With Federal Unemployment Benefits Expiring, Will Another COVID-19 Relief Deal Come Together in Congress?

With the extra $600 in federal unemployment assistance set to expire at the end of the month (July 25 in Michigan), talks about another coronavirus aid package is coming to a head in Washington DC.

Although negotiations about what should be in the bill still appear to be up in the air and significant disagreements exist, the US Chamber released five recommendations to Congress and the White House last week.  The US Chamber requested that Congress enact targeted and temporary measures that address the following five key areas:

• Liability Protection Against Unwarranted Lawsuits – While the Michigan Chamber is working on state legislation to provide protections for employers operating in Michigan, we recognize this is a national issue and a national threat.  The Michigan Chamber and US Chamber are urging Congress to provide employers, healthcare providers, non-profits and educational institutions a safe harbor from these types of lawsuits when they make good-faith efforts to follow applicable public health guidelines.  Ideally, the legislation would give jurisdiction to federal courts versus allowing state courts to deal with these lawsuits.

• Support for Small and Mid-Size Employers – The US Chamber is urging Congress to continue to help employers who continue to struggle with the economic fallout caused by the coronavirus.  They are advocating for a targeted approach to support, including: closing the gaps that existed in the CARES Act programs and providing additional relief for those businesses that cannot return to more normal operations as a result of the social distancing requirements necessary to prevent the spread of COVID-19.  The Michigan Chamber supports this call for additional relief.

• Unemployment Benefits and Funding for Job Training – Over 17 million Americans are currently unemployed. The vast majority – 13.4 million – have been unemployed from between 5 and 26 weeks. While the economy has begun to recover, and this number will fall as millions continue to return to work, unemployment will remain elevated for some time as some jobs will not return, and some employers will permanently close.  The US Chamber is arguing this warrants continued support for the unemployed, but it is critical that Congress take a more targeted approach to supporting the unemployed.  Specifically, the additional $600 weekly unemployment benefit must be significantly revised, and Congress should support job training for those whose jobs will not return.  The Michigan Chamber agrees with the assessment that the $600 in supplemental weekly unemployment benefits is causing significant distortions in the labor market and should be fixed. A recent study found that two-thirds of beneficiaries earn more on unemployment than they made while working. One-fifth earn at least double what they earned working, and the median replacement rate is 134%.

The US Chamber is urging a middle-ground approach along the lines recently suggested by former Obama and Bush economic advisors, namely:

• • Provide a variable supplement to state unemployment benefits designed to replace 80 to 90 percent of individual’s prior covered wages (after taking into account that payroll taxes are not collected on U.I. benefits) up to a maximum federal benefit of an additional $400 per week;
  • For states unable to initially adjust their computer systems to calculate a replacement rate, provide a flat amount equal to half the maximum benefit (e.g., $200) per week for up to three months to provide time for computer system upgrades; and
  • Phase down the additional benefit based on a state’s unemployment, providing the maximum benefit ($400) for unemployment rates above 15% and eliminating the bonus when unemployment falls below 7%.

• Financial Assistance for Childcare and K-12 Schools – The ability of many parents to return to work is dependent on schools physically reopening and childcare being available. Reopening must be safe and should be guided by public health officials. Congress should provide critical financial assistance to aid in a safe reopening.  The US Chamber is arguing that making investments now to ensure the safe reopening of schools and childcare centers will likely reduce federal spending in other areas.

• Assistance for State and Local Governments – Just as the pandemic caused a sudden, unanticipated drop in business receipts, it has done the same for state and local government revenue. Absent additional federal assistance, state and local outlays and employment will have to be quickly cut, deepening, and lengthening the economic downturn.  The US Chamber is encouraging Congress to work to apportion aid in a manner that (1) reimburses state and local governments for direct COVID response costs and (2) replaces a portion, say 90 percent, of forgone revenue based on the difference between quarterly pre-COVID revenue projections and actual receipts (or receipts in the corresponding quarter in 2019). They argue replacing only a portion of the lost revenue will encourage shared sacrifice and economization and that providing support on a quarterly basis will ensure that as the economy and state revenue recovers, aid is reduced.

We will continue to monitor these negotiations closely and will keep you posted.  If your business is a member of the Michigan Chamber, please contact Wendy Block with any questions at wblock@michamber.com.