Less than 24 hours after Trump broke off negotiations on the economic stimulus package with Congressional Democrat leaders, Pelosi and Shumer, last Friday August 7, Trump issued a series of Executive Orders (EOs) that he had been signaling and threatening all last week well before the break up.
Almost certainly the legal crafting of the EOs were written long before negotiations were dramatically ended by Trump’s hatchet man leading his negotiating team, staffer Mark Meadows. Trump clearly planned the break up and his EOs some time ago.
Trump, Meadows, Mnuchin and McConnell cleverly set up and sucked in Pelosi and Shumer into negotiations last week, never planning to conclude a deal by Friday, in the process getting them to reveal their priority demands and securing from them major concessions worth $1 trillion—for which the Democrat leaders apparently got nothing in return.
A day later, Trump dropped the hammer and issued his EOs, which are designed more as PR for his election campaign. They certainly won’t provide anything remotely necessary as fiscal stimulus to confront the US economy’s emerging fading rebound in recent weeks.
Upon close inspection the EOs are therefore mostly smoke and mirrors, designed to produce useful electoral soundbites for his campaign between now and November. The EOs are more PR for public relations purposes, while also serving as FUs (F*** You) to the Democrats.
EO #1: Payroll Tax Cut
The EO that has gotten the most media attention thus far is his proposal to introduce a payroll tax cut, which neither the Republicans or Democrats in Congress were calling for. Why were they not? Because they had both already agreed to an alternative measure far more lucrative for business: an expansion and extension of the ‘Retention Tax Credit’ passed in March as part of the CARES ACT stimulus. The retention tax credit has provided a direct tax cut to business worth $55 billion since March. Businesses get the tax credit by simply saying they didn’t lay off workers they might have. But any business can make that claim, even if they had no plans to lay off, and thus get the credit. In the current negotiations that were in progress until last Friday, both sides—Republicans and Democrats—had agreed to expand and extend the ‘Retention Tax Credit’ costing another $194 billion in addition to the $55 billion to date.
Another reason why even the Republicans in Congress weren’t all that interested in Trump’s Payroll Tax Cut was that Business already had already been given a payroll tax cut in the CARES ACT. Payroll taxes are paid for by both employers and workers, each contributing half the total 15.3% to Social Security and Medicare. (6.2% of the payroll tax goes to social security plus another 1.45% for Medicare). Employers have already therefore had their share of the payroll tax deferred (but not yet permanently cut). Deferral means employers have to start paying it back by the end of 2021. The media hasn’t provided much attention to that. But the employer tax ‘cut’ is really a tax ‘deferral’ that has to be restored at a later date to the social security and Medicare trust funds.
Trump wants not only a deferral of the 7.65% workers’ share immediately, but also to make it permanent later. That means the trust funds will never see the money restored. And if that’s his plan for the workers’ 7.65% share, it will presumably mean the same for the employers’ 7.65% as well. That translates into an end of the social security and Medicare programs! Ending the programs means, in turn that 50 million American households would be immediately thrust into poverty. Consumption would collapse. And economic depression would almost immediately result. But no matter to Trump, so long as he can spin it for re-election purposes in the interim.
Trump administration mouthpieces have been trying desperately to ‘walk back’, as they say, Trump’s disastrous declaration to make the payroll tax cuts permanent and thus destroy social security and Medicare. Mouthpiece #1, Larry Kudlow, says he didn’t mean permanent in fact.
Trump is caught between a rock and a hard place, as they say. By deferring the payroll tax the likely response by employers, as others have pointed out, is that the employers, who are responsible for collecting the payroll tax from workers, may do so and just sit on the collected payroll taxes from their employees.
Employers by law are responsible to collect and send the taxes to the government. If they don’t collect from their workers, thus allowing them to realize a real wage increase in their paychecks equal to 7.65%, then the same employers will be liable to pay out of their own profits what they didn’t collect once the deferral period ends. Employers will have to make up the payroll tax loss in 2021—at the same time they have to pay back the deferral on their own 7.65% share by the end of 2021!
Another related problem is that should workers have their 7.65% deferred and realize a wage increase in 2020 from it, they’ll have to declare that as income and pay taxes on it come April 2021. So it won’t be a 7.65% net income gain for them either.
Apparently Trump’s gambit on the payroll tax has had even some Republican Senators choking on the stupidity of the measure. Republican Senator from Nebraska, Ben Sasse, quickly called it “unconstitutional slop”!
EO #2: $400 Supplemental Unemployment Benefits
The supplement Pandemic Unemployment Compensation program, PUC, introduced last March in the CARES ACT provided for an extra federal $600/week benefit in addition to the States’ Unemployment Benefit programs. Those state programs provide up to $450 a week (California) to as little as $235 a week (Mississippi). The $600 was designed to help unemployed stay in their rental apartments and homes. $235 a week, or about $10,000 or so a year, is grossly inadequate to keep people in their homes during the pandemic. So the $600 was added, and not just to cover household living costs but also to stimulate consumption and the economic recovery. Studies show households earning less than $25,000 who received the $600 spent it all. Other university studies show the $600 has not discouraged workers from returning to their jobs.
Trump’s EO proposes to cut the $600 to $400 a week. But not even $400. The federal government will pay $300 and the states will have to kick in the other $100. If they do not, the government $300 may not even be available, according to some sources. The $600 since March has benefited between 14m and 28m unemployed. It generated $85 billion/month in consumer spending and thus GDP to the US economy. Reducing it to $300 billion—as Trump’s EO proposes—cuts that in half, which means at least $40 billion a month will be taken out of the economy and US GDP. Some stimulus that!
And where will the finances to provide the $300/week benefit come from? It is unclear, although Trump administration mouthpieces have raised the possibility the money will be diverted from the Disaster Relief Fund’s $44 billion—i.e. just as the hurricane season arrives! But $44B will only fund the $300/week for about five weeks at most. Not to mention that transferring funds from a program authorized by Congress is also another unconstitutional action—just as is Trump’s payroll tax cut proposal. It too is just another indication of Trump’s intention to run roughshod over any constitutional requirement that gives authority to Congress, and especially the US House of Representatives.
EO#3: Moratorium on Evictions
There are 108 million Americans living in approximately 48 million rental units in the US. The CARES ACT of last March provided for evictions moratorium in only about one third that total, specifically in apartments subject to federal housing finance programs. So evictions have been continuing ever since the pandemic and great recession began. But they have begun accelerating in July as even the limited moratorium expired on July 25. Estimates are that 12.5 million are potential evictions in the federal covered programs–11 million of which in 2020. Other estimates of potential evictions rise to as much as 30 million plus.
Trump’s eviction moratorium Executive Order does not prohibit evictions at all. It just says states should “consider” suspending or limiting evictions. This particular EO is just typical Trump smoke and mirrors, allowing him to say something in his tweets and public appearances that he’s stopped the evictions. In this case, the EO is just normal Trump BS.
EO#4: Student Loan Deferral
Whereas the March CARES ACT provided for the suspension of student loan payments and zero interest accrual through September 30, 2020. Trump’s EO merely extends it up to the end of December 2020. Or possibly earlier, since the EO states: “It is therefore appropriate to extend this policy until such time that the economy has stabilized, schools have re-opened, and the crisis brought on by the COVID-19 pandemic has subsided.” What’s ‘stabilized’? How many schools must ‘reopen’ and what constitutes ‘pandemic has subsided’? In other words, there’s no guarantee even the suspension is extended through 2020.
The current crisis provides no better opportunity for the US government to simply expunge federal student loan balances and obligations. The program is a travesty. It charges students, now in debt to the tune of $1.6 trillion, interest rates as high as 6.7%. That compares to the ability of businesses to obtain 10 year equivalent loans at interest rates as low as 0.6% today. Why is the federal government charging millions of students such usurious interest rates? Because it wants to push them off the Dept. of Education loan system into the arms of the private banks to re-consolidate their government education loans. Banks charge now about 4% to consolidate, less than the government’s 6.7% but far less than the 1%-2% they charge their business customers for equivalent loans. Abolishing the $1.6 trillion debt load on students will have no effect whatsoever on US government finances and US economic output. In fact, it would likely result in a major stimulus to consumption and therefore economic growth. But Trump’s EO does nothing except allow him to say he improved relief on student debt by some weeks before the November elections.
Executive Orders & Deepening US Constitutional Crisis
While running for president before 2016 Trump continually attacked Obama for trying to legislate immigration reform by Executive Order. Now he is doing the same, expanded by magnitudes. Trump has revealed time and again plans to govern by bypassing Congress. He has cornered the Federal Judiciary. Not just the Supreme Court majority but hundreds of his ideological appointees to the Federal Judiciary at all levels are now in his pocket. He clearly believes he can abrogate Congressional legislative authority and govern by decree: executive orders as well as national emergency declarations and similar legal maneuvers no doubt already being planned by Bill Barr and Steven Miller. The current flurry of EOs should be viewed as just the latest tactics in his broader strategy. They are largely public relations measures introduced primarily with his eye on the November elections.
They are also ‘FUs’ directed at the Democrats, declaring his intent to step on them at every opportunity in the run up to the November elections. It’s as if he’s saying and taunting them: “See, I outmaneuvered you guys again. I set you up allowing my hatchet men, Meadows and McConnell, to extract concessions from you in negotiations. I let you think you could get a deal. Now I’ll announce those measures and you can agree to them or not. I’ll spin it and take the political credit. Now you can come back to the bargaining table and give me some more concessions that I’ll take credit for as well. I’m going to string you along like this until November. I’ll look like I’m doing something and you’ll look like you can’t get anything done”.
A Trump De Facto Coup Scenario
Trump will never accede to the results of the upcoming November elections, should he lose. His strategy becomes increasingly evident with every passing week and action. The EOs are just the latest event in that strategy.
The mostly likely scenario for November is his plan to declare on November 4 that the voting has been tampered with as a result of mail ballots and the US post office refusing to process and mail millions of ballots. He’ll declare the November results null and void, and declare the US Supreme Court should decide in his favor for a second term—just as it did (unconstitutionally) in 2000 when the Court stopped the voting count in Florida. This time he’ll challenge the voting count in every state he’ll lose, but not in those he’ll win.
It is not beyond the possible he’ll also call for his radical right, gun-toting friends to come to Washington to surround and protect the White House while the crisis intensifies in December-January. His DHS troops and ICE cops are also available to provide physical protection. Democrats in Congress will rant and rail about it all, but have no executive force to stop him or drag him out of the White House in January when he refuses to leave. Nor will the Washington DC police, or FBI, or US military units want to confront a White House surrounded by his armed supporters. As time drags on, his position will become stronger.
Make no mistake. This is not an impossible scenario. Democrats and moderates think he cannot thus flout the US Constitution and law. Yes he can. And he likely will.