Trump Admin Eyes Back-to-Work Bonuses

Plus: Could the US pay companies to leave China?

Trump Administration May Support Back-to-Work Bonuses

Republicans have objected to extending the $600-a-week in extra unemployment benefits Congress provided as part of the CARES Act in March, arguing that the payments, which come on top of state benefits, slow the reopening of the economy by encouraging workers to stay away from their jobs. Now, a top White House economic adviser says that the administration may get behind an alternative proposal: back-to-work bonuses.

Larry Kudlow, the director of President Trump's National Economic Council, told Fox News that the administration “may well” back the idea of providing extra weekly payments to employees who go back to work. “It’s something we’re looking at very carefully,” he said.

Democrats want to extend the $600 weekly boost in jobless benefits, set to expire at the end of July, for six more months. Those benefits are shaping up to be a major sticking point in discussions over the next coronavirus relief bill. Proponents say they provide a critical lifeline and much-needed financial stability for laid-off workers.

Kudlow said he doesn’t think the benefits will be extended. "I frankly do not believe the $600 plus-up will survive the next round of talks, but I think we’ll have substitutes to deal with that issue," he said. Senate Majority Leader Mitch McConnell (R-KY) reportedly told House Republicans last week that the extension of enhanced unemployment benefits “will not be in the next bill.”

Kudlow praised a plan from Sen. Rob Portman, an Ohio Republican, that would provide a temporary bonus of $450 a week, on top of regular wages, for unemployed people who go back to work. The proposal could save taxpayers money and “saves small businesses from going out of business because they can get workers,” Portman told The Wall Street Journal.

Kudlow also said that President Trump still supports the idea of a payroll tax holiday for workers, an idea that lawmakers in both parties have greeted skeptically.

The math behind Portman’s plan: “Portman’s office settled on the amount by surveying benefits and wages in each state to come up with an average amount by which most people would be better off working than staying at home,” the Journal’s Siobhan Hughes and Lindsay Wise report. “The federal minimum wage is $7.25 an hour, meaning that a minimum-wage worker in states without a higher minimum, or floor, makes roughly $290 a week. The $450 payment each week on top of that base amount was designed with such low-wage workers in mind, in order to leave such employees better off than by taking $600 a week to stay home.”

Another idea for keeping workers on payrolls: Lawmakers in both parties are also looking at expanding the $55 billion, refundable “employee retention tax credit” created by the CARES Act in March. The $3 trillion coronavirus aid package by the House earlier this month would add about $194 billion to the wage subsidy. It would give employers money to cover up to 80% of wages and benefits, up to $45,000 per employee, plus a credit for expenses like rent, the Journal’s Richard Rubin reports.

“For Democrats, the subsidy offers an alternative to the payroll-tax cut President Trump is seeking, which they oppose because it does little for the unemployed. Republican supporters prefer the subsidy to spending programs favored by Democrats and see it as a way to link aid to work,” Rubin writes.

The expanded credit would cover 59 million workers, according to estimates from Congress’s Joint Committee on Taxation cited by Rubin. The House proposal would extend through the end of the year.

Senate Democrats have proposed an even more generous version of the plan.

Could the US Pay Companies to Leave China?

The Trump administration is encouraging American companies to bring their production facilities back to the U.S. from China — and Kudlow claims that it will pay them to do it.

"We welcome any Americans companies in Hong Kong or China mainland, we will do what we can for full expensing and pay the cost of moving if they return their supply chains and their production to the United States," Kudlow told Fox Business on Tuesday.

Kudlow provided no further details, but he has mentioned something similar in the past.

Last month, Kudlow said the U.S. should “pay the moving costs” of companies that leave China, with the payments apparently consisting of tax breaks. “I would say, 100% immediate expensing across the board for plant, equipment, intellectual property, structures, renovations ... In other words, if we had 100% immediate expensing, we would literally — literally pay the moving costs of American companies,” he told Fox Business.

Reuters reported last week that administration officials and lawmakers are discussing a range of options to encourage companies to move production facilities back to the U.S., including a possible $25 billion “reshoring fund” that would provide direct payments to firms. That particular option has met resistance, however, due to worries that paying companies would amount to the government setting industrial policy, which has long been opposed by Republicans as interference in the free market.

Another Relief Bill ‘Likely,’ McConnell Says

Senate Majority Leader Mitch McConnell (R-KY) said Tuesday that another round of coronavirus relief legislation is likely and may happen “in the next month or so,” but he again insisted that it will be narrower than the $3 trillion package passed by House Democrats earlier this month.

“Many of you are asking, what next? I think there’s likely to be another bill. It will not be the $3 trillion bill the House passed the other day, but there’s still a likelihood that more will be needed,” McConnell said at an event in Louisville, Kentucky, according to The Hill.

The Senate is out of town this week and scheduled to return to Washington on June 1. Republicans have said they want to pause and assess the effectiveness of the trillions in emergency coronavirus funding already provided by Congress, and some White House advisers have questioned whether another round of spending will be necessary.

“We can’t keep propping up the economy forever. We do need to begin to re-engage, to develop our activity again,” McConnell said at another event Tuesday. “The ultimate solution is to begin to get back to normal.”

The keys to getting fully back to normal, he said, would be testing, treatment and a vaccine.

The House-passed HEROES Act included more aid for state and local governments, an extension of enhanced unemployment benefits and another round of direct payments to households. Republicans have declared the bill dead on arrival, and McConnell on Tuesday again derided the package, which included many other provisions, as a “left-wing wish list."

“That ain’t going to happen,” he reportedly said of the $3 trillion legislation. McConnell has advised President Trump that the next coronavirus measure should not be larger than $1 trillion, The Hill says.

Republican requirements: McConnell has not laid out a detailed GOP plan for a next phase of coronavirus relief beyond saying that it be more narrowly focused and must shield businesses from coronavirus-related lawsuits. “It ought to be very carefully targeted to correct the mistakes that we certainly made in passing a multitrillion-dollar bill in one week,” he said Tuesday, adding that “there are some other needs that need to be met."



McConnell also said that he supports targeted aid to state and local governments, according to the Louisville Courier-Journal, but that the next round of funding can’t be used to address “pre-existing” fiscal troubles. Republicans including President Trump have objected to “bailouts” for blue states that they say have racked up large unfunded pension liabilities or other debt due to mismanagement.

McConnell denied advocating allowing states to declare bankruptcy, the Courier-Journal reported. The Senate Majority Leader last month told radio host Hugh Hewitt that he “would certainly be in favor of allowing states to use the bankruptcy route,” drawing a sharp backlash from governors and Democratic leaders, who warned that allowing such bankruptcies would worsen the economic damage from the pandemic. McConnell on Tuesday reportedly described that as just a suggestion, not a policy recommendation.

The bottom line: Republicans remain split over the next coronavirus bill, including how big it should be, how quickly it should happen, what it should include and whether there’s even a need for it. So while McConnell signaled that another bill will be in the works, there’s still a long way to go, and the pressure on Republicans is only likely to mount as we get closer to the end of July, when the $600 weekly unemployment benefit is set to expire.

Chart of the Day: Cuts That Keep Hurting

State and local governments cut nearly 1 million jobs in April, The Wall Street Journal reported over the weekend, and the layoffs are expected to keep coming as states and cities adjust to a $500 billion loss in revenue over the next two years. That has economists worried about the long-term effects of reduced spending at the state and local level. “We have the evidence of the global financial crisis and the years afterward where state and local government layoffs and lack of hiring did weigh on economic growth,” Federal Reserve chief Jerome Powell told the Senate Banking Committee last week.

Number of the Day: 80%

More than 80% of the publicly traded companies that have received funds from the Paycheck Protection Program are sticking with the program, according to the market research firm FactSquared.

Last month, the Treasury Department provided guidance stating that companies that have access to other sources of capital should be excluded from the $670 billion program. Pressured by both the Treasury guidelines and public criticism, some businesses, including Shake Shack, Auto Nation and the Los Angeles Lakers, have returned millions of dollars to the government. Others were given until May 18 to return their loans without risk of further scrutiny.

But it looks like hundreds of publicly traded companies are hanging onto their loans, which can be converted to grants if participants meet certain requirements. According to FactSquared’s review of 425 PPP loans made to public companies, just 68 had returned the money as of Tuesday. The returns total about $435 million out of the roughly $3.5 billion in loans provided to public companies. Treasury has said it will review all loans worth more than $2 million to ensure that recipients are truly in need.

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