The unemployment insurance stimulus package of $600 is running out this month. What happens next is up for debate at Congress beginning today. President Donald Trump wants payroll tax relief included or else he might not sign the bill.
Stimulus Package If Payroll Tax Relief Isn’t Included
Determined to include the provision, the President said: “I want to see it. I’ll have to see but, yeah, I would consider not signing it if we don’t have a payroll tax cut, yes.”
Related Article: Trump Wants Payroll Tax Cut, What That Means For You
Payroll Tax Cuts Determine The Next Stimulus Package
Payroll tax cuts first surfaced last March, during the start of the pandemic. The President asked lawmakers March 9 to enact a payroll tax cut and financial aid bill for workers. There were little details shared at the time, as the President said it was for discussion.
Payroll taxes are the main source for programs such as Social Security and Medicare. For workers, the payroll tax consists of both employer and employee shares. They are different from federal and state income tax withholdings.
Trump believes that a payroll tax cut can help stimulate the economy. The President said: “We are going to be asking tomorrow, we’re seeing the Senate. We’re going to be meeting with House Republicans … McConnell, everybody discussing a possible payroll tax cut or relief, substantial relief.”
Support for the measure is lukewarm at most. White House economic adviser Larry Kudlow has been an advocate of payroll tax relief. But, this view is not shared by Treasury Secretary Steve Mnuchin and others. The latter believes that any such measure will encounter opposition from Democrats. While the two have been at odds over this, they both agree for a need for stimulus packages.
Garret Watson, the senior analyst of the Tax Foundation, says that both parties do not find it helpful. He said: “The benefits primarily would accrue to folks who already are working, and we currently have record unemployment.” June’s unemployment rate is 11.1%, lower than previous months but still high.
With Congress resuming today, the priority item on the agenda is the next stimulus bill. Since the coronavirus pandemic, Americans received benefits from three earlier stimulus packages. The provisions of the last one will run out by month’s end, but the coronavirus crisis is still ongoing. This early, the GOP and the Dems have differing views on the next bill.
$1.3 Trillion Starting Number
Majority Leader Mitch McConnell (R-KY) will start by presenting a draft stimulus bill. The GOP’s beginning proposal is $1.3 trillion, which is lower than previous stimulus funds. Expectations are high that this bill will contain a one-time payment like the CARES Act. How much the check will amount to remains up for debate.
Another item for deliberation is whether the new bill will contain unemployment insurance. With the $600 welfare expiring July 31, Republicans felt that the amount last time was too much. In some cases, the latter said that laid-off workers made more money compared to their jobs. As such, it disincentives workers from finding and getting a new job.
Meanwhile, Democrats have pushed for a continuation. They believe that with unemployment rising, more workers will need help. They said that with little to no jobs available, people can’t go back to work even if they wanted to. The rising number of coronavirus cases are shutting down opportunities at increasing levels.
Instead of $600, Trump and senior Republicans are considering $200-$400 weekly. Or, have a system in place that does means-testing future federal unemployment benefits.
“We Need Protections”
Ina Fox News Sunday interview, host Chris Wallace posed a question to the President. He asked: “The stimulus bill is running out at the end of this month. The Republicans say they want liability limits, which the Democrats don’t like, you say that you want a payroll tax cut, which even some Republicans are cool too. Will you only sign a bill with those two provisions?”
Trump said that businesses need help managing liabilities caused by the outbreak. He said: “We’re going to see, but we do need protections because businesses are going to get sued just because … you don’t know where this virus comes from, they’ll sit down at a restaurant, they’ll sue the restaurant, the guy’s out of business.”
He continued with: “So we do need some kind of immunity. Just like you need immunity for the police whether they like it or not, you need immunity for the police. But they do need a form of immunity.”
While the provisions of the next stimulus are still up in the air, both sides agree on a basic framework. The coronavirus crisis is raging on, and Americans will need all the help they can get. With time running out, Congress needs to get it to act together and enact a new relief package. With Trump already making his stand known, the ball is with the US Congress.
Watch this video of Trump considering not signing the next stimulus package:
Do you support a payroll tax holiday? Why or why not? Share your views in the comment section below.
It’s Not ‘Unreasonable’ To See Gold Prices Soar To $4000 During Bull Market
Despite gaining 35% this year, gold prices have plenty of room to run, says Michael Cuggino, the CEO of the Permanent Portfolio Family of Funds.
Cuggino says that since gold formed a triple bottom from the end of 2015 through November of 2018, it has consistently climbed higher and has really soared this year.
“Ever since then, it has been a gradual move up, then some down. It moves sometimes in big chunks, gives some back, sits around and does nothing, reacts to stimulus, inflation, the value of dollar and euro … but it has had an aggressive move this year,” Cuggino said.
Possible Setbacks Along the Way?
With gold climbing so quickly in a relatively short period of time, Cuggino warns there could be sharp pullbacks along the way. But he says the overall trend is for higher gold prices.
Cuggino says the recipe of continued money printing by the government, the dollar steadily declining and growing inflationary fears mean it would “not be an unreasonable move” to see gold prices soaring to $4,000 an ounce.
He points to a metric that compares gold prices to the closing levels for the S&P 500 index. Gold is currently trading at 0.6 times the level of the S&P 500 and it hasn’t climbed above 0.7 since 2014. But when you go back to August 2011, gold traded as high as 1.7 times the S&P 500, so there’s plenty of upside for gold prices.
Gold Still Has a Long Way to Go
Just adjusting for inflation, gold would need to climb above $2,800 per ounce to equal 1980 levels, which means this gold rally has a long way to go.
Mike Shedlock, the Mish Talk blogger and investment adviser at SitkaPacific Capital Management, thinks the fuel that could push gold to $2,800 per ounce could come from all the hedge funds that are currently on the sidelines and missed the early innings of the gold rally.
“There is ample room for Fear of Missing Out to kick in as the managed money and big spec hedge funds sat out much of the recent rally,” he writes. “And with 105,025 short contracts there is plenty of fuel for a short squeeze too.”
E.B. Tucker, director of Metalla Royalty and Streaming, believes that the current rally will continue, and he thinks gold prices could hit $2,500 by the end of the year.
“Normally I would say [the bull run is overheated] but what I’m seeing in the daily action is that gold is rising in a very measured way and is not meeting much resistance, so when that’s happening you just step out of the way and let it go, that’s what you do,” Tucker said.
Like Cuggino, Tucker says there could be pullbacks in price along the way, but he says we’re in a secular bull market like we may never see again.
“This is a secular bull market. This is a bull market in gold that you’re probably never going to see in the course of your life again.”
Nasdaq Sets A New Record, Dow Forms A ‘Golden Cross’
Since bottoming in late March, the stock market continues to set records in what seems like an almost invincible climb higher.
Nevermind that Jim Cramer said the rally is being driven by the “power of enthusiastic buyers who do not know what they’re doing” and that he can’t fathom “how stupidly bullish this market can be,” the fact is that stocks are climbing higher.
The latest evidence for a runaway stock market is that the Nasdaq Composite Index just gained 1,000 points. It happened in the shortest amount of time in the last 20 years.
It took 114 days for the index to climb from the 9,000 level to the 10,000 level. That milestone was hit on June 10 of this year.
In just 40 days since, the Nasdaq has tacked on another 1,000 points, climbing above the 11,000 level.
That is the fastest 1000-point gain for the index since it took a blistering 38 days in 1999. Back then, it climbed from the 3,000 level to the 4,000 level.
You might recall that period, it was during the dot-com bubble. We know how that ended.
Today’s 1000-point climb is only a 10% overall gain (from 10,000 to 11,000) compared to the 33% overall gain during the ‘99 surge (from 3,000 to 4,000). However, it’s still a blistering pace that investors pay attention to.
“Although 11,000 by itself doesn’t mean much, these big round numbers are a nice reminder of just how strong this rally has been since the March lows,” said Ryan Detrick, the chief investment strategist at LPL Financial.
A ‘Golden Cross’
Not wanting to miss the fun, the Dow Jones Industrial Average just flashed its own bullish signal to investors.
The index just formed a “golden cross,” where the shorter-term 50-day moving average crosses above the long-term 200-day moving average.
Investors consider this to be a bullish signal for the index, as it shows the short term momentum is strong.
Conversely, when the 50-day moving average crosses below the 200-day it’s called a “death cross” and is a bearish indicator. The last “death cross” was on March 20. On that day, the stock market was pummeled by the economic shutdown caused by the coronavirus pandemic.
With the rally being led by technology stocks, the Nasdaq – which is more than 50% tech stocks – has gained more than 60% since the March lows. The S&P 500 is made up of about 25% tech stocks and has gained nearly 50% since March, and only 20% of the Dow is tech stocks so it’s lagged behind, gaining only 47% since March.
How reliable is the “golden cross” for stocks to move higher? According to Dow Jones Market Data, the last time a “golden cross” failed was in January 2016. That was also the last time the market slipped lower.
Day 10 of Stimulus Stalemate Yields Concessions From Both Parties
Republican and Democrat leaders appear to finally be willing to make concessions. This comes in an effort to finalize the next stimulus package. Meanwhile, President Trump has hinted that he may use an executive order to push through his own stimulus plan.
There are rumors swirling around Washington that Trump has met with his key advisers. He is also reportedly considering an executive order to pass his own stimulus bill. Indications are that the bill would include a payroll tax holiday and an extension of unemployment benefits. It would also include a moratorium on evictions and another round of stimulus checks for most Americans.
An Unexpected Move
Trump is considering the unorthodox move in an effort to sidestep the Democrats’ efforts to hurt the economic recovery by delaying the passing of the next stimulus bill.
President Trump’s only focus is on the economic recovery, says White House economist Joe Lavorgna during an interview yesterday with “America’s Newsroom.”
“The president is just trying to work in the best interests of the American people and trying to get the economy moving. We have reopened and been very successful,” he said.
Lavorgna added, “The president right now is hyper-focused on getting a deal done because while we have this V-shaped boom, why not take out an insurance policy and solidify what looks like we’re going to see, a record second-half economy. The Democrats have fought against it.”
Trying to End the Stalemate
Recent meetings between House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer, Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows have resulted in what Schumer calls “concessions” from both sides.
According to reports, the Trump administration has offered to extend the additional federal unemployment insurance until December at $400 per week. This is lower than the previous amount of $600 per week. Senate Republicans have proposed a different plan. Their plan would pay unemployment insurance at $200 per week through September. Then, it would change the benefit to 70% wage replacement once states were able to update their unemployment systems.
In a small sign of compromise, Mnuchin and Meadows offered to extend a moratorium on evictions from federally backed housing into December. Meanwhile, Democrats reduced their funding request for the U.S. Postal Service from $25 billion down to $10 billion.
There remains no agreement on other Democratic requests like aid for state and local governments. No deal has also been made funding for schools, and assistance for food, rent and mortgage payments.
Some Republican Senators, like Marco Rubio, appear willing to sign a bill that includes concessions for Democrats. They are willing to do so in an effort to get something approved.
Appearing on CNBC’s “Squawk Box” yesterday, Rubio said, “We have to act. We have to do something. And that will require us to vote for a bill that has things in it that I may not necessarily like.”
Rubio did say “there’s a limit” to what concessions he would accept. Additionally, those don’t include much of the $3 trillion legislation House Democrats passed in May.
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