Next Wave of Coronavirus Stimulus Payments Hinges on Debate Over Reopening Economy

By Richard Rubin

WASHINGTON -- Americans have gotten $239 billion -- and counting -- from the IRS to help them ride out the coronavirus pandemic. Whether households get another round of $1,200 stimulus payments is tied to the increasingly partisan debate over how quickly the economy should reopen.

Many House Democrats, seeing a slow return to normal and a protracted economic downturn, contend it is crucial to get money out again. They see fresh cash injections as a bridge to help families weather an uncertain economic future amid more waves of infections and deaths.

Many Republicans, however, predict a rapid economic recovery as lockdowns end, and they say government aid to households should now shift to focus more on incentives to work. They say the stimulus payments provided so far have helped tide Americans over as the economy recovers.

"Things are starting to pick up because this bridge to the other side that we built with the stimulus bill appears to be working," Kevin Hassett, President Trump's economic adviser, said in an interview with The Wall Street Journal last week.

That view will carry weight as the Republican-controlled Senate considers the $3 trillion coronavirus relief package passed last week by the Democratic-controlled House. That bill, as a whole, is unlikely to become law, but pieces of it may survive.

The House package included a second, larger round of payments. Individuals would again get $1,200 from the Internal Revenue Service, but the payment per child would rise to $1,200 from $500. Groups excluded from the first round would get money, including college students, adult dependents, and households with undocumented immigrants where not everyone has a Social Security number.

Those payments to people who were initially excluded in the law that passed in late March would be retroactive, adding $23 billion to the original $293 billion size of the first round. Together with larger payments for dependents, the second round of stimulus would be worth $413 billion.

"The $1,200 doesn't go very far over six weeks, so we decided to build a more robust initiative this time around," Rep. Richard Neal (D., Mass.), chairman of the House Ways and Means Committee, which writes tax laws, said in an interview.

Mr. Neal said he was trying to heed the advice of Federal Reserve Chairman Jerome Powell, who has said the government should spend more to stem the downturn.

Republicans including Rep. Kevin Brady of Texas favor more targeted policies that would give employers incentives to put people back to work. And they worry that continuing cash payments and the $600 a week extra in unemployment insurance that Congress approved mean that people can make more money by staying home than by working, slowing the recovery.

"The payroll tax cut from an economic standpoint is so much more efficient," said Mr. Brady, the top Republican on the Ways and Means Committee. President Trump has said he wants to suspend the payroll tax, which would do little directly to help the unemployed but would reduce the cost of hiring and keeping workers.

Republicans expressed concern about adding to federal budget deficits and said the Democrats' bill contained many items unrelated to the pandemic. Just one Republican, Rep. Peter King of New York, voted in favor of the bill, and 14 House Democrats, many of whom were elected in 2018 from swing districts, voted against it.

Senate Majority Leader Mitch McConnell (R., Ky.), has said the next bill must include measures to shield companies from liability during the pandemic, which could also help businesses reopen more quickly.

Republicans haven't ruled out more direct payments to households and focused their ire on other provisions, but they haven't endorsed more payments either.

"I don't think they're doing a lot of harm," Michael Strain, director of economic policy studies at the conservative American Enterprise Institute, said of the payments. "But I don't think that that's the best use of the marginal dollar."

The Congressional Budget Office projected last month that gross domestic product would drop 12% this quarter from the preceding quarter and start growing in the second half of the year but not regain all the lost ground.

Republicans have been discussing bonuses for workers who get rehired. And they embraced some ideas in the House-passed bill, including tax credits for employers who keep workers on payrolls.

The dispute about the path ahead highlights disagreements about the purpose of direct payments to households.

In 2008, the last time Congress authorized such payments, the goal was to support the economy in a downturn by encouraging consumer spending.

Now, the policy lever looks the same but its purpose is different. The goal is to help households fill gaps in their incomes as large parts of the economy shut down, throwing millions out of work.

More than 95% of working families have enough money to maintain their typical expenses for six months, using savings, the one-time payments and unemployment insurance, according to recent estimates from researchers at the Federal Reserve. But if and when those supports recede, household budget holes will emerge.

The longer the downturn continues, the more necessary direct payments might be, though they are a blunt policy tool. Even those who haven't been harmed by the downturn, such as retirees and employed people, get cash payments.

But others say that during a pandemic, paying people to stay home and avoid getting sick at work is precisely the point.

"A lot of people right now would choose not to work because they are worried about their safety, their health and the health of the loved ones around them," said Chris Hughes, a co-founder of Facebook Inc. and co-chairman of the Economic Security Project, which advocates more federal payments to Americans.

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