The president’s order depends on already cash-poor states being able to create and implement a new system and fund one-fourth of the aid.
Tens of millions of jobless Americans are unlikely to see their weekly unemployment checks grow anytime soon — despite President Donald Trump’s executive action promising an extra $400 a week.
The president’s order depends on already cash-poor states being able to create and implement a new system and fund one-fourth of the aid, which for many governors would be a difficult if not impossible task.
It also would draw from a limited pool of funding, meaning enhanced benefits might only last a few weeks once the program is up and running. And it imposes a minimum benefit requirement, which could render some low-wage and gig workers ineligible.
“I honestly think this can’t possibly be serious,” said Michele Evermore, a senior policy analyst with the liberal-leaning National Employment Law Project. “The White House must have released this thinking that this is just a negotiating tactic because it really is an empty promise.”
How would it work?
The action uses presidential powers under what’s known as the Stafford Act to use disaster relief funding, in combination with state dollars, to send money to unemployed workers.
The Labor Department has so far said it will work with states, the Department of Homeland Security and FEMA to help provide the relief, but it has not provided more specifics. Some states, like Hawaii and Missouri, have issued notices saying they are awaiting further guidance from DOL on how to implement the program.
States have to apply for the federal funding, and if they choose not to opt in or say they do not have the funds available to supply their portion of the aid, then unemployed workers in their state will get no extra benefit.
The memo instructs states to distribute the payments through their regular unemployment systems. But many experts and Democrats say they are confused as to how already struggling state systems would be able to administer Trump’s plan. “That’s something that we just don’t understand how that would work,” a Senate Democratic aide told POLITICO. “You basically need to set up this whole new entity.”
Where would the money come from?
Trump’s memorandum says the federal government would cover 75 percent of the costs, while states would provide the remaining 25 percent — or $100 per worker per week. But the president’s messaging on who would be required to foot the bill for the program has shifted in recent days, as he suggested he could have the federal government cover all of the costs or more than 75 percent.
“We have a system where we can do 100 percent or we can do 75 percent. They’d pay 25. And it’ll depend on the state. And they’ll make an application, we’ll look at it, and we’ll make a decision,” Trump told reporters Monday in New Jersey. “So it may be they’ll pay nothing in some instances.”
But White House press secretary Kayleigh McEnany appeared to knock down that idea during a Monday press briefing, noting that states are legally required to pay for a quarter of the aid. She added that states can use CARES Act funding “as a way to bring that hundred dollars forward.”
A White House spokesperson told POLITICO that “states could also apply their existing state unemployment benefits” as funds that meet the 25 percent share.
But some cash-strapped state governments have been holding on to a portion of that money, hoping that Congress will provide them with the flexibility to use it for budget gaps caused by declining tax revenues.
Can states afford it?
Governors are already making clear that it won’t be easy to come up with their required portion of the aid, nor to set up a new system in the middle of a pandemic that has already wreaked havoc on state budgets.
The nonpartisan National Governors Association, which for months has been calling for $500 billion for states from the federal government, said in a statement Monday it was “concerned” about “the significant administrative burdens and costs this latest action would place on the states.” The group called instead for Congress and the Trump administration to work out a solution that would not place new administrative and fiscal burdens on states.
“States are going broke and millions of Americans are unemployed, yet the solution calls for the states to create a new program we can’t afford to begin with and don’t know how to administer,” New Jersey Democratic Gov. Phil Murphy said on Monday.
And Ohio Gov. Mike DeWine, a Republican, said Sunday his state was still reviewing whether it could afford to fund its share of the new program. “The answer is, I don’t know yet,” DeWine said on CNN’s “State of the Union.”
How quickly will workers get paid?
Requiring states to implement a new program could take weeks or months as they reprogram their antiquated systems to calculate who will be eligible. States will also have to find a way to separately fund administration of the new aid alongside regular unemployment benefits.
“It will definitely be months,” Evermore said. “And that’s in states that are able to pay it out at all.”
The White House acknowledged on Monday the uncertainty around standing up such a system. “I can’t pinpoint a timeline,” McEnany said during a press briefing.
Who is eligible for benefits?
The memo says workers must receive at least $100 in benefits a week in order to be eligible, a requirement that could leave out many gig-economy, low-wage and part-time workers.
State unemployment benefits, which vary by state, typically replace about 50 percent of a worker’s wages. Most states will pay a minimum benefit far lower than $100, suggesting that some part-time and low-wage workers could fall below the threshold to receive the federal help.
Will this help the economy?
Experts warn there is not enough money available to have a meaningful impact on the economy.
Since Trump doesn’t have authority to order the spending of new money, the most he can do is push existing programs to spend their existing funding in new ways, said Jack Smalligan, who previously worked as deputy associate director at the Office of Management and Budget.
There’s roughly $44 billion available in the Disaster Relief Fund, from which the government will draw the federal portion of the benefit. Andrew Stettner, a senior fellow at the progressive Century Foundation, calculated that would provide about six weeks of benefits if every state were to take up the extra unemployment insurance program — “not enough to endure the current Covid-19 surge and get to the point when jobless are able to go back to their jobs,” he said.
He also noted that the extra $400 per week for eligible jobless workers would still represent an average 22 percent pay cut for those who had through July been receiving an extra $600 weekly from the federal government.
And that in turn is likely to lead to a drop in consumer spending that has been supporting jobs. The Economic Policy Institute, a progressive think tank, estimates that cutting the enhanced benefit by $200 per week would cost 1.7 million jobs.
“Compared to actually doing another installment of emergency unemployment insurance legislation,” Smalligan said, “what’s done in the executive order is really quite paltry.”
About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.
About the Author: Megan Cassella is a trade reporter for POLITICO Pro.