Stimulus stalemate threatens to leave Americans in the lurch

For nearly 15 years, Lisa Thompson worked as an administrative assistant at one of Las Vegas’s biggest casino groups, helping sort shifts and vacation days for some 500 employees.

Since she was furloughed at the start of the US coronavirus outbreak, she has relied on $600 a week in emergency jobless benefits paid by the federal government on top of state unemployment aid — money that allows her to pay for car insurance, groceries and, crucially, her rent. 

But that financial life vest is on the verge of being ripped off, amid a stalemate between the White House and Congress on approving new stimulus for the struggling US economy and extending the unemployment payments, which expire this week. 

Ms Thompson, 56, now worries she will have to dip into her 401K retirement savings to keep the home she shares with her adult son, a disabled veteran who was also laid off from his job in the casino industry.

“Now that I don’t have that job and don’t have that extra $600 that means I’m living off $300 a week,” Ms Thompson says. “That’s barely my share of the rent.”

On Sunday, senior Trump administration officials expressed confidence that they could reach a compromise with Republican allies and Democrats to renew some fiscal support for the US economy in the coming weeks.

“We want to make sure something gets passed quickly,” Steven Mnuchin, the US Treasury secretary, said on Fox News Sunday. But big differences remain on the details of the next stimulus package, so there is no certainty that a deal will be reached.

Even if a compromise is thrashed out, the result is likely to significantly reduce unemployment payments for struggling Americans like Ms Thompson. 

Economists fear the withdrawal or reduction of stimulus risks a huge self-inflicted wound for the US, depressing consumption and potentially creating a housing crisis. The deadline to extend jobless benefits has also coincided with the end of a federal moratorium on evictions, leaving families at the whim of a patchwork of state and local laws and courts to protect them from being forced out of their homes.

According to the Household Pulse Survey, a data series produced by the US census bureau during the pandemic, nearly 15 per cent of Americans with a mortgage payment coming due have no or just slight confidence they will be able to make it. Nearly 35 per cent feel the same about their rent payments. Both figures have been rising in recent weeks and more than 38m Americans are experiencing such anxieties.

“We have people that are just hanging on because of those [jobless] benefits and I think now, once they expire, those folks will join a growing group of people who haven’t been able to pay the rent,” said Joe Colangelo, managing attorney at the Evictions Defence Center in Oakland, California. 

In Congress, an agreement is still distant and difficult. Democrats in May passed legislation adding $3tn in additional stimulus — including an extension of emergency jobless benefits to January — on top of the $3tn already agreed with the White House and Congress since the outset of the crisis. But the White House and congressional Republicans delayed any negotiations on a compromise package for weeks, believing that additional stimulus was unnecessary.

Last week, they began discussing a $1tn plan but struggled to unite around their opening bid amid a conservative backlash to new spending. 

On Monday, Senate Republicans are expected to unveil their version of the stimulus legislation, which would partially allay fears of a fiscal cliff. They have already embraced Democratic demands for a new round of cheques to US households, worth up to $1,200 for every adult, which could offer a new injection of aid to many families. They also say they will extend the evictions moratorium.

But the renewal of jobless benefits will be a sticking point.

The Trump administration and many Republicans believe unemployment benefits are excessively generous and discourage Americans from returning to work. They are proposing to slash them by as much as a third and calculate them based on the aim of replacing up to 70 per cent of wages.

Democrats say this would still hammer the finances of many households and make it more difficult for states to administer compared with a fixed payment, leading to bureaucratic delays. 

“Look how long it took states to get their act together to implement it successfully [in the first round],” Don Beyer, a Democratic lawmaker from northern Virginia, told the Financial Times.

“Virginia, which is a very well run state, I think, still, nobody could answer the phone for the first two weeks and that website crashed every 15 minutes . . . Can you imagine 18m separate individualised unemployed cheques? It’s going to take years to work out and it would have to be done by data processing geniuses.” 

Back in Nevada, where the 15 per cent unemployment rate is higher than the national average, Dawn Jensen, an attorney with Nevada Legal Services, said that in Las Vegas the jobless benefits were especially vital since some casinos had only partially reopened, without restaurant buffets and nightclubs, so many workers have not been called back.

“People don’t have their jobs and they probably won’t get them back until there’s a vaccine,” she said.