Stimulus executive orders6/4/2023 ![]() ![]() The term “relief” generally refers to an action that quickly (if not permanently) addresses a critical problem and produces immediately beneficial effects. Photo: Jabin Botsford/The Washington Post via Getty Images Stock markets would be similarly impacted and likely won’t react well if broader stimulus talks fail, even if an executive order offers a potential stopgap.Don’t expect anything big to change after Trump’s poorly crafted orders. However, stimulus by executive order, even if feasible, would likely be smaller causing a decline in growth for the remainder of 2020 relative to the boost we saw from stimulus in the April-July period. It seems possible that a bipartisan deal from lawmakers, where it to happen, could sustain a similar level of stimulus to the Cares Act. This means that an executive order might achieve around a half to a third of the spending power of the Cares Act, and even when assuming funds are pulled from other stimulus measures. Even them, an executive order is likely smaller in scope even relative to the Republican HEALS Act proposal. ![]() However, even if both a material extension to unemployment benefits and a payroll tax cut were successfully implemented by executive order, the overall package would still likely cost under $1 trillion and the net impact would be lower still if, funds were obtained from stimulus measures that had already passed, since reduced spending in other areas would offset these new measures in terms of total stimulus spend.Īn executive order to provide stimulus would require bipartisan talks to collapse over the next few days and overcome legal issues that many scholars see. So an aggressive payroll tax cut could become a major item in an executive order and provide a tailwind to markets. That’s about the same cost as another round of stimulus checks. Last year the cost of a payroll tax cut over 2 years was estimated at $300 billion. That could be material depending on its scope and duration. ![]() The wildcard from any executive order is the payroll tax cut. If an executive order provides a few weeks of unemployment payment or at a lower weekly payment, then the economic jolt is far smaller. That’s why the measures cost hundreds of billions. The reason these stimulus measures are expensive is that programs such as unemployment insurance payments persist for several months on most plans. Moving dollars around doesn’t increase the overall level of stimulus spending, which is what the economy and markets care about. The market would react less well to that since the focus is the economic boost from massive spending, and indeed, most of that money is already out the door. Moving Moneyįurthermore, some scholars believe the president may only have the ability to move funds that were allocated in the recent stimulus packages, but have not yet been spent. Eviction protections and student loan repayment options, while critically important policy decisions, are less material to the economy and markets when compared to more direct stimulus spending. ![]() Trump’s proposed executive order would only hit one of those three. The major items in terms of cost in any stimulus package are stimulus checks, the payroll protection program (PPP) and unemployment insurance. Hence an executive order is potentially smaller in scope than most versions of a bipartisan stimulus package, even the smaller Republican starting point as embodied in the HEALS Act. Yesterday, Trump defined a potential executive order, in a tweet, as follows, “I’ve notified my staff to continue working on an Executive Order with respect to Payroll Tax Cut, Eviction Protections, Unemployment Extensions, and Student Loan Repayment Options.”Ĭlearly, that framing excludes the popular stimulus checks, which appear to attract bipartisan support. However, an executive order may achieve less in terms of spending power than the current stimulus proposals from lawmakers. ![]()
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