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Which View Will Win?

Democrats want to extend benefits. Republicans, led by Trump seek a back-to work bonus.

Fox News comments Here’s what Trump’s back-to-work bonus could look like

Republicans are resisting an extension of the $600 expanded unemployment benefit implemented as part of the CARES Act in March, and the Trump administration has instead pushed a so-called “back-to-work bonus.”

Ohio Republican Sen. Rob Portman has a plan that would provide individuals returning to work with a temporary $450 a week payment on top of their wages for several weeks.

Kudlow called Portman’s plan a “good idea” during an interview with Fox News.

Texas Republican Kevin Brady has proposed turning unemployment benefits into a bonus for returning to work. Specifically, it would give workers two weeks’ worth of $600 payments if they find a job, or $1,200.

Expiring Benefits

The $600 pandemic benefit will expire on July 31 unless Congress agrees to an extension. At the end of June, more than 19 million people received benefits.

At Least for a While, It Pays Better to Be Unemployed

On May 18, I commented At Least for a While, It Pays Better to Be Unemployed

That must end, not slowly, but immediately. Unemployment insurance should never pay more than someone was making before.

Pick a limit, but I suggest something like 60% maximum.

If you make it zero, you immediately throw people off the cliff edge via government-mandated shutdowns.

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Trump's View

Trump wants to cut payroll taxes (FICA etc.) for those who find a job.

The nice thing about Trump's idea is the that it benefits lower wage employees the most because of the FICA cutoff at $137,700 for 2020.

But what if previously-employed people cannot find a job or simply do not want to?

Two Flawed Approaches

  • House Speaker Nancy Pelosi's approach encourages people not to work.
  • Republican approaches punish people who genuinely want a job but cannot find one.

The correct compromise is not to to do both but rather to provide some benefit to those who return to work while tapering benefits for those who don't to ensure people do not take advantage of free benefits.

As a Libertarian, it pains me to suggest government to do anything. But doing nothing also implies there never would have been any shutdowns, with clearly disastrous consequences. 

In this case, if Government mandates a shutdown, then it has to properly mitigate the consequences. Competing views show that is easier said than done.

Getting the compromise wrong would be a huge disaster.