get it the first time around, and then the second round of payments would, you know, would be prospective, would be going forward.

[J.R. Whelan]

Is part of the reason for the rocky path toward resolution here due to the fact that there really isn't a blueprint to refer to, like comparing it to the 2008 recession?

[Richard Rubin]

Yeah, it's really about trying to figure out what it is that Congress is trying to do. Is it trying to sort of plug holes in people's budgets? Is it trying to get people to spend money? Is it trying to encourage people to go back to work? Like the Congress, you know, so far has really tried to do all of that. And there's, you know, something to be said for that approach of let's just try everything. But when you're trying to evaluate a particular policy, then you're trying to think about, well, what are we trying to do here? And these payments conserve some of those ends but not necessarily all of those ends.

[J.R. Whelan]

Now the topic of limits on state and local tax deductions is still being put on the table. What's the status of that?

[Richard Rubin]

Yeah, that's not gonna happen. That was in the bill that passed the House and Democrats really favor it, but Republicans have are sort of vociferously against that. And so you may see some compromise on some other things, but that's certainly something that is not attracting a lot of support among Republicans.

[J.R. Whelan]

All right. That's Wall Street Journal tax reporter Richard Rubin. Richard, thanks for coming on the show.

[Richard Rubin]

Yep. Thank you.

[J.R. Whelan]

And that's your money briefing. I'm J.R. whelan for the Wall Street

[Deel Representative]

Journal deal replaces fragmented payroll vendors with one Global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e l.com WSJ.