On Tuesday, May 12, 2020, U.S. Speaker of the House Nancy Pelosi unveiled a bill to fund a new round of relief spending to support the U.S. economy in the wake of the COVID-19 crisis and shutdown of wide swaths of the economy. The bill has been named the HEROES Act . The following Friday, May 15, 2020, the bill passed the House.
- Democrats in the U.S. House of Representatives unveiled a bill to fund a new round of relief spending to support the U.S. economy amid the COVID-19 crisis.
- At over $3 trillion, the House bill would constitute the single largest piece of economic support legislation ever enacted.
- The bill has been named the HEROES Act and is expected to be voted on in the House on Friday, May 15, 2020.
This new bill would extend, supplement, and build new spending programs on top of several previous bills that have passed into law to address the issue over the past few months. At a price tag of over $3 trillion, if passed, the House bill would constitute the single largest piece of economic support legislation ever enacted, matching the $3 trillion in total already committed through the four different laws that have already been passed.
Highlights of the bill include:
- $915 billion in aid to state and local governments facing budget pressures as tax revenues fall
- Another round of $1200 direct tax rebates to taxpayers, with more generous conditions than the previous payments
- Extending the $600 per week federal supplement to unemployment benefits through January 2021
- $180 billion to boost pay for essential workers who have had to continue working during the pandemic
- $75 billion in additional funding for testing and contact tracing of those exposed
- Automatic forbearance on delinquent home mortgages, a moratorium on evictions, and $175 billion in relief for rent, mortgage, and utility costs to consumers
- Extension of student loan forbearance to all federal and private loans through September 2021 and forgiveness of up to $10,000 in student debt.
President Trump and Senate Majority Leader Mitch McConnell have already expressed opposition to so much spending right now. Any final version of an additional spending package will undoubtedly require some contentious negotiation and cooperation with the President and the Senate. The HEROES Act, which was written entirely by House Democrats and passed largely along party lines, is unlikely to move forward to the Senate.
The HEROES Act comes as the unemployment rate in the U.S. has hit 14.7% and climbing, with 20.5 million net jobs lost in April. The economic damage from the widespread business shutdowns and stay-at-home orders has continued to mount. Political pressure has increased at the state and local level to re-open the economy and volatile public demonstrations have occurred as at least some of the public grows increasingly skeptical that the public health benefits of shutdowns outweigh the economic costs.
Much of the HEROES Act reflects the content of previous standalone bills already introduced in the House, now included in one omnibus package. This means that the HEROES ACT would include a wide range of disparate spending and regulatory measures all agglomerated together under a single bill, making the overall bill a kind of grab bag for Democratic legislative priorities. For example, one section of the bill includes the Secure And Fair Enforcement Banking Act, for the purpose of allowing cannabis-related businesses easier access to traditional banking. Another section expands federal hate information collection, grant funding, and punishments. Yet another directs expanded federal support for LGBTQ suicide prevention.
However, despite this catch-all approach to packaging this panoply of bills together under one act, the largest provisions of the HEROES Act remain focused on mitigating compensation for the damages imposed on the economy by the government response to COVID-19.
Major Economic Provisions
The major economic provisions of the HEROES Act include direct federal assistance to state and local governments, a new round of direct tax rebates to taxpayers, an extension to the previously enacted federal supplement to unemployment benefits, a federally-funded pay increase for essential workers, and direct and indirect housing assistance to consumers.
State and Local Fiscal Relief
The HEROES Act appropriates $540 billion for states, territories, and tribal governments, and $375 billion for cities, counties, and other local government units. In general these funds are to be allocated according to population based on the 2010 Census and are required to be used to mitigate unanticipated costs or lost revenues due to the epidemic or the economic damage that has resulted. State and local government entities would also be eligible to receive funds under many of the various lesser programs funded by the Act.
The Act institutes another round of tax rebates similar to those implemented in the previous CARES Act but with expanded eligibility. Individual filers would receive $1,200 and joint filers would receive $2400, plus $1200 per dependent up to three dependents. This puts the benefit at $1,200 for a single person up to $6,000 for a married couple with three or more children. The rebates are available to all individuals other than non-resident aliens, dependents, estates, or trusts. Payments phase out above incomes of $75,000 for individuals, $112,500 for head-of-household, or $150,000 for joint filers at a rate of 5% of income above the threshold. The Act also expands a few other tax credits, including the Earned Income Tax Credit and the Child Tax Credit. In a major benefit to high-tax states and cities, it also eliminates the limit on deduction of state and local taxes from federally-taxed income for 2020 and 2021.
Pandemic Unemployment Extension
The HEROES Act extends the $600 per week bonus to unemployment benefits enacted under the CARES Act by six months, through the end of January 2021. This emergency supplement to unemployment benefits was originally scheduled to run through July 2020. The existing benefits under this program have been seen as creating a major incentive for people not to work, despite a lack of any proof that this is the case. With their regular unemployment benefit plus $600 per week, many unemployed workers are already receiving as much or more than they were earning while employed.
Pay Raises for Essential Workers
The HEROES Act funds $180 billion in grants to essential employers to pay a higher premium wage to essential workers who have had to continue working through the crisis. It raises pay for these workers by up to $13 an hour, retroactive to January 27th, 2020 until 60 days after the declared end of the emergency. Total grant-funded compensation would be limited to $10,000 earning less than $200,000 per year or $5,000 for those earning more than $200,000 per year. Essential government services, public health, health care providers, first responders, food industry, sanitation, waste disposal, funeral and mortuary services, news reporting, education, laundry services, election operations, hazardous material work, dental and other health services, work directly related to COVID-19 treatment and research, and the U.S. Postal Service, are all covered as essential work for premium pay purposes.
The HEROES Act puts a moratorium on residential foreclosures and rental evictions for 12 months, and on repossessions of motor vehicles or RV’s being used as residences for 6 months. In turn, it directs the Treasury to make some of the loans to distressed industries authorized under the CARES Act available to provide liquidity to mortgage servicers, and it directs the Federal Reserve to establish a new low cost credit facility to residential rental owners. It provides $100 billion in new housing assistance grants for emergency assistance with rent and related living expenses for low income households and $75 billion for grants to state housing finance agencies to provide homeowners with emergency assistance for mortgage payments, utilities, taxes and related expenses.
Student Loan Forgiveness
The HEROES Act extends the scope and period of student loan forbearance established under the CARES Act. All federal and private student loans would be given forbearance through September 2021. The Treasury would pay the loans up to $10,000 per borrower during this forbearance, and $45 billion is appropriated for this purpose. After that period any amounts remaining of the $10,000 per borrower would be provided to fund student debt forgiveness.