The executive actions signed by President Donald Trump on Saturday add up to a thinning lifeline of support for an already-stalling U.S. economic recovery, but may refocus lawmakers on getting back to the table for negotiations.
Trump’s redirection of disaster-relief funds would provide $300 a week in federal aid to the unemployed, plus $100 in state funds -- down from the weekly $600 in the Cares Act that expired in July. That money is capped at $44 billion, which at the current level of unemployment could run out in one to two months.
“The extra $400 unemployment payment is likely to last only a month,” Goldman Sachs economists said in a research note on Saturday.
Trump’s other major action could potentially have a bigger impact: it defers the payroll tax from September through year-end for workers earning as much as $8,000 a month, which could put an extra $600, at most, in employees’ pockets. Economist Stephen Moore, a Trump ally, says it amounts to a $300 billion tax cut that would help the economy.
Other economists said, however, that it’s unlikely to provide as much stimulus as Trump may hope.
“The payroll tax deferment would last through year-end, but consumers might be hesitant to spend extra income without a change in tax law,” Goldman economists Alec Phillips and Blake Taylor wrote in their note.
While the actions may beat a complete lapse in relief for Americans, the funds for the unemployed are much more limited than in prior months, and the payroll tax deferral won’t help the tens of millions who’ve lost their jobs. Beyond that, the legality of Trump’s actions isn’t completely clear, and the moves didn’t include an extension of aid to small businesses who are running low on prior relief funds.
In all, the executive actions “might create some new deadlines at the start of September,” the Goldman economists said. “If these policies are indeed implemented, this suggests that they might force Congress to act by then to avoid further disruptions.”
Ernie Tedeschi, an economist at Evercore ISI, said Trump’s moves were “certainly better than nothing, but it’s not as good a solution as Congress coming to a more clearly legal and logistically feasible compromise in their fiscal negotiations.”
The impact of the payroll-tax deferral hinges on whether employers will stop withholding the money from Americans’ paychecks, with voters in turn pressuring Congress to eventually pass legislation forgiving the accumulated amount.