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Congress should consider these 7 ideas for the next stimulus package

From a federal paycheck guarantee to recurring payments, these proposals could help people navigate the economic fallout from the coronavirus.

The Oculus transportation hub and mall stands nearly deserted in lower Manhattan as the coronavirus keeps financial markets and businesses mostly closed on May 8 in New York City.
Spencer Platt/Getty Images

For the next stimulus package, some lawmakers want to go bigger. Much bigger.

While it could be weeks before members of Congress land on the next bipartisan bill to combat the economic fallout of the coronavirus, many have no shortage of ideas about what that could look like. House Democrats, after all, have already passed their $3 trillion opening bid, with a focus on getting more than $900 billion to states and cities.

Make no mistake, focusing on an influx of funding to local governments is hugely important and could do a lot to stave off the long-term economic effects of the crisis. But other ideas that have been proposed — like a federal paycheck guarantee or rent cancellation — would also be more ambitious ways to address the problem than what lawmakers have done so far.

A focus on implementing such expansive stimulus could well be warranted given the scale of the problem: Economists say that Congress’s economic support needs to match the devastating nature of the issue at hand. As of mid-May, the country’s unemployment rate is still growing, with more than 36 million people applying for unemployment insurance within the first eight weeks of the crisis.

“There is a growing sense that the recovery may come more slowly than we would like, but it will come. And that may mean that it’s necessary for us to do more,” Federal Reserve Chair Jerome Powell emphasized during a speech last Wednesday. Forty percent of households that make less than $40,000 annually have seen job losses, Powell added.

It’s clear that more needs to be done, even as Republicans begin to raise concerns about the national debt.

President Donald Trump has already said House Democrats’ bill, which includes a $200 billion hazard pay fund and another stimulus payment, is dead on arrival. In addition to the plans this legislation contains, however, lawmakers have several other genuinely interesting ideas for getting America out of this economic crisis.

Here are seven ambitious ideas from Democrats and Republicans that could make a difference.

1) A federal paycheck guarantee

One of the more interesting ideas floating around in Congress comes from ideologically dissimilar members; versions have been offered by everyone from progressives like Sen. Bernie Sanders (I-VT) and Rep. Pramila Jayapal (D-WA) to moderate Democrats such as Sens. Mark Warner (D-VA) and Doug Jones (D-AL). Republican Sen. Josh Hawley (R-MO) has put forth his take as well.

The idea is a federal paycheck guarantee: As part of it, the federal government would give a direct subsidy to businesses to cover paycheck costs for employees who are furloughed or laid off.

By covering these costs, the federal government helps workers keep their jobs and enables businesses to maintain relationships with their employees so they don’t have to go through the costly and time-consuming hiring process when the economy begins to recover. Such plans would mean that fewer workers would need to apply for unemployment benefits — and guarantee more people a regular paycheck, even if businesses are operating at a reduced capacity due to the coronavirus.

Lawmakers’ approaches to this idea all differ slightly: Jayapal’s plan, the Paycheck Guarantee Act, would provide businesses with grants that cover worker salaries up to $100,000 an employee, while the Democratic senators’ offering, the Paycheck Security Act, puts the cutoff at $90,000. Both their plans would also provide businesses with funds to address a portion of their overhead costs.

Hawley and Sen. Cory Gardner (R-CO) have a plan that is similar in its aims but somewhat less generous. Their Rehire America plan would cover up to 80 percent of wages of an employee currently on payroll, up to $50,000 per person. It would also cover up to 120 percent of wages for workers who are rehired, with that same cap.

Although these proposals have the potential to significantly reduce unemployment, there are a few reasons they’ve encountered resistance: For one, the cost is likely significant — as much as $600 billion over six months for Jayapal’s proposal — and though the benefits could well outweigh them, this issue has prompted pushback even from Democrats.

Because of the temporary expansion in unemployment insurance, it’s also possible some workers may be disincentivized from returning to their previous jobs if they were laid off. (Hawley and Gardner’s plan would rehire some workers at a higher salary to address this issue.)

For many, though, the security of having a stable workplace and employer could outweigh other potential downsides. Additionally, a major benefit of keeping employees on payroll is that many will still be able to access their employer-sponsored health insurance.

“A key feature of this type of policy is that, by preserving employment, the worker is able to maintain employer-sponsored health insurance, which is crucial during a pandemic,” says Columbia University economics professor Sandra Black.

2) Recurring stimulus payments

Congress already authorized sending one-time $1,200 payment stimulus checks to many Americans. But now, some lawmakers are interested in making it more of a recurring effort.

A number of recurring payment plans have been floated so far. In the House, Reps. Ro Khanna (D-CA) and Tim Ryan (D-OH) teamed up on a plan that would send $2,000 per month to every qualifying person over the age of 16. Reps. Rashida Tlaib (D-MI) and Jayapal released a similar bill that would put $2,000 monthly recurring payments on debit cards for qualifying Americans during the pandemic, and add $1,000 per month for a year after the pandemic ends.

House Financial Services Chair Maxine Waters (D-CA) has supported the concept of automatic monthly $2,000 payments as well, and Reps. Madeleine Dean (PA) and Don Beyer (VA) have pushed for such funds to apply to adults who are considered dependents and immigrant households that were excluded from the first wave of checks.

In the Senate, Sens. Michael Bennet (D-CO), Cory Booker (D-NJ), and Sherrod Brown (D-OH) released a plan that would send $2,000 every month to every adult and child — including those on Veterans Affairs and Social Security benefits. The Senate plan would not include high-income earners and would automatically extend if the pandemic continued or the unemployment rate kept rising. Another trio, Sens. Sanders, Kamala Harris (D-CA), and Ed Markey (D-MA), also had a bill for $2,000 per month for each qualifying adult and child, including undocumented immigrants who pay taxes.

An important consideration across these proposals is whether they are means-tested, says Stephanie Kelton, an economics professor at Stony Brook University and adviser to Sanders’s 2016 campaign. She urges the relaxing of such means tests in order to increase the versatility of the payments as more people — including those in higher income brackets — begin to see the effects of the economic crisis.

Even with $2,000 per month being the consensus from multiple parts of the Democratic caucus, House Democratic leadership ultimately settled on another $1,200 one-time payment in their latest bill, although they did propose upping the amount for dependents from $500 per child to $1,200 per child (although that payment would be capped at three children per household).

One advantage of setting up a recurring payment versus continually approving one-off stimulus checks is that it makes the distribution for such funds more fluid and efficient as the pandemic continues. These payments would also address the core issue that many Americans face as businesses have closed and laid off employees: It helps fill gaps in people’s incomes.

“The advantage of making it recurring is that Congress doesn’t have to come together every time, so you don’t have the uncertainty,” says Cecilia Rouse, a former member of Obama’s Council of Economic Advisers and current dean of Princeton’s Woodrow Wilson School of Public and International Affairs.

3) Automatic stabilizers

The significant challenge of getting legislation through Congress could also be reduced by implementing automatic stabilizers, which target relief toward unemployment insurance and other existing federal programs for low-income people.

“Automatic” is the operative word here; automatic stabilizers keep expanded unemployment insurance, food assistance like SNAP, and Medicaid assistance flowing to newly unemployed people who need it as long as America’s economy is weak due to the coronavirus. Rather than benefits being tied to an arbitrary end date on a calendar, as they are now, they would instead be tied to the economic conditions. When the economy improves and job numbers rise, the benefits shut off.

A group of Democrats in the House and Senate, Sens. Bennet and Jack Reed (RI) and Rep. Beyer, have released a plan to do this, ensuring assistance gets to those who need it without Congress having to approve more money.

This effort is consistent with a policy developed by former Federal Reserve economist Claudia Sahm: Under her policy, if the unemployment rate hits a certain level, automatic payments would be sent to every US household. The upside of this approach is that the proposal is more responsive to economic changes and less responsive to congressional roadblocks.

While Senate Democrats have little leverage to move Majority Leader Mitch McConnell’s hand in this round of talks, moderate and progressive House Democrats alike are pushing House Speaker Nancy Pelosi to include automatic stabilizers in the next House coronavirus relief bill to negotiate with Republicans. But the House Democrats’ bill sets an end date for the additional money. The only hope for it now is to get attached to the Senate bill, which could be an uphill climb, or to be included in future packages.

4) Mortgage and rent assistance

There are two different plans circulating among Democrats to assist people with rental costs, one of which is being pushed by progressives and would cancel rent altogether.

The first plan, from Waters, Rep. Denny Heck (WA), and Sen. Brown, creates a $100 billion Emergency Rental Assistance program that would help renters who can’t afford their monthly rent pay it, and also help property managers make repairs to their buildings. The money could be used to help renters with future rent payments or with rent or utility payments that are past due. This idea is included in House Democrats’ latest coronavirus bill.

A separate bill introduced by progressive Rep. Ilhan Omar (MN) and co-sponsored by Rep. Alexandria Ocasio-Cortez (NY) and other members of the Congressional Progressive Caucus would go much further: a nationwide cancellation of rents and mortgages until the coronavirus crisis is over. Omar’s bill would establish a landlord relief fund through the Department of Housing and Urban Development to get financial assistance to residential landlords who would lose money due to canceled rents.

While progressive groups and civil rights organizations are in favor of the bill, it would likely struggle to gain traction even with moderate Democrats because of the financial burden it would place on residential landlords.

Navigating how to target this type of support is key, experts note. A blanket approach may not be as effective as one aimed specifically at those who need it, for example. “Initially landlords and banks will suffer losses, and businesses and people that rent will benefit,” says Jonathan Parker, a finance professor at MIT’s Sloan Business School. “Like stimulus payments, this is not well targeted at people whose incomes have been hit by the economic effects of the spread of Covid-19.”

5) Emergency Medicaid or Medicare coverage

The high cost of coronavirus treatment has become a major problem patients have had to deal with during this pandemic, and it’s an issue that multiple proposals, including one from Reps. Ruben Gallego (D-AZ) and Gil Cisneros (D-CA), aim to address head-on.

Their bill, the Emergency Medicaid for Coronavirus Treatment Act, would guarantee Medicaid insurance coverage for residents in any state who needed to seek treatment following a Covid-19 diagnosis. Specifically, it enables anyone who has needed this treatment since Trump declared a national emergency earlier this year to obtain Medicaid coverage.

As Vox’s Dylan Scott has written, this bill is significant. Under it, “the federal government would assume responsibility for medical care for every American under these particular circumstances.”

Another bill from Sen. Sanders and Rep. Jayapal, the Health Care Emergency Guarantee Act, would use Medicare to cover medical costs both for uninsured and insured patients during the coronavirus pandemic. Under their plan, Medicare would cover copays and deductibles for those who are insured, and the entirety of health care costs for anyone who’s uninsured.

So far, many patients have already reported exorbitant costs for coronavirus-related treatment they’ve received, with a hospitalization for the illness resulting in thousands of dollars in medical bills.

Both bills would help provide coverage for millions of people who are currently uninsured, shielding them from these costs. The use of either the Medicaid program or Medicare could be an efficient way to shift some of the financial burden for coronavirus medical costs from patients to the federal government.

University of Pennsylvania law professor Allison Hoffman tells Vox that Medicare may be the best vehicle for a plan like this. Because it’s accepted by more providers, offers higher reimbursement for procedures, and is fully funded by the federal government (rather than splitting the cost with states), a Medicare expansion could potentially address the problem more effectively.

6) Extend expanded unemployment insurance, including to college students and recent graduates

A major component of the CARES Act is an expansion of unemployment insurance, which, despite many flaws, is directly helping millions of people who have been laid off or furloughed during the pandemic. As part of this expansion, people receiving unemployment insurance get an additional $600 per week, a benefit set to end July 31.

House lawmakers are pushing for an extension of these benefits until the end of next January. Rep. Dan Kildee (D-MI) is also working on making sure more people are covered by these benefits — which were already made more accessible to independent contractors and self-employed people as part of the CARES Act.

One group left out of the previous coronavirus relief packages is college students, including those graduating this year and others still in school. Unlike older adults, students’ limited time in the workforce means they aren’t eligible for unemployment insurance. And many can be claimed as dependents by their parents, meaning they can’t get $1,200 stimulus checks either.

A recent bill introduced by Kildee would provide at least some unemployment benefits for college students and recent graduates, if not the full expanded $600-per-week benefit others are eligible for.

Kildee’s legislation would give a $300 weekly benefit for students and recent graduates who can’t find work due to the coronavirus, a provision also included in a previous expansive bill introduced by House Democrats in late March that was ultimately never voted on. College seniors are about to graduate into a terrible economy with no benefits to help them. While Kildee’s bill may not get traction among congressional Republicans, it highlights the importance of providing access to unemployment insurance (UI) to more people and for a longer period of time.

“The UI expansion [in the CARES Act] was very important, allowing gig workers and nontraditional types to apply,” says Kelton.

7) Hazard pay for essential workers

Hazard pay is one of the provisions included in House Democrats’ new stimulus proposal, and it’s also a measure that’s gotten the backing of lawmakers in both parties.

It’s a proposal intended to boost the compensation of essential workers including grocery store employees, health care workers, and public transportation employees, all of whom are being asked to risk their personal health to complete their work.

Senate Democrats initially introduced a “premium pay” proposal, also a key tenet of Sen. Elizabeth Warren (D-MA) and Rep. Khanna’s Essential Workers Bill of Rights, that would increase workers’ pay by $13 per hour through the end of December. Sen. Mitt Romney (R-UT) has also put forth an option he’s dubbed “Patriot Pay,” which would give workers an additional $12 per hour in wages through July. The House’s new bill would establish a $200 billion fund aimed at boosting the pay of front-line workers.

Although there’s some bipartisan interest in providing some form of hazard pay, Romney’s offering is notably more limited than the one Democrats first raised. The drive to provide hazard pay in both parties is similar, however: It’s meant to compensate workers for the degree of risk they are experiencing by continuing to go to their jobs during the pandemic.

“Typically, jobs that entail more risk pay more and that’s built in,” says Rouse. “The sad truth about this situation is that many of our essential workers are our lowest-paid workers.”