No stimulus deal means ‘tough choices’

Another stimulus package appears to be on hold until after the presidential election, threatening to delay urgently needed unemployment aid and a second round of $1,200 direct payments by at least a month.

That would affect millions of out-ofwork Americans who are struggling financially following a wave of job losses in the coronavirus recession, especially those in hard-hit industries like travel and hospitality who are relying on another stimulus check to make ends meet, experts say.

In fact, nearly one-quarter of U.S. consumers say they have less than three weeks of financial runway before they run out of cash, according to a weekly survey on Americans’ finances by consumer finance company Credit Karma. With just four weeks until the election, 1 in 5 Americans could be out of money by Election Day, the data shows.

“People are going to be forced to make tough choices,” says Colleen McCreary, chief people officer at Credit Karma. “There are a lot of Americans who either haven’t been in this situation in a long time or have never had to face this reality. Many will have to sacrifice and prepare because it could get worse before it gets better.”

Finances are top of mind for most Americans. In a separate survey, about 56% of Credit Karma respondents who plan to vote in November said economic recovery is the issue that matters most to them, topping other issues, including health care reform (45%), racial justice (38%) and immigration (29%). And more than one-third of respondents said they have seen their finances worsen during the pandemic.

For those who are suffering financial strains, McCreary suggests creating a budget and recommends that people reach out to creditors as soon as possible because lenders will likely have hardship plans available for those who need help, she said.

How we got here

Congress hasn’t approved additional coronavirus relief since March, when both chambers came to bipartisan compromises on a handful of bills that totaled more than $3 trillion, including one-time $1,200 checks to Americans and a $600 weekly unemployment boost.

But most of that relief dried up, including a loan forgiveness program for small businesses called the Paycheck Protection Program. Airlines have warned of mass layoffs and furloughs as their billions of dollars in federal payroll assistance expired.

On Tuesday, President Donald Trump effectively killed discussions on a broader stimulus package until after the Nov. 3 election. The move came just hours after Federal Reserve Chair Jerome Powell urged Congress to pass a robust package, warning that providing too little relief would weaken the U.S. recovery from the coronavirus recession. Powell added that the economic recovery has “a long way to go.”

The latest negotiations would have offered another round of stimulus checks to Americans, enhanced jobless benefits and funds for struggling small businesses and airlines, which have suffered severe layoffs.

Along with unemployment aid, stimulus checks, PPP and airline aid, the proposed stimulus also included:

● COVID-19 testing and contact tracing funds

● Vaccine development money

● Aid for state and local governments

● Education funding

● Enhanced food stamp benefits funds

But just hours after he pulled the plug on negotiations, Trump did an about-face Tuesday and urged Congress to approve piecemeal relief measures he would sign, including a new round of $1,200 stimulus checks. He said in a tweet that he would approve funding for hard-hit industries, including airlines and small businesses.

“The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!” Trump said.

Will there be a Plan B?

Very limited fiscal measures are possible on a piecemeal basis, like airline aid, Goldman Sachs analysts said, but not some of the larger items such as stimulus payments that Trump has suggested Congress consider as a standalone policy. More substantial fiscal support is likely post-election and will depend on the election outcome, they added.

To be sure, a piecemeal approach might allow for only a very limited amount of fiscal relief, they said. Analysts theorize that since the White House and Democratic leaders appear to support standalone airline relief legislation, the enactment of another $25 billion in airline aid looks likely.

Airlines have sought payroll assistance to keep their staff until the spring. Without the additional aid, airlines argue that they will be forced to layoff more employees in what is shaping up to be a tough winter until travelers return once the pandemic ends.

A passage of standalone legislation authorizing another round of the Payroll Protection Program loans for hardhit businesses is possible, though not likely, according to Goldman Sachs. Both parties support it, but it faces obstacles because lawmakers on both sides of the aisle would likely want to attach additional measures to such a bill, like a renewal of the expired extra $600 a week in unemployment benefits, or aid to schools.

Analysts worry that a standalone bill could quickly become a renewed negotiation over a broader fiscal package.

“A standalone bill to authorize another round of stimulus payments to individuals is even less likely, as neither party has made this a priority even though both parties appear to support such payments as part of a broader package,” Goldman Sachs analysts said in a note.

What should struggling Americans do?

Michael Foguth, president and founder at Foguth Financial Group in Brighton, Michigan, says four more weeks without stimulus aid would be detrimental to many Americans. He’s advising his clients to focus on paying the minimum on debts.

“While you’re waiting on a second stimulus check, remember to pay all the minimum payments on debt and bills,” Foguth said in a note. “If you have any money left over after paying the minimums, then put more money towards the debt with the highest interest.”

Experts advise taking a look at your expenses to identify where you can cut costs if you’re facing unemployment.