As the economy craters, Senate passes $2.2 trillion economic stimulus bill


This is what putting the U.S. economy into a “lockdown” to fight the spread of the coronavirus pandemic looks like in a graph — this is historic and previously unimaginable.

Screen Shot 2020-03-26 at 9.43.26 AM

The AP reports, 3.3 million seek US jobless aid, nearly 5 times earlier high:

Nearly 3.3 million Americans applied for unemployment benefits last week — almost five times the previous record set in 1982 — amid a widespread economic shutdown caused by the coronavirus.

The surge in weekly applications was a stunning reflection of the damage the viral outbreak is inflicting on the economy. Filings for unemployment aid generally reflect the pace of layoffs.

Layoffs are sure to accelerate as the U.S. economy sinks into a recession. Revenue has collapsed at restaurants, hotels, movie theaters, gyms and airlines. Auto sales are plummeting, and car makers have closed factories. Most such employers face loan payments and other fixed costs, so they’re cutting jobs to save money.

As job losses mount, some economists say the nation’s unemployment rate could approach 13% by May. By comparison, the highest jobless rate during the Great Recession, which ended in 2009, was 10%.

“What seemed impossible just two weeks ago is now reality,” said Nancy Vanden Houten, an economist at Oxford Economics, a consulting firm. “The US economy will experience the largest economic contraction on record with the most severe surge in unemployment ever.”

As recently as February, the unemployment rate was at a 50-year low of 3.5%. And the economy was growing steadily if modestly. Yet by the April-June quarter of the year, some economists think the economy will shrink at its steepest annual pace ever — a contraction that could reach 30%.

In its report Thursday, the Labor Department said 3.283 million people applied for unemployment benefits last week, up from 282,000 during the previous week. Many people who have lost jobs in recent weeks, though, have been unable to file for unemployment aid because state websites and phone systems have been overwhelmed by a crush of applicants and have frozen up.

That logjam suggests that Thursday’s report actually understates the magnitude of job cuts last week.

* * *

Even for those able to file a claim, the benefits will take time to kick in. It typically takes two to three weeks before applicants receive any money. State agencies must first contact their former employers to verify their work and earnings history. Only then can the employee’s weekly unemployment benefits be calculated.

Worsening the problem, most state agencies that handle unemployment claims are operating at historically low funding levels and staffing that are intended to handle a trickle of claims.

A group of Republican Senators threatened to delay the economic stimulus bill over the unemployment compensation provisions, but settled for a meaningless show vote on an amendment that failed (yes, they really are this petty). The Senate then unanimously approved a historic $2 trillion stimulus deal amid growing coronavirus fears:

The Senate on Wednesday approved a historic, $2 trillion stimulus package to provide a jolt to an economy reeling from the coronavirus pandemic, capping days of intense negotiations that produced one of the most expensive and far-reaching measures Congress has ever considered.

Read the 883-page bill, titled the “CARES Act.” 

In a remarkable sign of overwhelming bipartisan support for the legislation, the vote was unanimous at 96-0.

The legislation represents the largest emergency aid package in US history and the most significant legislative action taken to address the rapidly intensifying coronavirus crisis, which is overwhelming hospitals and grinding much of the economy to a halt.

It will next go to the House for a vote. House Majority Leader Steny Hoyer announced Wednesday evening ahead of Senate passage that the House will convene at 9 a.m. on Friday to consider the relief package. The plan is to pass the bill by voice vote, a move that would allow the House to avoid forcing all members to return to Washington for a recorded roll call vote.

Note: It only takes one member to object to a voice vote to force a recorded vote. Cue Rep. Andy Biggs (R-AZ), the new chairman of the GOP House Freedom (sic) Caucus, who voted against the two earlier coronavirus stimulus bills. Will the radical Republicans of his caucus demand a recorded vote so they can give speeches railing against the stimulus bill on the House floor for use on their campaign websites?

So what exactly is in this mammoth bill? I will attempt to piece together elements from a number of reports analyzing the bill.

First, the Coronavirus stimulus package includes $150 billion for medical centers and workers who are overwhelmed and running out of supplies and beds to treat patients:

The emergency influx of $150 billion for hospitals and medical workers to help care for coronavirus patients is arguably the most critical part of the massive stimulus deal.

And the funding highlights a prime argument for maintaining widespread lockdowns in the United States, despite President Trump’s aim to open things up by Easter: If coronavirus infections continue growing at the same rate, the nation’s health-care system will quickly grow overwhelmed.

Hospitals already risk running out of beds and equipment to treat patients severely ill with covid-19, the disease caused by the virus. And the strain could hurt patients with other serious health conditions as resources are diverted away from them.

It includes extensive aid to medical centers, which Senate Minority Leader Chuck Schumer had described as a “Marshall Plan” for the U.S. health-care system. Hospitals and health systems will get $100 billion in emergency grants. Billions more will provide protective equipment for medical workers, ventilators for patients, testing supplies and new construction to house patients.

Politico: Hospitals also get a 20 percent bump in Medicare payments for treating patients with the virus.

“It’s unclear the influx of funds is enough – or will come soon enough – to prevent the strain on hospitals.”

Next, Dylan Matthews explains the coronavirus unemployment insurance plan:

The centerpiece of the new plan is a $600-per-week across-the-board increase in unemployment benefits for all workers claiming them. Given that as of January the average UI check was $385 per week, this is a massive increase.

In Arizona, the maximum unemployment benefit by law is $240.

The package promises these higher benefits for UI recipients for up to four months (Democrats successfully pressured Republicans to increase the number from three). The bill creates a new program, Pandemic Unemployment Assistance, for self-employed and contract workers [gig economy] who are typically ineligible for UI. It provides some incentives for work-sharing, a program whereby the government covers a portion of lost wages for workers whose hours have been reduced. The intention here is to incentivize companies to retain workers by just employing them for less time.

* * *

[T]here are other important provisions as well. It expands unemployment insurance to contractors, the self-employed, and nonprofit/government employees who are not typically eligible. It revives the “Emergency Unemployment Compensation” program but only for 13 additional weeks on top of states’ standard; that limits the total benefit period for states with 26 week programs to 39 weeks, compared with 99 weeks maximum during the Great Recession.

Many states have a one-week “waiting period,” meaning that the first week a person is unemployed, they get no benefits. This bill pushes states to waive that period by paying the full cost of that week of benefits. States with work-sharing programs (also called “short-term compensation”) have their full work-sharing costs covered by the federal government; those interested in setting up such a program get assistance in paying startup costs, and a 50 percent match in expenses.

* * *

The $600 bump expires as the end of July, and it’s far from clear that the crisis will be over then. [Arindrajit Dube, a professor of economics at UMass Amherst,] notes that beyond the $600, there’s little for people with too little earnings to normally qualify for unemployment insurance. He suggests that the bill should lower the minimum earnings requirement to allow poorer workers, or workers without much earnings history like people graduating from high school or college in 2020, to benefit.

The Post adds:

It also for the first time covers gig workers, such as Uber and Lyft drivers who lose their jobs, something Uber and Airbnb executives lobbied Congress for. And it temporarily expands unemployment insurance to people who would like to work but can’t because they are sick or are caring for a family member who is, including people who are self-employed or who don’t have an extensive work history. Senate Minority Leader Charles E. Schumer (D-N.Y.) has called this “unemployment insurance on steroids.”

Then there are the direct cash payments to taxpayers. The Washington Post explains:

Anyone who files a 2018 or 2019 return and earns $75,000 or less will receive a one-time $1,200 check, or $2,400 for couples filing jointly. In addition, those households will receive $500 per child. The check amount will go down until it phases out completely for people earning $90,000, or $198,000 for joint taxpayers. The Tax Foundation estimates this will cost $301 billion. (People who don’t file taxes because they receive Social Security also qualify.)

Note: People who do not earn enough income to have to file an income tax return will have to file a return in order to be eligible to receive a payment. Check with your local IRS office.

Politico describes some additional benefits:

The stimulus includes nearly $25 billion for food assistance, including nearly $16 billion for SNAP and nearly $9 billion for child nutrition.Senate Democrats were unable to secure a 15 percent increase to households’ SNAP benefits. Congressional leaders acknowledge that they may need to provide additional rounds of food assistance in future legislative relief packages.

Nearly $24 billion, including $14 billion for an obscure Depression-era financial institution that USDA has wide discretion to use to stabilize the farm economy. Another $9.5 billion would be set aside for emergency aid for the agriculture sector, including cattle ranchers and fresh fruit and vegetable growers.

The Post adds:

People who need extra cash as a result of the economic impact of the virus will be allowed to withdraw from their retirement accounts without getting hit by a 10 percent fee.

Students with federal loans can suspend payments until Sept. 30, interest-free. Students who have to drop out of school because of the virus also don’t have to pay loans for that time.

The Post also reports on the small business loans provision:

The Senate measure includes a $367 billion loan program for small businesses. Small businesses will be able to take out loans of up to $10 million, and employers could use the money to pay employees making up to $100,000 a year.

There is also the controversial $500 billion “slush fund” for loans to struggling industries. Politico reports:

Rules added to the bill will order an inspector general and accountability committee to oversee how the money is spent, rather than giving Treasury Secretary Steven Mnuchin broad power to cut the loan checks. Veterans of the 2008 bank bailout say, however, that the effectiveness of that oversight will only be as strong as the chosen watchdogs and how much power they really have.

The Washington Post adds:

Some $50 billion of that is specifically for airlines, which claim they are harder hit financially than in the weeks after the Sept. 11, 2001, terrorist attacks. And there’s controversial carve-out specifically for Boeing, which is still under fire for its deadly jet crashes, to get $17 billion in federal aid, The Washington Post reports.

Politico adds: Airlines would receive $29 billion in grants, and $29 billion in loans and loan guarantees, as well as a reprieve from paying three of their major excise taxes on the price of a ticket, the fuel tax and a cargo tax. That funding comes with strings, though — no stock buybacks, and limits on executive compensation, to start. Half the funds would go toward “the continuation of payment of employee wages, salaries, and benefits” while the other half would go to loans and loan guarantees for passenger airlines, repair stations and ticket agents — subject to conditions.

Companies that had to lay off employees and that hire them back when this is all over can qualify for loan forgiveness.

But companies in which President Trump, White House officials or members of Congress own a majority stake can’t receive any loans. That means Trump’s hotels — which he has acknowledged are hurting in this crisis and which The Post has reported are probably losing millions — can’t apply for financial assistance.

Companies can’t buy back stocks (to make their bottom lines look good to investors) for as long as they are receiving assistance, and a year afterward. But Treasury Secretary Steven Mnuchin can waive that rule for companies if he tells Congress about it first.

Republicans still managed to protect some of their corporate masters in this compromise deal. Fine Print of Stimulus Bill Contains Special Deals for Industries:

Restaurants and retailers will get a tweak to federal tax law they have been seeking for more than a year that could save them $15 billion.

Community banks are being granted their long-held wish of being freed to reduce the amount of capital they have to hold in reserve.

And for-profit colleges will be able to keep federal loan money from students who drop out because of the coronavirus.

But not all of Republicans’ corporate masters won, according to Politico:

The bill does not include the $3 billion Trump sought to fulfill his promise this month of filling the country’s oil stockpile “right up to the top” as a way to aid U.S. drillers amid a price decline. Democrats failed to clinch language extending tax breaks for renewable energy industries.

Insurers wanted an emergency fund to offset big losses stemming from the pandemic, as well as premium subsidies to help fund temporary “COBRA” coverage for laid-off workers. They got none of that, although the legislation aims to protect them from price-gouging on coronavirus tests.

The deal also does not appear to include any direct funding for the ailing cruise ship industry, which has been devastated by the pandemic.

Good. Nearly all ships operated by U.S.-headquartered cruise lines are registered in foreign countries and they are floating petri dishes for disease. Nevertheless, “Trump has called the cruise industry a “prime candidate” for federal assistance and a “great and important industry.”

Another pot of money is for state and local governments, which are likely to need additional funds in future bills. Politico reports:

The agreement would provide $150 billion for state and local governments, with $8 billion set aside for local governments, which are bleeding tax revenue as only essential businesses remain open and unemployment claims climb by the tens of thousands every day.

Congressional negotiators are already talking about a fourth legislative relief package that could include more money for state and local governments. Governors warned this week that their states are running out of funding to fulfill the skyrocketing number of unemployment claims, and could face multibillion-dollar budget shortfalls in the weeks and months to come. The funding the stimulus provides is only a “drop in the bucket” compared to the need, New York Gov. Andrew Cuomo said.

The U.S. Postal Service also gets a lifeline from insolvency according to Politico:

The final bill would provide the already-underwater U.S. Postal Service with a $10 billion Treasury loan to stave off total insolvency, but not a direct infusion of emergency cash. House Democrats had wanted a $25 billion appropriation to keep the federal carrier going amid the pandemic, in addition to language that would wipe out its $11 billion debt.

Democrats have warned that fallout from the virus could decimate the U.S. Postal Service by June, absent action from Congress. While the independent agency now has some extra borrowing authority, it could require more direct aid in future legislative packages to stay afloat.

Finally, Democrats managed to get some seed money for mail-in ballot voting to secure the election in November, but Republicans continue to oppose the idea according to The Post:

The bill also includes $400 million to help states protect voters from the virus. A growing number of election officials say the answer is mail-in ballots, but setting up the system will be time-consuming and expensive. Only five states are set up for statewide mail-only elections. This funding is far less than what was requested by states that want to set up mail voting, reports The Post’s Amy Gardner. According to Gardner, Democrats wanted this bill to mandate that states have mail-in ballots in a national emergency.

I am certain there are many more interesting provisions hidden in this mammoth bill that will come to light in the coming days. We’ll get around to it.

Nancy Pelosi forecasts House OK of Senate’s $2.2T coronavirus aid plan on Friday. This remains to be seen.