April 06, 2020
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A guide to Congress’ $2 trillion stimulus and why economists say it may not be enough

Andrew Harnik | AP
Andrew Harnik | AP
From left, Labor Secretary Eugene Scalia, Senate Majority Leader Mitch McConnell of Ky., Treasury Secretary Steven Mnuchin, Senate Minority Leader Sen. Chuck Schumer of N.Y., and White House chief economic adviser Larry Kudlow attend a a meeting to discuss the coronavirus relief bill on Capitol Hill, Md., Friday, March 20, 2020, in Washington.

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WASHINGTON — The record U.S. economic stimulus package provides much-needed aid to small companies and Americans hit hard by the coronavirus, but it falls short of a fiscal elixir that heals the economy and offsets labor-market carnage.

After midnight Wednesday, the White House and Democratic lawmakers said they reached agreement on a $2 trillion bill aimed at limiting the economic hit of the outbreak. The Republican-led Senate may vote later in the day; it must clear the House and be signed by President Donald Trump.

Even with a price tag representing 10 percent of the nation’s output, not all Americans who may need direct payments will receive them and timing remains an issue. The bill — a third phase of coronavirus aid — was tweaked after House Democrats proposed a $2.5 trillion version.

Further stimulus will be needed in the coming days and weeks to further bolster the economy and leaders should begin working on that now, said Jason Furman, a member of Barack Obama’s economic team during the 2008 recession.

“I’ve never seen Congress move so fast to do something so large. Unfortunately, the problem may be larger and faster,” Furman said.

Here are economists’ views of the primary pieces of the latest bill.

Direct checks

For individuals, the package provides direct payments to lower- and middle-income Americans of $1,200 for each adult, as well as $500 for each child. House Democrats had been pushing for bigger payments.

The one-time payment simply isn’t enough depending on the duration of a lockdown and slower business, according to Andrew Husby of Bloomberg Economics. Other analysts, including Claudia Sahm, a former Federal Reserve economist, say it’ll be necessary to send multiple rebates over the course of many months of the downturn.

The payment amount doesn’t apply to those making more than $75,000, just above the nation’s median household income. That could prove limiting as many technical, manufacturing and technology positions are cut and those workers find a smaller safety net.

Speed remains a key question, as millions of workers have lost jobs in recent weeks and require those checks to pay rent, make mortgage payments at the beginning of April and satisfy ongoing credit card, auto and student debt payments, as well as afford other daily costs.

Trump indicated checks would go out by April 6, said Senate Minority Leader Chuck Schumer, D-New York, but during the prior recession, it took about two months for them to go out.

Unemployment funds

Under the consensus language, unemployment insurance would be extended by four months, benefits would be bolstered by $600 weekly and eligibility would be expanded to cover more workers.

That would help address a surge in joblessness unprecedented since the Great Depression. Unemployment-insurance claims are projected to skyrocket to 1.5 million for the week ended March 21, after not long ago touching a half-century low, according to a survey of economists by Bloomberg. Forecasts are as high as 4 million.

But this income usually accounts for 50 percent or less of an employee’s regular pay, so it doesn’t offset the income loss, Husby said. Also, many state websites administering claims have been slow amid overwhelming traffic, so some Americans may be waiting longer than normal to receive funds.

Business

Corporations and state and local governments get about $500 billion in assistance. Large firms — those with 500 or more employees — account for roughly half the private U.S. workforce, according to the ADP Research Institute. States disperse much of the health care spending. This component was one of the more contentious in discussions between Democrats and Republicans.

About a quarter of private U.S. jobs are in firms with fewer than 50 employees with a similar share at midsize firms, according to ADP. They’ve been among the hardest hit so far with retail and restaurant closures, so any support for them is key to holding up the broader economy.

Executives at Jefferies Financial Group Inc. suggested that the government should guarantee loans for companies so they can retain and pay workers throughout business disruptions. The bill includes more than $350 billion in cash-flow assistance to small businesses that can be forgiven if the employer maintains payroll for eight weeks. It was championed by Sen. Susan Collins, R-Maine, and negotiated with Democrats.

“It will keep the workers connected to the employer and ensure that they not only are getting their wages but their health insurance if that comes through their employer and any other benefits that come through the employer,” Collins told WSKW on Wednesday.

Amherst Pierpont Securities economist Stephen Stanley, who broadly saw small firms as well-covered in the bill, said in a note to clients Tuesday that “there are a lot of difficulties in vetting applicants, but getting money out the door quickly will be vital to keeping small businesses alive and hence keeping workers employed.”

BDN writer Michael Shepherd contributed to this report.

 


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