August 10, 2020 – In a research report issued by Bank of America’s Global Economics Team, analysts noted that the four executive orders issued over the weekend may have a limited impact in stimulating the economy.

The most significant executive order relates to Enhanced Unemployment Insurance (EUI). The order contemplates a $400 weekly EUI, to be funded 3/4th from the FEMA-administered Disaster Relief Fund and 1/4th by states. CNBC, during an interview, confirmed that at least two state officials received guidelines that state unemployment would qualify for the state’s portion of the EUI.

However, Bank of America cautioned that the roll out of EUI could take weeks – “if not months” – to implement. Absent of EUI, the U.S. economy could be losing up to $12B of stimulatory funds a week (4/6 multiplied by $18B – the estimated impact of the current $600/week EUI).

On a second executive order allowing employers to defer with-holding of payroll taxes, Bank of America noted some employers might be reluctant to provide larger temporary paychecks only to with-hold a “balloon” payroll tax a few months from now right around the holiday season.

The other two executive orders, relating to federal agencies’ discretion in assisting renters and homeowners and student loan deferrals, may benefit some individuals, but not likely to move the needle on the broader economy.

Only Congress, the analysts said, can provide a longer-term, more sustainable solution to the U.S.’s economic stress:

The bottom line is that the economy will remain under downward pressure until the Congress and Administration agree on a plan that targets the troubled areas with adequate funding. Our base case has been that we see a fiscal stimulus package of $1.5tr passed before the end of the month. We continue to hold this view but there are considerable risks.

Contact Jenny Lee at JLee@buymuni.com.