On August 7th, President Trump signed four presidential memoranda aimed at providing another round of economic stimulus and financial assistance for unemployed workers. The White House has been negotiating with Congressional leaders for several weeks on legislation that would extend many of the emergency economic programs established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and provide additional aid to the economy that is still struggling from the effects of the COVID-19 pandemic. Although the CARES Act was enacted in March with overwhelming bipartisan support, the White House and Congressional leaders have been unable to reach agreement on another legislative package. The parties have deadlocked over the inclusion of aide to the states (sought by Congressional Democrats), COVID-19 liability protections (sought by GOP Senate Leader Mitch McConnell), and the amount of enhanced unemployment benefits (Congressional Democrats have sought to extend the CARES Act’s $600 per week; the White House and Congressional Republicans have sought to lower the amount to around $300 per week). In addition, the parties have sharply different views on the overall spending level for the next bill. In May, House Democrats passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which would provide $3 trillion dollars in stimulus, while Senate Republicans have introduced a $1 trillion stimulus bill.
When signing the presidential memoranda, President Trump expressed his frustration with the negotiations with Congress and his willingness to move forward with further fiscal support without Congressional action. The presidential memoranda cover four long-stated priorities of the Administration during the national emergency declared by President Trump in response to COVID-19: (1) cutting payroll taxes; (2) preventing home evictions and foreclosures on federally backed mortgage loans; (3) increasing unemployment insurance payments; and (4) suspending student loan payments. While each of the executive orders takes steps to advance these policy priorities, they are also constrained by the President’s limited legal authority and, therefore, do not fully obviate the need for legislation.
Deferring Payroll Tax
Under the first Presidential Memorandum, the President directed Treasury Secretary Steven Mnuchin to defer without penalty the collection of employee payroll taxes during the period from September 1st to December 31st for employees whose bi-weekly pay is less than $4,000 ($104,000 per year). The CARES Act had previously allowed employers to defer the payment of the employer’s portion of the payroll tax. Although the Treasury Secretary has its own authority to defer the collection of taxes, only Congress can eliminate the payroll tax. Accordingly, the deferred payroll taxes will need to be paid by employees next year absent Congressional action. President Trump has said that he would support such legislation, but it is unclear whether Congress will ultimately eliminate the tax for this year. Absent Congressional action, a variety of administrative issues will likely arise related to how and when the deferred payroll taxes are ultimately to be paid, including whether and when employers or employees will be liable for paying the taxes. The Treasury Department is expected to provide guidance on these issues in the near future.
Assistance to Renters and Homeowners
Under the second Presidential Memorandum, the President directed members of his cabinet to assess actions that could be taken prevent evictions and foreclosures. The CARES Act contained an eviction and foreclosure moratorium for renters in federal housing program or homeowners with federally-backed mortgages, but that moratorium expired on July 24th.
- The President directed Treasury Secretary Mnuchin and Secretary of Housing and Urban Development Ben Carson to identify federal funds available to aid renters and homeowners who are struggling to pay their rent or mortgage obligations due to financial hardship caused by COVID-19.
- The President directed Secretary Carson to take all actions available under the law to promote the ability of renters and homeowners to avoid eviction or foreclosure resulting from financial hardship caused by COVID-19, including providing financial assistance to public housing authorities, affordable housing owners, landlords and organizations that seek to minimize evictions and foreclosures. As it routinely does following natural disasters, The Federal Housing Administration (FHA) had previously announced a temporary eviction and foreclosure moratorium on FHA-insured single-family mortgages, and it has extended this temporary moratorium beyond the expiration date in the CARES Act.
- The President directed Treasury Secretary Mnuchin and federal Housing Finance Agency Director Mark Calabria to review all existing authorities and resources that could be used to prevent evictions and foreclosures due to financial hardship caused by COVID-19. As it routinely does following natural disasters, the FHFA has already instituted a temporary eviction and foreclosure moratorium for single-family mortgages backed by the Fannie Mae and Freddie Mac, and it has extended this temporary moratorium beyond the expiration date in the CARES Act.
- The President also asked Secretary of Health and Human Services Alex Azar and Center for Disease Control Director Robert Redfeld to assess whether any measures were needed to halt residential evictions for failure to pay to rent in order to prevent the spread of COVID-19 across state lines.
It is not clear whether the Administration will announce additional rental and homeowner assistance programs in the near future resulting from these directives. The lack of Congressional appropriations to fund these programs, though, will limit the scope of any such programs unless Congress provides additional funding and authority as part of another stimulus bill.
Under the third Presidential Memorandum, the President sought to provide additional unemployment benefits, by reallocating federal funds and encouraging states to use federal assistance provided under the CARES Act for wage assistance programs, including unemployment compensation programs.
To provide additional unemployment benefits, the President authorized the Secretary of Homeland Security Chad Wolf to provide disaster relief assistance under the Stafford Act to any Governor requesting lost wage assistance. The conditions on receiving such lost wage assistance are:
- The Governor must agree to a 75/25 percent cost share requirement between the federal government and the state; and
- The Governor must administer the delivery of financial assistance for lost wages in conjunction with the state’s unemployment insurance system.
Under the program, the total lost wage assistance is limited $400 per week ($300 federal contribution/$100 state contribution) and eligibility is limited to persons who (1) receive at least $100 per week from a list of unemployment assistance programs; and (2) certify that they are unemployed or partially unemployed due to COVID-19.
The federal lost wage assistance is funded with up to $44 billion from the Department of Homeland Security’s Disaster Relief Fund (DRF). Under the law, a mandatory 75/25 percent federal/state cost share applies to expenditures from the DRF. The presidential memorandum calls on states to use funds made available to them through the Coronavirus Relief Fund (CRF) established by the CARES Act to cover the state cost share for DRF funds. It also called on states to find additional funds without a federal match to fund unemployment compensation program in the event that the $44 billion in DRF funds is exhausted.
Due to the lack of Congressional appropriated funds for the program, the duration of federal lost wage assistance is necessarily limited. In addition, how the program will be administer is still uncertain. Under the Presidential Memorandum, the program terminates upon the earlier of (1) the balance of the DFR reaching $25 billion (its current balance is approximately $80 billion), (2) December 6, 2020, or (3) the enactment of legislation providing supplemental federal unemployment compensation due to the COVID-19 outbreak.
Student Loan Payment Relief
Under the fourth Presidential Memorandum, the President directed Secretary of Education Betsy DeVos to extend the current suspension of federally-held student loan payments and setting of interest on such loans to 0 percent until December 31st In March, Secretary DeVos announced that the Department of Education was setting interest rates on federally-held student loans at 0 percent for at least 60 days and granting borrowers the option of suspending their payments for two months. The CARES Act later codified and extended these changes, as well as suspended student loan payments, until September 30th. The Presidential Memorandum does not cover private student loans.
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