New Stimulus Package Announced: $1,200 Second Stimulus Checks, Unemployment Benefits, Student Loan Relief, PPP Loans, School Opening, Coronavirus Testing

Senate Majority Leader Mitch McConnell (R-KY)

ASSOCIATED PRESS

Updated July 28, 2020

Senate Republicans unveiled their stimulus package proposal today.

Here’s what you need to know — and what’s inside.

New Stimulus: Heals Act

Senate Republicans today announced the Heals Act (Health, Economic Assistance Liability Protection & Schools Act), a ~$1 trillion stimulus package proposal as a follow up to the Cares Act and a response to the Heroes Act, which House Democrats passed as a $3 trillion stimulus plan. Senate Majority Leader Mitch McConnell (R-KY) and several Republicans senators spoke on the Senate floor today to discuss the proposed legislation, which may be introduced through multiple bills. Here are some highlights about what’s inside (although there are many more provisions):

$1,200 Second stimulus checks

As expected, Senate Republicans propose a one-time, $1,200 stimulus check. As Treasury Secretary Steven Mnuchin indicated last week, the requirements to receive the second stimulus check will be the same as the first stimulus check under the Cares Act, which was the $2.2 trillion stimulus package in March. So, if you received a first stimulus check, then you would receive a second stimulus check under the Republican plan.

Who is eligible for a second stimulus check?

Under the Republican proposal, based on the first stimulus check, second stimulus checks (or Economic Impact Payments) would work like this:

$1,200 for each individual;
$2,400 for married/joint filers;
$500 for dependents (no age cap, which helps adult dependents).
If you earned less than $75,000 (individuals) or $150,000 (married/joint filers), you would receive a $1,200 second stimulus check.
Like the first stimulus check, the second stimulus check will be reduced by $5 for every $100 of adjusted gross income above those income limits until $99,000 of adjusted gross income for individuals and $198,000 for married/joint filers.

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Previously, McConnell suggested that second stimulus checks may only be available to Americans who earn up to $40,000 a year. However, Senate Republicans apparently have scrapped that idea.

What do Democrats say?

Republicans and Democrats agree that the second stimulus check should be $1,200. However, Democrats have called for $1,200 second stimulus checks for dependents (compared to $500 under the Republicans proposal), up to a maximum of three dependents. Some Democrats also wanted $2,000 a month second stimulus checks. However, Democrats likely will compromise on a one-time stimulus check, rather than monthly stimulus checks.

Unemployment benefits capped at “70% of wages”

As expected, Senate Republicans propose to cut enhanced weekly unemployment benefits from $600 a week under the Cares Act. The lower weekly unemployment benefits are based on a 70% wage replacement, according to Sen. Chuck Grassley (R-IA), and could amount to about $200 a week. A 70% wage replacement means that a recipient of unemployment benefits could receive federal unemployment benefits that are no more than 70% of the recipient’s income when the recipient was last employed. As Mnuchin has said repeatedly, the $600 a week unemployment benefit can create a disincentive for recipients to return to work. According to Mnuchin and Director of the U.S. National Economic Council Larry Kudlow, the $600 a week unemployment benefits mean that some recipients receive more money while they are unemployed compared to then they were working. Grassley said that unemployment benefits alone won’t stimulate the economy. Tax provisions will help Americans get back to work, according to Grassley. For example, Republicans would expand opportunity tax credits and other tax credits to get people back to work. Republicans also would increase the employee retention tax credit (ERTC) in the form of a refundable payroll tax credit. Republicans would increase the percentage of wages that can be reimbursed from 50% to 65%.

What do Democrats say?

Congressional Democrats want to extend unemployment benefits through at least January 31, 2021, according to Senate Minority Leader Chuck Schumer (D-NY). Democrats argue that the economy is in recession and note that more than 40 million Americans have filed for unemployment benefits.

Student Loan Relief

Is there student loan relief in the new stimulus? Is there student loan forgiveness? Senate Republicans did not mention today that they would extend the Cares Act student loan relief beyond September 30, 2020 for all federal student loan borrowers. That said, Sen. Lamar Alexander (R-TN) proposed a new student loan repayment plan in which student loan borrowers with no income would make no student loan payments. Alexander also proposed that monthly student loan payments would be based on 10% of discretionary income once a borrower earns income again. Effectively, if you don’t have any income after September 30, you would not be responsible to pay federal student loans after September 30, 2020. As expected, Republicans did not include any student loan forgiveness in the new stimulus.

What do Democrats say?

Democrats want to extend the Cares Act student loan relief through September 30, 2021. Democrats also would extend student loan relief from Direct federal student loans to Perkins Loans and some FFELP loans not owned by the federal government. So, through September 30, 2021, under the Heroes Act (if passed), you could receive the following student loan relief:

pause all payments for federal student loans
set interest rates at 0%, so interest will not accrue on your federal student loans
halt collection of federal student loan debt
“count” non-payment of federal student loan debt toward the 120 required monthly payments for public service loan forgiveness.

The Heroes Act also includes $10,000 of student loan forgiveness for borrowers who are “struggling financially.”

Liability protections for businesses

Sen. John Cornyn (R-TX) discussed liability protections as a central component of the stimulus proposal. While he didn’t discuss specifics, McConnell has said that businesses, hospitals and schools should receive five-years of liability protection, retroactive to 2019.

What do Democrats say?

Given other economic priorities, liability protection is not a major priority for Democrats.

Payroll Protection Program (PPP)

Republicans proposed to extend the Paycheck Protection Program (PPP), which is scheduled to stop taking applications on August 8. Sen. Susan Collins (R-ME) says that a small business with 300 or fewer employees could receive a second forgivable PPP loan if revenue has declined 50% or more due to the Covid-19 pandemic. Sen. Marco Rubio (R-FL) also introduced a new, low interest loan for small businesses that would allow businesses to borrow a 20-year loan at 1% interest rate.

100% Meal Deductions

To help the restaurant industry, which has shed more than 5.5 million jobs according to Sen. Tim Scott (R-SC), individuals can deduct 100% of business meals, up from 50%.

$105 Billion For Schools

As expected, Republicans proposed $105 billion to open schools:

K-12: $70 billion
Higher Education: $30 billion
Governor’s Discretion: $5 billion

Sen. Richard Shelby (R-AL) said the goal is to open schools at least 50% of the time, and Alexander said Republicans want to fund 135,000 public and private schools. According to Alexander, the goal is to help the American people get “safely back to child care, safely back to school and safely back to work.”

What do Democrats say

This is another wide difference with Democrats. Sen. Patty Murray (D-WA) and other Democrats introduced the Coronavirus Child Care and Education Relief Act:

K-12: $175 billion
Child Care: $50 billion
Governor’s discretion: $33 billion
Vulnerable students: $12.9 billion

$25 billion in Coronavirus testing

Among other funding priorities to fight Coronavirus, Senate Republicans propose $25 billion for Coronavirus testing and contact tracing. The $25 billion is equal to the $9 billion already authorized in a prior stimulus plus $16 billion of new spending.

Final Thoughts

McConnell needs a bipartisan bill to pass Congress before President Donald Trump signs the potential legislation. Can a stimulus deal get done? Sen. Lindsay Graham (R-SC) says that half of Senate Republicans will vote “no” on the proposed legislation, no matter what’s inside the stimulus package. Senators such as Ted Cruz (R-TX) and Rand Paul (R-KY) oppose the stimulus package and further federal spending after trillions of dollars in previous economic stimuli. Democrats want $3 trillion in financial stimulus, while Republicans are trying to limit spending closer to $1 trillion.

Key Timeline

Theoretically, members of Congress have as long as necessary to reach a stimulus deal. Practically:

July 27, 2020: Republicans announce new stimulus package proposal
July 31, 2020: the House of Representatives is in summer recess after July 31. Representatives are expected to delay summer recess to get a stimulus bill finalized.
August 7, 2020: the Senate breaks for summer recess after August 7.
September 8, 2020: the Senate resumes session.

If Congress does not finalize legislation in July or August, then the new stimulus could be delayed until after Labor Day.

When will you get a second stimulus check?

It depends when or if a stimulus bill is finalized and signed by Trump. If Congress finalizes the new stimulus before August 7, it’s possible that second stimulus checks could be sent as early as late August. Otherwise, second stimulus checks could be delayed.