Millions of jobless Americans have been given hope that fresh aid may be on the way after President Donald Trump signed executive orders that would grant $400 enhanced weekly unemployment benefits to those out-of-work. With the original weekly $600 additional unemployment benefit - which had been introduced to help those put out of work by the coronavirus pandemic - expiring at the end of July, jobless workers in some states saw their incomes fall by as much as 71% (opens in new tab) almost overnight.
Congress has been working on a replacement program (opens in new tab), but with agreement still seemingly some way off, the President has attempted to take matters into his own hands with the memorandum that he signed over the weekend. However, while the intervention seems well-intentioned, it also comes with its own uncertainties, and appears unlikely to represent the quick fix that so many desperately require right now.
Why is a replacement program needed?
It is not difficult to understand why a new round of enhanced unemployment benefits is needed. In a survey of more than a thousand unemployed workers querying how they hoped to cope financially after the additional $600 weekly benefit ended, almost half (49%) felt their finances would be at “very high risk”.
Significantly, the poll (opens in new tab), conducted by couponlawn.com, also found that 30% of jobless Americans feared that they might have big debts in the near future, with the need to make ends meet now coming at the expense of their long-term financial health. Many will already have necessarily turned to the best personal loans (opens in new tab), and even payday loans (opens in new tab), to help see them through, while latest estimates suggest credit card debt alone will rise by $80 billion (opens in new tab) during 2020.
The top concern among those facing the loss of the enhanced unemployment benefit was simply meeting household bills. Meanwhile, almost 4% of respondents said they were already in considerable debt and, in losing the income that they were using to pay their borrowings down, may soon have little option than to consider the best debt consolidation companies (opens in new tab) to see if they can help.
How is the extra $400 benefit expected to work?
Under the plans put forward by President Trump, the $600-a-week payment that was being made on top of the usual state unemployment up until the end of July would be replaced by a lower weekly enhancement of $400. In this instance, the federal government would cover $300 of the enhanced aid, with individual states then responsible for the remaining $100.
The idea is that the program will run until the earlier of Congress coming up with a solution of its own, December 6, or until the $44 billion put aside to fund the scheme runs out - the bad news for the longevity of the scheme is that the funding is predicted to run out first, potentially within five weeks.
Who would qualify for the additional $400 benefit?
Under the original program introduced as part of the CARES Act, anyone who received unemployment benefits was eligible to receive the weekly $600 boost. This included those who qualified for regular unemployment benefit, or did so due to their eligibility for Pandemic Emergency Unemployment Compensation (PEUC), Pandemic Unemployment Assistance (PUA), Extended Benefits, or Short-Time Compensation, among a handful of other programs.
With this proposal, however, only those who receive at least $100 in unemployment benefit under one of the aforementioned schemes will qualify for the extra $400 in federal aid. The thinking behind the minimum requirement is that it will help to counter instances of fraud - inevitably, however, it will also mean that some of those most in need of assistance will miss out. One estimate, by Eliza Forsythe (opens in new tab), labor economist and assistant professor at University of Illinois, Urbana-Champaign, suggests that 6% of all regular unemployment insurance recipients fall under the $100 weekly threshold. Among those most at risk of missing out would be part-time workers and those who rely on tips.
When could the program start?
According to the orders, the $400 boost would be paid retroactively to those who received unemployment benefits for the week ending August 1, thereby filling the void since the $600 benefit ended. However, there is little telling how long it will take for people to actually get any of this money in their hands. Any resumption of the old program was predicted to take at least two weeks to get going, so what is essentially a new process would undoubtedly take much longer.
Are there any other stumbling blocks?
Besides the time it will take to implement a new system, other potential obstacles to the plan will also need to be overcome. On its first announcement, some states immediately raised doubts as to whether they could afford to pay the quarter of the bill that they are expected to foot this time around. The President has since responded that state governors could make a request to the federal government to pick up the whole cost, but obviously such important matters will need ironing out.
The other major stumbling block surrounds whether the President actually has the authority to put such a program in place. While the order has been enacted using the powers afforded to the President under the Stafford Disaster Relief and Emergency Assistance Act, it remains unclear - and open to potential legal challenge - as to whether this law can be used to pay for unemployment benefits.
What should unemployed workers do?
Given the wider uncertainty that surrounds the program, and the likely lengthy wait for monies to begin being paid out even if it does get the green light, millions of unemployed workers obviously remain in a terribly uncomfortable state of financial limbo. For those in such a situation, we know that advice is easy to disperse but not always easy to follow - however, there may be a way to help that you have not yet thought of, or a scheme that has been introduced without you noticing.
Besides the obvious step of filing for unemployment benefits, make sure you are claiming everything that you are eligible for. This includes the first coronavirus stimulus check, and the second that could soon be on the way (opens in new tab), along with any tax refunds that you might be due - filing online using the best tax software (opens in new tab) is the fastest route to making sure the IRS will pay you what you are owed.
If you’re concerned about meeting your monthly mortgage payments, talk to your lender - the best mortgage lenders (opens in new tab) will be willing to listen and should be able to afford you some flexibility (opens in new tab). Similarly, you may be able to lower your monthly payments by switching to a new lower mortgage rate from one of the best refinance mortgage companies (opens in new tab) - recent research suggests 15 million homeowners could save an average of $289 a month (opens in new tab) by taking advantage of the record low rates currently on offer.
As already mentioned, wider debt is already a problem for some people and will become a growing issue for more going forward. Again, existing credit card borrowers should speak to their lender to what help is on offer (opens in new tab), as should those struggling to pay a personal or auto loan (opens in new tab).
Crucially, you should always try to avoid taking out a payday loan if at all possible, and consider all the alternatives (opens in new tab) first. This advice is even more important if you’re really struggling under the weight of your debt - in this instance, seek help from family, friends, debt counselors, or the best debt consolidation companies (opens in new tab) to see if some of the pressure can be lifted.