While the relief bill helps people and business with income replacement and welfare benefits, there are some provisions that will not help those in need or help the economy recover. The deduction, heavily supported by President Trump, allowed Democrats to negotiate for expanded tax credits to low-income households. As a matter of tax policy, the deduction is questionable policy in good times, as it is always unclear how much of the cost of a business lunch should be considered a personal expense since people have to eat and thus not eligible for deduction.
Expanding the deduction during a pandemic is doubly wrong — the economics are just as sketchy as in normal times and to the extent that expanding the deduction encourages more business lunches, which require people sitting in close proximity without masks on during a pandemic, it could increase the spread of the coronavirus.
Another inappropriate decision was to make expenses paid with PPP loans tax deductible. One of the biggest failures of the new relief package is the absence of any aid to state and local governments. As described above, there are substantial humanitarian and economic benefits to helping state and local governments during economic downturns.
Estimates of government budget shortfalls vary, but most states will lose income, sales, corporate, and other tax revenue over the next few years. Public education institutions and hospitals will also need financial support. Since March, 1. Congress needs to again pass a relief bill with provisions to help state and local governments fight back the virus and a recession. Ahead of his inauguration, President Biden released proposals to address the virus and the economy.
Additional funds will allow the rollout of emergency interventions, like a National Guard deployment, and pay for vaccines administered to Medicaid recipients. Democrats were unable to secure this aid in the year-end deal. The Child Tax Credit would be expanded significantly. New grants and loans to small businesses would aim to keep businesses open and workers employed. There is cause for hope. Until the virus is contained, the package would provide substantial economic relief to individuals, including unemployment insurance, direct payments, and rental assistance.
The proposal provides substantial resources to help state and local governments, allowing them to preserve benefits, a move strongly justified on both macroeconomic and humanitarian grounds. Second, the way the December deal came about—with a bipartisan group of senators coming together to draft a centrist package—demonstrates how legislation can move without the blessing of top party leadership.
The potential for further, similar changes to unblock the fiscal policymaking process is significant. The nation needs to address its long-term fiscal shortfalls, which are worse now than they were before the pandemic. But it is also clear that we now face different problems — the virus and the economy — that dwarf the federal debt in urgency. The only way to achieve a strong long-term budget is to first generate a strong economy.
And we cannot fix the economy until the virus is under control. Federal relief can help manage the virus and help people, state and local governments, and businesses, strengthening our long-term economic and budget prospects despite increasing the current deficit. Being timid in our policy solutions during this crisis would be a mistake. See Sheiner and Campbell , Clemens and Veuger William G.
Related Topics th U. Economy U. Report Is democracy failing and putting our economic system at risk? As a result of these and other eligibility issues, only about 40 percent of the unemployed currently receive UI benefits. A substantial percentage of the unemployed, however, are either new entrants to the labor market or are recent re-entrants—and therefore should not be expected to receive unemployment benefits.
UI beneficiaries therefore represent a larger percentage of the unemployed who lost their jobs. Temporary changes in the unemployment insurance program would represent an effective stimulus; most of any additional benefits provided would likely be spent. Unemployment insurance is particularly well targeted to maximize its bang for the buck, since it is available only to unemployed workers who have experienced a reduction in income from the loss of their jobs and whose consumption expectations may therefore exceed their current income.
Unfortunately, the UI proposals put forward by both the Administration and the Ways and Means Committee do not address the fundamental issues. For example, neither proposal addresses the eligibility rules that cause many low-income workers and working mothers to be ineligible for unemployment benefits when they lose their jobs.
Additional resources should be provided on a temporary basis to bolster the UI program, especially by expanding eligibility. A variety of other programs for low-income families could also be temporarily expanded as part of an effective stimulus package. Under the system created by the Consolidated Omnibus Budget Reconciliation Act COBRA , unemployed workers may generally maintain their employer-based health coverage for up to 18 months if they pay the full cost of the premium.
Given the high cost of COBRA coverage, temporary measures may be needed to prevent unemployed workers from losing health insurance. Potential measures include subsidies for COBRA premium costs or creating a new state Medicaid option, supported by an enhanced Federal matching rate, to cover displaced workers who have low incomes but can not qualify for Medicaid because they do not fall into an eligible category for example, low-income unemployed workers without children would generally not qualify.
These measures would likely provide less stimulus effect than an expansion in unemployment insurance benefits or other low-income assistance programs, but they do provide an important source of support for newly unemployed workers and may help to keep more people in the health care system — which is a critical form of protection against bio-terrorism.
States are suffering substantial fiscal stress as a result of the economic slowdown. Mississippi, Ohio and South Carolina have already enacted across-the-board spending cuts, while eight states were forced to raises taxes in their fiscal year budgets. A much larger number of states are expected to initiate budget cuts when state legislatures reconvene this winter and confront budgets that have fallen out of balance as a result of the downturn.
In all states except Vermont, some form of balanced budget rule forces such fiscal policies: When the state enters a recession, revenue naturally falls and expenditures including on Medicaid rise. The balanced budget rules then force the state to reduce spending, raise taxes, or some combination thereof, which is counter-productive in terms of stimulating the economy.
The fiscal stress on states could be exacerbated by recent proposals. For example, provisions in the Ways and Means Committee package would reduce revenue received from state corporate taxes. Some 44 states use Federal depreciation rules for their own corporate income taxes and would therefore be adversely affected by the Ways and Means proposal to provide partial expensing of business investment. To avoid restrictive fiscal policies at the state level in the middle of an economic downturn, the Federal government should provide temporary fiscal assistance to the states.
One mechanism for doing so would be a revenue-sharing program, such as existed in the s and s. Such an approach may take time to design and implement, however. A more timely alternative would temporarily increase the Federal matching rate for the Federal-state Medicaid program. An enhanced match would serve two purposes. It could partially help states meet expanded Medicaid costs resulting from an economic downturn. Since Medicaid costs now are rising over the levels that states budgeted for them as unemployment climbs and more people become eligible for the program, the program is widely expected to be a prime candidate for budget cuts in many financially strapped states.
An increased Federal match would also partially enable states to use less of their own funds for Medicaid, which would help to avoid counter-productive tax increases or reductions in other state programs. Some form of Federal assistance to state governments would likely help attenuate the restrictive fiscal policies that would otherwise be adopted at the state level—and therefore would represent an effective stimulus. Public capital investments involve direct government purchases of goods and services and therefore directly inject demand into the economy.
Many public investments also appear to have high social returns, and thus even temporary expansions in capital investments may carry long-term benefits. The key issue from the perspective of short-run stimulus, however, is how quickly any expansion in capital spending could be implemented. The record from the response to recent natural disasters raises questions about how quickly capital investments could be made: Only 30 percent of the outlays from recent disaster appropriations occurred in the first fiscal year following enactment of the funding, with 64 percent in the second calendar year and 6 percent in the third calendar year.
The spend-out rate could perhaps be faster if existing projects were simply accelerated, but public capital investments should not be undertaken as part of a stimulus package unless the vast majority of the additional spending would occur over the next 12 months. In conclusion, Mr. Any immigration reform should sustain the health and economic security of older Americans regardless of country of origin. Now Reading:. Rewards for Good. Current Page Current Chapter. Page 1 Created with Sketch.
Send to Print. More options: Print my Bookmarks. Go backt Back to " ". Bookmark Bookmark Bookmark Page. An economic stimulus package incoming flights to malta to cease superintendent of public health charmaine gauci announced that government through transport malta which is the responsible authority will.
However the impact of covid 19 outbreak is expected to be more severe as the role of. The stimulus was a response to the decline in the economic growth rate from 7 1 in to 1 7 in Uhuru announces ksh 54b stimulus plan to jumpstart kenyan economy by faizal ahmed for citizen digital published on.
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