COVID-19 Relief Package Passes Congress
The Democratic House of Representatives helped shepherd into law the largest relief package in the history of the nation. It includes a $1,200 direct payment to individuals; subsidized loans, grants and tax breaks to small businesses faced with a near total economic shutdown; a massive investment in public health; and vital support for state and local governments right here in Arkansas. However, more action is needed to secure the future and well-being of working Arkansans who have been laid idle by this public health crisis.
Arkansans need a promise of support & relief through the duration of this public health crisis. They have earned it.
The CARES Act is still a victory and some much needed relief from the federal government. The Arkansas Democrat-Gazette notes the size of the plan, “dwarfs prior Washington responses to crises like 9/11, the 2008 financial crisis, and natural disasters.” The bi-partisan plan, signed into law on Friday by Donald Trump, totals $2.2 trillion. Unfortunately, about $500 billion is being spent on a corporate slush fund carved out by the Republican Party. More needs to be done on the federal and state level to support hard hit small businesses, and accountability mechanisms need to be strengthened for federal dollars going to larger corporations.
Most importantly, Arkansas families need more support. A one-time direct payment isn’t enough to provide security and peace of mind when the crisis is expected to sprawl out through the Spring and Summer. They need more support like paid sick leave, protections for renters, a halt to utility disconnections, a more substantial direct payment, and a commitment for financial relief through the duration of the public health emergency.
Democratic Party of Arkansas Chairman Michael John Gray noted on Wednesday, “We can’t let people head into April and May not knowing how they’ll pay their rent, keep the lights on, and put food on the table.”
There are six main groups that would see the widest-reaching impacts: individuals, small businesses, big corporations, hospitals and public health, federal safety net, state and local governments, and education. Here’s what each group can expect if this bill becomes law.
The bill includes several elements aimed at helping keep people engaged in the economy. That means direct cash for many families plus expanded unemployment benefits, new rules for things like filing your taxes and making retirement contributions.
Cash payments: Estimated to total $300 billion. Most individuals earning less than $75,000 can expect a one-time cash payment of $1,200. Married couples would each receive a check and families would get $500 per child. That means a family of four earning less than $150,000 can expect $3,400.
The checks start to phase down after that and disappear completely for people making more than $99,000 and couples making more than $198,000.
The cash payments are based on either your 2018 or 2019 tax filings. People who receive Social Security benefits but don’t file tax return are still eligible, too. They don’t need to file taxes; their checks will be based on information provided by the Social Security Administration.
Expanded unemployment payments: The $260 billion estimated cost is subject to change based on the number of people filing for unemployment.
The bill makes major changes to unemployment assistance, increasing the benefits and broadening who is eligible. States will still continue to pay unemployment to people who qualify. That amount varies state by state. So does the amount of time people are allowed to claim it.
This bill adds $600 per week from the federal government on top of whatever base amount a worker receives from the state. That boosted payment will last for four months. For example, if an out-of-work person is receiving the national average of about $340 per week, under the new federal program their take-home pay will be $940.
The legislation also adds 13 weeks of additional unemployment insurance. People nearing the maximum number of weeks allowed by their state would get an extension. New filers would also be allowed to collect the benefits for the longer period.
Gig workers and freelancers: Typically, self-employed people, freelancers and contractors can’t apply for unemployment. This bill creates a new, temporary Pandemic Unemployment Assistance program through the end of this year to help people who lose work as a direct result of the public health emergency.
Tax returns: Some people have not filed their 2019 tax returns, but that’s OK. The filing deadline has been extended to July 15. The IRS also says that people who have filed or plan to can still expect to receive a refund if they are owed one.
Student loans: Employers can provide up to $5,250 in tax-free student loan repayment benefits. That means an employer could contribute to loan payments and workers wouldn’t have to include that money as income.
Insurance coverage: The bill requires all private insurance plans to cover COVID-19 treatments and vaccine and makes all coronavirus tests free.
The main features for small businesses are emergency grants and a forgivable loan program for companies with 500 or fewer employees. There are also changes to rules for expenses and deductions meant to make it easier for companies to keep employees on the payroll and stay open in the near-term.
Emergency grants: The bill provides $10 billion for grants of up to $10,000 to provide emergency funds for small businesses to cover immediate operating costs.
Forgivable loans: There is $350 billion allocated for the Small Business Administration to provide loans of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.
Relief for existing loans: There is $17 billion to cover six months of payments for small businesses already using SBA loans.
The bill sets aside roughly $500 billion in loans and other money for big corporations. These companies will have to pay the government back and will be subject to public disclosures and other requirements.
Airlines: About $58 billion is allocated to help airlines stay open. One portion of that money is set aside to help cover employee wages, salaries and benefits divided up as up to $25 billion for passenger air carriers, up to $4 billion for cargo air carriers, and up to $3 billion for airline contractors.
Stock buyback ban: Any company receiving a loan under the program is barred from making stock buybacks for the term of the loan plus one year.
Reporting requirements: All loans, their terms and any investments or other assistance provided by the government must be publicly disclosed.
Oversight: The bill creates a special inspector general to oversee pandemic recovery. That person, along with a special committee, would provide oversight of all loans and other uses of taxpayer dollars.
No benefit for Trump: The president, vice president, members of the Cabinet and members of Congress are barred from benefiting from the money carved out for corporations. That also extends to the “the spouse, child, son-in-law or daughter-in-law.”
All businesses: The bill establishes a fully refundable tax credit for businesses of all size that are closed or distressed to help them keep workers on the payroll. The goal is to get those employees hired back or put on paid furlough to make sure they have jobs to return. The credit covers to 50 percent of payroll on the first $10,000 of compensation, including health benefits, for each employee.
For employers with more than 100 full-time employees, the credit is for wages paid to employees when they are not providing services because of the coronavirus. Eligible employers with 100 or fewer full-time employees could use the deduction even if they aren’t closed.
Lawmakers want to supplement community and private health systems to help meet the influx of new patients.
Hospitals: There is $100 billion for hospitals responding to the coronavirus.
Community health centers: The bill provides $1.32 billion in immediate additional funding for community centers that provide health care services for roughly 28 million people.
Drug access: There is $11 billion for diagnostics, treatments and vaccines. The bill also includes $80 million for the Food and Drug Administration to prioritize and expedite approval of new drugs.
Centers for Disease Control and Prevention: CDC programs and response efforts are getting $4.3 billion.
Veterans’ health care: There is $20 billion set aside for veterans.
Telehealth: The bill reauthorizes a critical telehealth program to extend the reach of virtual doctors appointments.
Medicine and supplies: The bill gives $16 billion to the Strategic National Stockpile to increase availability of equipment, including ventilators and masks. It also boosts hiring for vital health care jobs during the public health crisis and speeds the development of a vaccine, treatments and faster diagnostic.
This is the second wave of funding for major food security programs.
Child nutrition: There is $8.8 billion to give schools more flexibility to provide meals for students.
Food stamps: $15.5 billion is going to the Supplemental Nutrition Assistance Program, also known as SNAP. The money will help cover the expected cost of new applications to the program as a result of the coronavirus.
American Indian reservations, Puerto Rico, Northern Mariana Islands and American Samoa all get additional funds and access to federal nutrition programs.
Food banks: There is $450 million more for food banks and other community food distribution programs.
STATE AND LOCAL SUPPORT
The legislation designates $339.8 billion for programs that will go to state and local governments. It is divided up to put $274 billion toward specific COVID-19 response efforts, including $150 billion in direct aid for those state and local governments running out of cash due to high numbers of cases.
It also includes $5 billion for Community Development Block Grants, $13 billion for K-12 schools, $14 billion for higher education and $5.3 billion for programs for children and families, including immediate assistance to child care centers.
The bill includes relief for college students and graduates with outstanding federal student debt.
Temporary student loan relief: All loan and interest payments would be deferred through Sept. 30 without penalty to the borrower for all federally owned student loans.
Work study funds: It allows schools to turn unused work-study funds into supplemental grants and continue paying work study wages while schools are suspended.
Students who are forced to drop out: Students who drop out of school as a result of the coronavirus wouldn’t have that time away from school deducted from their lifetime limits on subsidized loan and Pell grant eligibility. Those students would also not be asked to pay back any grants or other aid they’ve already received.
There are several areas of the CARES Act that warrant improvement. Take a look at what the the Brookings Institute. has to say.
Low-income, cash earners, no SSN Issues
“It bears emphasis that many low-income or otherwise vulnerable households may struggle to obtain a payment, especially people who may not have filed a 2018 or 2019 return. These include workers who earn less than the standard deduction ($12,200 for single filers in 2019, $24,400 for joint filers, and slightly more respectively for seniors) and people who earn cash income but don’t report it. Dependents over the age of 17, such as cared-for parents and disabled children, are not eligible for the direct payment, but their caretakers also will not receive a $500 benefit for them. The CARES Act also excludes tax filers without Social Security numbers (SSNs), requiring both taxpayers and their spouses to have SSNs if their payments are determined from a joint return. The choice to give payments only to households with SSNs leaves out Dreamers and families of filers with only Individual Taxpayer Identification Numbers.
State & Local Governments will need more help
But subfederal governments will need even more assistance. State revenues fell 9 percent during the Great Recession, equivalent of $246 billion today. If budget constraints prompt state and local governments to lay off workers, it will deepen the economic contraction by lowering consumer spending and depriving people of services they need. States and localities will need to tap into rainy day funds (or budge on longstanding and ingrained balanced budget rules). At least some states will need additional assistance because of the severity of this situation
Long-term Recession Ahead
Controlling the virus will take time. So will the economic recovery. The bills enacted to date do not address the challenge of what may be a long-lasting recession.
The CARES Act offers no additional forbearance regarding mortgage and rental payments. Additional action may be needed.