On Friday, the U.S. House of Representatives passed a $2 trillion coronavirus economic stimulus bill, two days after the Senate passage of the legislation. President Trump signed the legislation shortly after the House vote.
The Coronavirus Aid, Relief and Economic Security (CARES) Act provides relief for workers and businesses that have been devastated by the outbreak, and is the largest economic relief package in modern U.S. history. This is the third round of federal government support, succeeding $8.3 billion in public health support in mid-March and the Families First Coronavirus Response Act.
The bill’s passage came after an emotional three-hour debate on the House floor in which members of both parties largely voiced support for the measure despite some misgivings.
More on what the CARES Act provides:
- Expanded Unemployment Benefits: The measure increases unemployment payments and extends the benefit to those who typically do not qualify, such as gig economy workers, furloughed employees and freelancers. The bill increases the maximum unemployment benefit that a state gives to a person by $600 per week for four months.
- Funding for Hospitals, Community Health Centers, and Health Care Workers – provides over $100 billion for hospitals through direct payments and higher reimbursements, further expands access to telehealth services, and provides $16 billion for purchasing Personal Protective Equipment (PPE) and other critical supplies.
- Direct Payments to Americans Who Qualify: The bill also provides for direct payments to Americans, giving individuals who make up to $75,000 a year checks for $1,200, couples making up to $150,000 payments of $2,400, and an additional $500 per child. The payments decrease for those making more than $75,000, with an income cap of $99,000 per individual or $198,000 for couples. What to do with this extra cash on hand? Here’s a helpful guide.
- Paycheck Protection Loans to Small Businesses – creates a new “paycheck protection” loan for small businesses that fully forgives the portion of the loan used to keep workers on payroll and pay their rent, mortgage, and utilities over the next few months.
- Additional Tax Relief for Individuals and Main Street Businesses – includes tax provision for businesses and individuals to provide more relief, such as a refundable payroll for employers who keep their workers on payroll despite having to close their doors.
- Financial Support for Distressed Businesses of Any Size – allocates $454 billion through loans and loan guarantees to businesses of any size in distress, with priority for mid-sized businesses that are above 500 but not large corporations, to provide immediate liquidity.
- Funding and Flexibility for Students, Schools, and Colleges – provides over $30 billion for K-12 schools and colleges to help them continue serving their students, pauses all student loan payments, and student borrowers are held harmless if they were not able to finish their semester.
- Relief for Homeowners and Bolstered Housing Assistance – prohibits foreclosures for 60 days and allows homeowners to delay mortgage payments by shifting them to the end of their mortgage, while providing significant funding for programs serving low-income families and the homeless.
The Senate is now in an extended recess until April 20, and both sides are continuing discussions on what’s next. Even after three stimulus packages signed into law, lawmakers are considering taking action on a phase four to ensure the U.S. is combating the coronavirus and the impacts to our economy fully. We’ll have the latest as these discussions continue.
Impacts to The Federal Debt
In the first five months of the fiscal year that began October 1, 2019, the U.S. budget deficit was already up to $625 billion. Now, as the government works to implement stimulus packages to offset the negative economic effects of the coronavirus, most analysts predict the deficit will skyrocket.
The budget deficit is how much government revenues (from taxes, for example) falls short of spending, which includes everything from defense spending to Social Security to unemployment benefits. The U.S. government set a deficit record of $1.5 trillion in 2009 to manage the fallout from the financial crisis. Many analysts are now predicting the deficit will soar well past that record due to (1) decreases in government revenues as a result of reductions in household incomes and corporate profits, which affect taxes; (2) increases in spending for safety-net programs like unemployment insurance as more workers get laid off due to the coronavirus; and (3) economic stimulus packages, which could add at least $1 trillion to the deficit. Projections for this year’s deficit range from $1.7 trillion (from J.P Morgan economists) to $2.1 trillion (from Moody’s Analytics).
This all comes as the U.S. debt, the total accumulation of past annual deficits, tops $23.5 trillion in the first few months of 2020. The Policy Circle’s Federal Debt Brief takes an in-depth look into the main drivers of the debt and deficit and why they were projected to continue their upward trajectory even before the coronavirus came into play. With this much debt, how exactly can the U.S. afford a stimulus package that’s expected to be even bigger than the one enacted in 2009?
White House economic adviser Lawrence Kudlow sums up the general consensus among economists: “We have to deal with debt and deficits at some point down the road… But during crisises or wars, you have got to sort of not worry about borrowing.”
This is not to say the debt and deficit are not important, but rather that the current needs of the economy – from the needs of small businesses struggling to stay afloat as social distancing affects their operations, to the needs of every day Americans who have lost their jobs because they cannot be done remotely – take precedence. As long as fiscal institutions and the long-term productive capacity of the economy are secure, says William D. Lastrapes, Professor of Economics from the University of Georgia, the government can afford to focus on the nation’s public health and on “mitigating the harm recessions can do to workers and small businesses.”
Want to explore the Federal Debt more? Take a look at The Policy Circle Brief on the topic and host your own virtual Circle Discussion. Also check out the resources page on taking action in your community – tell your representatives and the media what you are doing to follow social distancing in the workplace to protect workers and customers, or personally in parks and with friends. You should also share the impact on your business and tell them what needs to change.
The Policy Circle would also like to hear from you – share with us how you are staying connected, supporting local businesses and maintaining normalcy as much as possible. Email firstname.lastname@example.org.
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