Covid-19 crisis: Donald Trump bypasses Congress to halt payroll tax

President Donald Trump announced four executive actions, bypassing the Congress, on Saturday, including continued expanded unemployment benefits and a temporary payroll tax deferral for some workers, as the coronavirus pandemic continues to hobble the US economy.

Trump also ordered continued eviction protection and student loan relief.

The moves could jeopardise negotiations with congressional Democrats over an additional coronavirus relief package, with the two sides trillions of dollars apart on key issues, including aid to state governments and the amount of supplementary unemployment benefits. The president, though, said he’d continue to negotiate with Democrats — who said Saturday’s measures “provide little real help to families.”

Trump’s “meagre” policy announcements were “unworkable, weak and narrow,” and by pushing off payroll taxes for some, “they endanger seniors’ social security and medicare,” House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer said in a joint statement.

“What Democrats primarily want is bailout money — has nothing to do with the coronavirus,” Trump said during a news conference at his golf club in Bedminster, New Jersey. “We’re not willing to do that.”

Tax deferrals

Trump said his action authorises the US Treasury to allow companies to defer payroll taxes for Americans making less than $100,000 a year from September 1 through December 31. He said if he’s re-elected in November, he may extend the deferral and terminate the tax for some workers.

“This fake tax cut would also be a big shock to workers who thought they were getting a tax cut when it was only a delay,” Senator Ron Wyden, the ranking Democrat on the Senate Finance Committee, said in a statement. “These workers would be hit with much bigger payments down the road.”

The president said another order would provide $400 a week in jobless benefits —down from $600 weekly that had been provided through last week, authorised by a Congressional stimulus bill in March — and that states would be responsible for covering 25 per cent of the cost.

The administration is directing states to use part of the $150-billion Coronavirus Relief Fund, while the federal government will tap on $44 billion of the existing $70 billion Disaster Relief Fund, said Andrew Husby, an economist for Bloomberg Economics.

“Because the Trump plan taps a limited pool of existing funds to extend unemployment benefits at $400 per week, there is a high risk they run short ahead of the election,” Husby said.

To act on his own, the president is relying on an expansive and controversial reading of executive power that likely will face legal challenges. Trump’s advisers say executive action could pressure Democrats to reduce their demands and allow him to argue to voters that he’s looking out for their well-being amid congressional inaction.

Alienating Democrats

But the gambit risks alienating Democratic lawmakers and decreasing the odds for a deal that both sides say is necessary to help the economy recover from a pandemic that’s decimated industries and left nearly 160,000 Americans dead so far.

“Unable to deliver for the American people in a time of crisis, Donald Trump offered a series of half-baked measures today,” Democratic nominee Joe Biden said in a statement. “He is laying out his roadmap to cutting Social Security.”

Democrats criticised the president when he threatened the move during negotiations, saying the administration would be better off returning to the bargaining table. White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin had been meeting throughout the week with Schumer and Pelosi to try to craft a deal, without success.

Of the $3.7 trillion Congress has authorised for the coronavirus response, there is still $1.5 trillion yet to be spent or committed, according to an analysis from the Committee for a Responsible Federal Budget.