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5 Ways the Next Stimulus Deal May Disappoint You

Put plainly, there's nothing that could have prepared folks for what we've experienced in 2020. Putting the murder hornet jokes aside, the coronavirus disease 2019 (COVID-19) pandemic has been quite the physical and financial shock to America. It's caused the deaths of more than 136,000 people in the U.S., displaced over 20 million workers, and pushed the U.S. economy into a deep recession following its longest expansion in history.

Though tackling the medical response to COVID-19 remains touch-and-go, lawmakers believed the best way to respond to an unprecedented pandemic was with a never-before-seen relief package. The result was that the Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act was signed into law on March 27.

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The CARES Act provided stimulus money to over 160 million Americans

The $2.2 trillion CARES Act was an ambitious proposal that ultimately supplied funding to hospitals, distressed industries, and small businesses, as well as provided added funding to the unemployment benefits program. But make no mistake about it, the CARES Act is best-known for providing more than 160 million tax filers and seniors with a direct stimulus payment.

These Economic Impact Payments, as they're officially known, could total up to $1,200 per individual and $2,400 for a couple, with parents and households eligible to receive $500 for qualifying dependents under the age of 17. Thus, a qualifying family with three young children could receive a $3,900 payment under the CARES Act.

But despite having all the right intentions, the CARES Act came up woefully short in the financial assistance department. Approximately three-quarters of stimulus recipients used up their payout in four weeks or less. Considering how slow the economic recovery has been, these payouts simply haven't been enough for most Americans.

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News flash: Stimulus deal 2.0 could disappoint you in a number of ways

The good news is that another stimulus deal appears likely, and a direct payment to workers and seniors is probable. But there's also a real chance that the next round of stimulus could disappoint a lot of people in a variety of ways.

1. The payouts still aren't close to being enough

To begin with, there's the very real possibility that another round of funding doesn't do much for a majority of Americans. To be clear, any financial assistance is better than no financial assistance. However, with CARES Act funding not even lasting a month for three-quarters of recipients, stimulus 2.0 could be a repeat.

For what it's worth, the Democrat-led House of Representatives passed the HEROES Act on May 15. This proposal would mirror the maximum individual and couples payouts from the CARES Act of $1,200 and $2,400, respectively, with higher dependent kickers (limit three) of $1,200 instead of $500. Thus, a couple with three children could max out with a $6,000 payout.

Meanwhile, President Trump suggested in a recent interview with Fox Business Network that he'd like to pay Americans more than what Democrats have offered. Whether he can get other Republicans to agree to such a measure remains to be seen.

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2. The qualifying thresholds are narrowed significantly

Another way you might be disappointed by the next round of stimulus is if lawmakers adjust the income thresholds to qualify for a maximum or partial payment.

Under the CARES Act, single, head-of-household, and married tax filers could net the maximum payout with adjusted gross income (AGI) below $75,000, $112,500, and $150,000, respectively. Further, payouts were completely phased out at $99,000, $136,500, and $198,000 for single, head-of-household, and married filers.

While the HEROES Act left these income thresholds unchanged, Republicans may narrow down who'll receive another stimulus payment. Although nothing is written in stone, Senate Majority Leader Mitch McConnell (R-Ky.), while speaking at an event in his home state of Kentucky, noted that persons making under $40,000 have been hit hardest by the pandemic. With the GOP looking to rein in an already ballooned federal deficit as much as possible, we could see a battle develop over the qualifying income thresholds for stimulus 2.0.

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3. A flurry of exclusions remain

As noted, the CARES Act resulted in more than 160 million people receiving an Economic Impact Payment. Democrats would prefer to see this figure increase when the next round of funding is announced, with a wider gamut of dependents providing a kicker for their parent or household, and undocumented workers with a taxpayer identification number receiving a payment.

That's unlikely to be the case with Republican lawmakers. Though there have been no specific disagreements over the expansion of who qualifies as a dependent, a number of GOP lawmakers have been standoffish about the idea of allowing undocumented workers to qualify for a stimulus payment.

Obviously, the next round of stimulus will represent some give and take from both political parties. But it's not out of the question that a number of exclusions will remain in place, especially when it comes to undocumented workers with a taxpayer identification number disqualifying themselves and/or their family from receiving stimulus money.

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4. Enhanced unemployment benefits aren't extended

Tens of millions of Americans are also likely to be disappointed if enhanced unemployment benefits aren't extended in their current form.

Enhanced unemployment benefits involve paying approved unemployed beneficiaries an extra $600 a week between April 1 and July 31. In less than two weeks, this extra $600 a week payment is going to stop. The problem is, there were more than 18 million continuing unemployment claims as of June 27, per the U.S. Employment and Training Administration. Without this added $600 per week, it could be difficult for folks to pay their rent, mortgages, and auto loans. 

Republican lawmakers have been adamant that they have no intention of extending enhanced unemployment benefits in their current form beyond July 31. The GOP views these exorbitant unemployment payouts as a disincentive to return to the workforce. While it's possible the next stimulus deal doesn't offer enhanced unemployment benefits, the more likely scenario is that the enhanced weekly payout is commensurate with what a person would make at work. In short, most unemployed beneficiaries will be kissing their $600/week extra goodbye at the end of July.

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5. There are passage and/or payout delays

Finally, stimulus 2.0 could be a disappointment if lawmakers allow their differences to get in the way of passing a bill, thusly delaying the disbursement of stimulus funds.

Today, July 19, happens to be the last day that the U.S. Senate is out of session. However, the Senate is expected to have another month without legislative work between August 10 and Labor Day, Sept. 7, 2020. This means lawmakers have between July 20 and August 7 to hash out the next stimulus proposal. It sounds easy, especially considering that some of the legwork of the next deal has probably been going on behind the scenes for weeks. But if lawmakers can't put political hubris aside, it's very possible that their differences could lead to nothing getting done until after Labor Day.

As a reminder, direct stimulus payments aren't going out the moment another stimulus deal is signed into law. It often takes multiple weeks for the Internal Revenue Service to get everything in order to send out direct deposits and other forms of payment. Thus, there's real risk that, even if a second stimulus deal is passed, it could be a while before Americans and seniors get their hands on this cash.

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