The Trump Administration wants to Change the Benefits System

The Trump Administration wants to Change the Benefits System

The Trump administration wants to end the enhanced benefits for unemployment. Thus, according to a senior aide, they want to replace it with a different policy.

Federal coronavirus relief legislation was enacted in March. It authorized jobless Americans to receive an extra $600 a week in benefits for unemployment.

Those payments will end after July 31. Thus, this could lead to a sharp decrease in cash flow for the roughly thirty million people currently enjoying the benefit.

Past the Great Depression, the unemployment rate in April and May has been higher than at any time.

In line with many congressional Republicans, the Trump administration wants the $600 payments to end. Larry Kudlow is a White House economic adviser. According to him, the administration thinks that they are providing a disincentive to return to a job or find work.

Thus, the administration is supporting replacing the enhanced benefits. Those benefits are paid on top of traditional state-level benefits, with a cash bonus that encourages people to rejoin the workforce.

Kudlow is the director of the National Economic Council. On Sunday, he said to CNN that the President is looking at a reform measure. That measure must provide bonuses for returning to work. Unfortunately, it will not be a significant sum. Nonetheless, they do believe that it will create an incentive to work.

A few existing proposals hint at what such a policy may look like, while Kudlow did not elaborate on the specific form of a return-to-work bonus.

One proposal from Senator Rob Portman, Ohio, will replace the $600 weekly checks with interim payments of $450 a week for those who return to work. Recipients will get the $450 plus their job wages.

Benefits System

Moreover, there is one more proposal from Republican Kevin Brady, Texas. It will let workers who accept a job offer to keep two weeks’ worth of the $600 enhanced benefits for unemployment. Usually, if someone finds work, they will lose their unemployment benefits. Brady said that the concept is comparable to a hiring bonus of $1,200.

Benefits

Nevertheless, in their current form, these policies each have an end date on July 31. This is the same expiration date as the weekly benefits of $600.

On the other hand, Democrats are willing to extend the enhanced unemployment benefits. They did pass some financial relief legislation that will extend the $600 benefits until early next year.

Nonetheless, other Democrats have also proposed to reduce the aid by tying it to economic metrics gradually. Financial metrics will include the rate of state unemployment. To interpret this in another way, weekly benefits will decrease as the rate of unemployment falls in the state.

Ernie Tedeschi is an economist at Evercore ISI. According to him, Lawmakers will most probably compromise. Thus, they will extend the enhanced unemployment benefits in some form after July. They are doing this to avoid sending household income over a cliff for millions of Americans.

Tedeschi said that is because states are generally replacing between 30% and 50% of one’s prior wages. The weekly enhancement of $600 is aiming at entirely replacing job wages for the average worker. For comparison, the average worker makes around $1,000 weekly.

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