Democrats race for Covid aid that could still reach Americans late



A few weeks ago, it looked like Andrew Cuomo was on track to break a New York curse and make it past a third term in office. But now, roiled in a Covid scandal, his political future is looking less certain.

And getting aid money out quickly is crucial to keeping the economy afloat after the hit it took from the coronavirus, economists warn, given that any lapses in assistance will lead to a drop in consumer spending. Spending among low- and middle-income Americans who are receiving stimulus checks and unemployment benefits is slightly higher than it was before the pandemic, heavily bolstering the economy even though 10 million people remain unemployed.

“When people talk about how startlingly strong the rebound was out of the depths of the initial part of the crisis, that was predicated on unprecedented support” from the federal government, said Diane Swonk, chief economist at Grant Thornton.

The start-and-stop nature of unemployment aid and other benefits is already weighing on consumer behavior, dampening the effects on the broader economy, Swonk and other economists warn. If people are unable to count on regular unemployment checks or anticipate a change in the amount of benefits they are getting, they will spend less.

“It creates uncertainty, and uncertainty is a tax on the economy,” Swonk said.

Among the stimulus policies that would most significantly increase cash to Americans, the package would boost the child tax credit and allow families to receive that money on a monthly basis, providing up to $300 a month per kid. But the IRS would not have to start offering those monthly payments until July 1.

The case for expanding the child tax credit as an immediate stimulus “is weaker given the timing challenge,” said Garrett Watson of the Tax Foundation, noting that there is also an argument for expanding the credit to reduce child poverty over the long term.

The IRS would also be charged with sending out new stimulus checks of up to $1,400 while at the same time facing the tidal wave of tax filing season. Leaders in the tax industry have already called on lawmakers to ensure the overburdened agency is not ordered to swiftly distribute all stimulus checks to the detriment of its core mission of collecting taxes.

John Koskinen, who served as IRS commissioner from 2013 through 2017, said the agency did “amazingly well” distributing stimulus checks last year despite being underfunded and short thousands of employees since a decade ago.

“But there’s a limit to what new things you can ask them to do without threatening the entire system,” Koskinen warned.

In another tall order, the stimulus would require the Small Business Administration to launch a $25 billion restaurant grant program that the industry has been fighting for since the early months of the pandemic. Since then, about 17 percent of restaurants have closed, according to the National Restaurant Association.

The SBA, which has faced unprecedented demands from Congress during the economic and health crisis, has not fully implemented relief efforts from December’s economic aid package. The most glaring example is a $15 billion grant program for shuttered live venues that has not yet launched and has no official start date.

Under the stimulus, the Federal Communications Commission also would receive $7.6 billion to subsidize Wi-Fi hot spots and other devices to help students connect to virtual classes. But the agency would get two months to set up rules for doing so, likely releasing that assistance with just a few weeks left in the school year.

At the state level, officials are already running out of cash from the previous stimulus.

“We’ve already had cities, counties, municipalities cutting staff to pay for Covid expenses,” Kansas State Treasurer Lynn Rogers said Thursday during a call hosted by the advocacy group Invest in America Action.

Several states have yet to even begin distributing some of the unemployment assistance granted under the pandemic aid package that became law in late December.

Some centrist lawmakers in both parties warned congressional leaders early in the process that enacting a massive aid package would result in painful delays. Rep. Tom Reed (R-N.Y.), co-chair of the bipartisan Problem Solvers Caucus, said Congress should peel off funding for vaccines, as well as an extension of unemployment benefits, and pass those portions as soon as possible.

There is now “a cliff hanging over Congress’ and the president’s desire to act,” Reed said. “There should be no reason to have that unofficial deadline of unemployment holding up what could otherwise be good policy.”

Rebecca Rainey, Zachary Warmbrodt, David Lim, John Hendel and Marianne LeVine contributed to this report.



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