The bulk of the program was $350 billion to provide eight weeks of cash-flow assistance to small businesses through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers to remain employed and aid in the recovery of small businesses and the economy after the crisis. $10 billion will be for the Small Business Administration (SBA) emergency grants of up to $10,000 to provide immediate relief for small business operating costs; $17 billion will be for SBA to cover 6 months of payments for small businesses with existing SBA loans.<\/li><\/ul>\n\n\n\n
- $500 billion lending fund for distressed businesses
The provision increases the U.S. Treasury Department\u2019s Exchange Stabilization Fund with $500 billion to aid large distressed firms, which the Federal Reserve can then leverage to inject approximately $4 trillion back into the marketplace in secured loans. An independent Inspector General and Congressional Oversight Panel will be established to oversee Treasury loans and investments \u2013 the loans must eventually be paid back following the coronavirus pandemic. <\/li><\/ul>\n\n\n\n- Individuals (approx. $560 billion)
Each qualifying adult will receive up to $1,200 in the form of a one-time rebate check. The full amount is available for individuals with incomes up to $75,000 per year ($150,000 for married couples) before phasing out and ending altogether for those earning more than $99,000 ($198,000 for joint filers with no children). Families will receive an additional $500 per child. Included in the $560 billion is $260 billion for expanded unemployment insurance. An additional $600 per week payment to each recipient of unemployment insurance for up to four months. Funding will be provided to pay the cost of the first week of unemployment benefits through December 31, 2020 for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits. Finally, the expansion of unemployment insurance will provide an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of state unemployment benefits are no longer available.<\/li><\/ul>\n\n\n\n- Public Health $153.5 billion \u2013 provisions include:
- Hospitals<\/em>: $100 billion for hospitals responding to the coronavirus.<\/li><\/ul>
- Community health centers<\/em>: $1.32 billion in funding for community centers that provide health care services<\/li><\/ul>
- Drug access<\/em>: $11 billion for diagnostics, treatments and vaccines. <\/li><\/ul>
- Centers for Disease Control and Prevention:<\/em> $4.3 billion for CDC programs and response efforts <\/li><\/ul>
- Veterans’ health care:<\/em> $20 billion <\/li><\/ul>
- Medicine and supplies<\/em>: $16 billion for the Strategic National Stockpile to increase availability of equipment, including ventilators and masks. <\/li><\/ul><\/li><\/ul>\n\n\n\n
- State and Local Governments $339.8 billion
Included is $274 billion to help states fight covid-19, with $150 billion in direct aid for those state and local governments that are running out of cash. Also included is $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.<\/li><\/ul>\n\n\n\n- Safety net $26 billion
This includes $8.8 billion school meals, $450 million for food banks, and $15.5 billion for the Supplemental Food Nutrition Program (SNAP), in other words, food stamps. <\/li><\/ul>\n\n\n\n- Student Loans
- The Department of Education will automatically suspend payments on Direct student loans without penalty through Sept. 30, 2020.<\/li><\/ul>
- 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.<\/li><\/ul><\/li><\/ul>\n\n\n\n
The CARES Act was\nPhase III of a fiscal response to the coronavirus. In dollar amount, Phase III\ndwarfed the previous measures. Previous Phase I legislation included $8.3\nbillion in aid to help contain and treat the virus, including diagnostic\ntesting and human vaccine clinical trials. Phase II (the Families First\nCoronavirus Response Act) legislation guaranteed free coronavirus testing,\nprovided paid emergency leave, enhanced unemployment insurance, strengthened\nfood security initiatives, and increased Federal Medicaid funding to states. The bill required governments and\nprivate businesses with fewer than 500 employees to provide up to two weeks of\npaid sick leave for those who miss work due to the coronavirus or for those who\nhave to take care of family members affected by the pandemic. If needed,\nworkers could take another 10 weeks off at two-thirds of their pay. A\nrefundable tax credit is available to businesses and self-employed workers to\ncover the expense. The U.S. Labor Department could exempt companies with fewer\nthan 50 workers if they risk going out of business.<\/p>\n\n\n\n
The fiscal\npolicy stimulus reflects the challenges of a service sector economy when\nconsumer spending is declining. According to the U.S. Bureau of Labor\nStatistics, nonfarm payrolls in the private sector consisted of 128 million\njobs as of February 2020. Out of those jobs, approximately 107.2 million (about\n83 percent) were in the service sector, approximately 20.8 million (about 17\npercent) were in the goods-producing sector. Many service sector jobs are in transportation, retail trade, restaurants, real estate,\nmovie theaters <\/a>\u2013 industries that depend on personal visits and service.\nMany of those jobs are within small businesses. <\/p>\n\n\n\n
The Phase III fiscal\npolicy also comes on the heels of the use of monetary policy by the Federal\nReserve to bolster the sinking economy. Programs of the Federal Reserve\nincluded:<\/p>\n\n\n\n
- Purchase\nat least $500 billion of Treasury securities<\/li>
- Purchase\nat least $200 billion of mortgage-backed securities (including commercial)<\/li>
- Creation\nof two credit facilities that support large employers through making loans and\nbond financing more accessible<\/li>
- Additional\ncredit facilities were created to help facilitate the flow of credit to\nconsumers, small business, and municipalities <\/li><\/ul>\n\n\n\n
Collectively, the programs of the Federal Reserve were meant to increase access to credit and borrowing by consumers, business, and municipalities. The programs were in tandem with the Federal Reserve cutting the fed funds rate to 0.00\u20130.25% earlier in March.<\/p>\n\n\n\n
Unfortunately, the fiscal\nand monetary policy actions were reactionary. Would they be enough to bail-out\nthe economy? Probably not, but no one really knew. The ultimate impact of the\ncoronavirus on the economy would be a function of how much it would spread, and\nhow long it would last. <\/p>\n\n\n\n
For further information on the CARES Act:<\/p>\n\n\n\n
- From the Tax Foundation: Tax Foundation – CARES Act<\/a><\/li>
- From NPR: NPR – CARES Act<\/a><\/li><\/ol>\n\n\n\n
CBEI Blog Series: The Coronavirus \u2013 Why the U.S. Economy Will Never be the Same<\/strong><\/em>
Part 1: What Happened \u2013 A Review of the Economic Impacts<\/a>
Part 2: What Happened \u2013 A Review of the Stock Market<\/a>
Part 3: What Will Change \u2013 Supply Chains<\/a>
Part 4: What Will Change \u2013 Healthcare<\/a>
Part 5: What Will Change \u2013 Deficits and Government Spending<\/a>
Part 6: What Should Change \u2013 An Appreciation for Service Sector Workers<\/a>
Part 7: What Should Change \u2013 Securities Regulation of Congress<\/a><\/p>\n\n\n\n - From NPR: NPR – CARES Act<\/a><\/li><\/ol>\n\n\n\n
- From the Tax Foundation: Tax Foundation – CARES Act<\/a><\/li>
- 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.<\/li><\/ul><\/li><\/ul>\n\n\n\n
- The Department of Education will automatically suspend payments on Direct student loans without penalty through Sept. 30, 2020.<\/li><\/ul>
- Student Loans
- Safety net $26 billion
- State and Local Governments $339.8 billion
- Medicine and supplies<\/em>: $16 billion for the Strategic National Stockpile to increase availability of equipment, including ventilators and masks. <\/li><\/ul><\/li><\/ul>\n\n\n\n
- Veterans’ health care:<\/em> $20 billion <\/li><\/ul>
- Centers for Disease Control and Prevention:<\/em> $4.3 billion for CDC programs and response efforts <\/li><\/ul>
- Drug access<\/em>: $11 billion for diagnostics, treatments and vaccines. <\/li><\/ul>
- Community health centers<\/em>: $1.32 billion in funding for community centers that provide health care services<\/li><\/ul>
- Hospitals<\/em>: $100 billion for hospitals responding to the coronavirus.<\/li><\/ul>
- Public Health $153.5 billion \u2013 provisions include:
- Individuals (approx. $560 billion)
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