Congressional Grinches May Have Hearts
Nearly nine months after the $2.2 trillion CARES Act became law, the lame duck Congress is poised to pass an additional $900 billion relief bill before adjourning for its winter break. Like the ornery Grinch in the Christmas classic, lawmakers’ small hearts seem to have grown three sizes in just the nick of time.
The Congressional compromise bill will provide relief to individuals, small businesses and the economy as a whole. Though not as large as the previous legislation, which according to a CBO analysis likely boosted GDP by 4.7 percent in 2020 and 3.1 percent in 2021, this current round should help prevent some of the suffering and bridge the output gap between now and the time when widespread vaccination is available.
Highlights include:
A new round of non-taxable, direct payments of $600 for individuals with income (wages, SS, and/or pension) earning under $75,000 ($150K MFJ), PLUS $600 per child under the age of 17. The amount will phase out for those with incomes up to $99K ($198K MFJ). ($166B)
Aid to small businesses, including continuation of Paycheck Protection Program ($284B) and $15B for entertainment venues. ($325B)
Extension of supplemental federal unemployment benefits of $300 per week (on top of state unemployment programs) for an additional 11 weeks, at least through March 14. (The CARES Act had extended state benefits by 13 weeks, so total will now be 24 weeks, for anyone receiving either state benefits or pandemic unemployment assistance.)
Extension of Emergency Pandemic Unemployment Assistance program for self-employed, part-time, contract and gig workers for an additional 11 weeks, or 50 week total.
Aid for vaccine distribution, testing, and for health care providers ($69B), for schools ($82 billion), and for child care providers ($10B).
Extension of eviction moratorium until Jan 31, the next Congress and Administration will have to deal with anything beyond the first month of the year. The bill will also create a new $25 billion federal rental assistance program for those who have fallen behind on rent and may face eviction. State and local governments will distribute the funds.
Home loan forbearance for federally backed mortgages is available for up to 180 days (after that, homeowners can ask for an additional 180 days). For Fannie and Freddie loans, there is no end date, the agencies will determine when to end their plans. Homeowners with FHA loans must contact their servicer and request an initial COVID-19 forbearance on or before Dec. 31.
Student Loans: The Department of Ed had already extended forbearance until Jan 31st.
Assistance for Transportation: Airlines $15B in assistance to encourage a return of furloughed workers to payrolls; Amtrak ($1B); Public Transit systems ($14B); State highways ($10B).
What Did NOT Make It Into the Bill: aid for states and local governments and liability protection for businesses. Previous measures had provided more than $200 billion for state, tribal, and local municipalities. This time around, a bipartisan group of senators argued for an additional $160 billion in the current legislation, but Republicans balked. Without more money, state and local governments will have to absorb the double whammy of big spending amid the loss in sales and other taxes.
Analysis from the Brookings Institute found that state and local revenues, excluding fees to public hospitals and institution of higher education, “will decline $155 billion in 2020, $167 billion in 2021, and $145 billion in 2022,” or $467 billion over three years. Because most state and local governments have to balance their operating budgets each year, the lack of funds may create a second order effect of more job cuts, which could dampen the overall economic recovery.
To be clear, the new stimulus is an important development, but there could still be millions of Americans who find themselves in financial peril. According to the Census Bureau’s Household Pulse Survey covering November 25 through December 7, three data points underscore the dire need for federal assistance for millions of Americans:
People experiencing food scarcity (either sometimes or often not enough to eat in the past seven days): 27.4 million or 12.7 percent
People experiencing housing insecurity (behind on rent or mortgage payments, or who don’t think household can make next month’s rent or mortgage payment on time): 12.8 million or 9.1 percent.
People who have difficulty paying for usual household expenses: 85.4 million or 35.6 percent.
These measurements have deteriorated since state and federal resources have dried up, according to new data released last week by researchers at the University of Chicago and the University of Notre Dame. “Poverty rose by 2.4 percentage points from 9.3 percent in June to 11.7 percent in November, adding 7.8 million to the ranks of the poor.”
As the humanitarian emergency escalates, the economy is also in need of federal intervention. In the last Federal Reserve meeting of the year, Chair Jay Powell cautioned that the next few months are likely to be “very challenging.” Challenging, indeed. Economic data have shown that the pace of recovery is slowing down, amid a surge in coronavirus cases and the municipal response of new restrictions to control its spread.
Job creation has trended lower since the spring, weekly claims are rising, and retail sales for November, a month that included a stellar Black Friday-Cyber Monday e-commerce weekend, declined by 1.1 percent from the previous month. Economist Joel Naroff believes that there is a “distinct possibility that both fourth and first quarter will be disappointing,” as widespread vaccinations are unlikely to come quickly enough to prevent economic weakness, and human suffering, right now and continuing over the next few months.