Congress recently sweetened the terms for businesses seeking loans to survive the economic impact of the coronavirus pandemic with the passage of the Paycheck Protection Program Flexibility Act of 2020, amending the original PPP loan program enacted as part of the CARES Act (summarized):
- The SBA had previously provided that PPP loans would have a 2-year maturity, even though the law provided for a maximum maturity of up to 10 years. Congress has now modified the law to provide that PPP loans will have a minimum maturity of 5 years.
- The Act has modified the covered period in the PPP loan program, extending the ending date from June 30, 2020 to December 31, 2020. The covered period in this section now runs from February 15, 2020 to December 31, 2020.
- Under the CARES Act this covered period was the 8-week period beginning with the date of origination of the PPP loan. The date of origination was later defined by the SBA as the date that funds were received by the borrower from the loan. This covered period is the period that a borrower had to spend the funds for appropriate uses to obtain loan forgiveness. Under the revised rule, that period is now tripled for most loans. The Act allows those who had the PPP loans before this revision was passed to retain the 8-week covered period.
- Why would a borrower want an 8-week period rather than a 24-week period? A key reason is that the FTE reduction rule measures average FTEs during the covered period. So while 24 weeks gives borrowers a longer period during which they can spend the money and qualify for forgiveness, it also increases the period over which the employer (i) must maintain the FTE level under CARES Act and (ii) must avoid a reduction of salary and wages under CARES Act. If the employer cannot meet the restoration of FTEs and salary/wages under CARES Act Section 1106(d)(5). The restoration deadline under that section is moved by the PPPFA from June 30, 2020 to December 31, 2020.
- The PPPFA adds a new relief provision that will prevent a reduction in forgiveness in additional circumstances. This change may serve to grant relief if the employer is unable to rehire employees or has to reduce staff to comply with requirements imposed on a business to control COVID-19, such as reducing the number of customers served to enable social distancing.
- In what could be either good news or bad news for a borrower, the PPPFA added a minimum payroll cost requirement for use of the funds in order to obtain forgiveness. Under the rules established by the SBA for the original PPP loan program, a minimum of 75% of the amount forgiven for a PPP loan had to be paid for payroll costs. Under the PPPFA, the law now provides, while the percentage is reduced to 60%, the test is no longer simply on the amount forgiven. Rather, now a borrower who fails to spend 60% of the amount borrowed on payroll costs will not receive any forgiveness.
- The PPPFA also expands the deferral period found in Section 7(a)(36)(M) of the Small Business Act, however, if a borrower waits too long to apply for forgiveness, the law will require payments to begin.
- The PPPFA removed the provision found at CARES Act that required borrowers who received forgiveness of debt to cease the deferral of payment of employer old age, survivors and disability insurance (OASDI). Now all employers may defer the payment of such taxes for wages paid after March 27, 2020 and before January 1, 2021, paying half of the deferred balance on December 31, 2021 and the other half on December 31, 2022.
After three tranches of coronavirus pandemic stimulus legislation, most businesses – admittedly not all, over 40% of all small businesses are on the verge of permanent closure – have access to the flexibility they need to receive a loan to remain open and to maintain employee payrolls, and if they can manage to do so, to receive loan forgiveness (if not, they are in trouble).
Individual employees, who were needlessly forced into seeking unemployment insurance benefits under the CARES Act enacted by Congress, as opposed to the more intelligently designed unemployment relief programs enacted by some European governments, are not so lucky.
The $600 per week enhanced unemployment benefit is set to expire on July 31, and Republicans in Congress are loath to extend what they consider an overly generous benefit to workers. “You damn takers!”
“Ignore those corporate oligarchs hiding behind the curtain!” According to an April report from the Institute for Policy Studies, America’s billionaires saw their wealth shoot up by $282 billion in just 23 days as the country was sheltering in lockdown. Overall, U.S. billionaire wealth grew by nearly 10% at the same time over 20 million people filed for unemployment, and by April 10 had passed $3.2 trillion—topping last year’s level.
The rich got richer, even in an economic disaster.
Jordan Weissmann explains at Slate, Here’s What Happens if Republicans Let Those $600 Unemployment Benefits Expire (excerpt):
Thanks to Friday’s unexpected [unemployment] report, Republicans are suddenly feeling less pressure to renew the $600-per-week federal unemployment benefits that have been keeping many families afloat through the coronavirus crisis.
[Republicans] appear to be crossing their fingers and hoping that if more businesses are permitted to reopen, our economic problems solve themselves and they will be able to stop spending money on the plebes.
But while one might not have guessed it based on Trump’s surreal Rose Garden touchdown dance Friday, the country’s unemployment problem has not actually disappeared. It’s barely budged. As of May 16, the last date with complete data, more than 29 million Americans were still claiming jobless benefits. It is not at all clear how soon those people will be able to return to work. Allowing their federal aid to outright lapse would be both cruel and a near-term blow to the economy.
The cornavirus relief bill Congress passed in March currently provides Americans who’ve lost their jobs a flat, $600 payment on top of the normal state unemployment 
benefits they’d be eligible for. As a result, many Americans likely receive more in government aid at the moment than they were paid at their old jobs. This has irked Republicans—especially Sen. Lindsey “Over Our Dead Bodies” Graham—who claim that it disincentives people from going back to work. While this may be true to some extent, Friday’s employment report has shown that plenty of people are in fact returning to their jobs, despite the ongoing plague and generous aid on offer, as Tim Noah points out at the New Republic.
Note: The Congressional Budget Office (CBO) has a more nuanced view. CBO: Extending higher jobless benefits would increase unemployment. While it may be true that:
Five out of six workers would receive more in expanded unemployment benefits than they would earn on the job if Congress extends those benefits through January … [and] that would translate into lower employment both in the second half of this year and next year than if lawmakers let the added $600 weekly benefit expire July 31 as scheduled.
At the same time:
The analysis said that in the second half of this year, economic output would probably be greater than it would be without an extension of extra unemployment benefits enacted in March. That’s because jobless workers would have more money to spend on needed goods and services.
But in 2021, the CBO said, economic output would be lower than it otherwise would be, since there would be fewer people working.
Back to Weissmann:
And what would happen if Congress simply let the federal payments expire? The average recipient would potentially see a 63 percent drop in their income. That’s according to an analysis by Evercore ISI managing director Ernie Tedeschi (he tweeted out a state-by-state estimates earlier in the week, but added a national figure at my request. Thanks, Ernie). Cutting the federal benefit in half to $300 would shrink the incomes of the unemployed by about one-third. Given the number of people who will likely still be out of a job by summer, that would almost certainly deal a significant blow to consumer spending power and slow down the recovery.
Another way to look at this is what’s known as the replacement rate: the size of an unemployment payment as a percentage of how much people earned at their previous job. Currently, Tedeschi estimates that the average replacement rate is about 101 percent (that’s why Democrats pushed for the $600 in the first place; they wanted to fully match people’s old earnings to make them whole). If you zero out the federal benefit, the rate drops to 37 percent. At the halfway point, you get 69 percent replacement. (You might notice this graph is basically a right-side up version of the one above.)
If I had to guess, my sense is that Republicans and Democrats will likely still come to a deal that lowers the federal unemployment benefit, but doesn’t eliminate it entirely, which is where things seemed to be headed before Friday’s job figures. A $350 benefit that replaced 75 percent of income, on average, would actually be in line with what some progressives were hoping for before the CARES Act was negotiated (yes, Democrats actually exceed expectations on that front). An even more humane approach, which would avoid cutting anybody’s income at a time of national strife, might be to keep the benefits as-is but let workers collect a “return to work” to work bonus if they decide to get back to the job (Republicans have proposed the bonus as an alternative to the current UI setup, which would be the opposite of humane).
It would be a one-time “death benefit” to return to work before it is safe to do so.
But simply letting the benefits disappear would be vicious, pointless, and set back the recovery Republicans seem to think is going so well.
Raise your hand if you believe the coronavirus pandemic will be fully contained by the end of this year, allowing businesses to reopen and workers to return to work safely? Anyone? Hello, is anyone out there? Yeah, that’s what I thought.
Congress is going to have to extend the enhanced unemployment benefit at some level, just as it extended relief for businesses under the Paycheck Protection Program Flexibility Act of 2020. With the coronavirus still spreading unchecked in many parts of the country, including here in Arizona, and a “second wave” anticipated this fall/winter, not extending the benefit would reduce unemployment benefits during the additional 16 weeks of unemployment under the CARES Act (to the end of the year) to whatever states are willing to pay. In Arizona it is a maximum of $240 per week; most will receive less.
For those who have returned to work, Fewer hours, less pay and more anxiety greet returning workers:
As millions of Americans return to work amid the worst economic crisis in a generation, they’re unexpectedly discovering their old positions are far more burdensome than they used to be. Their hours have been cut, their pay has been slashed and their responsibilities are now magnitudes greater. And their job security — despite President Trump’s recent proclamations about an economy on the mend — remains anything but guaranteed.
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For those who did maintain their old jobs, newly unfavorable conditions have left many workers trading one set of anxieties for another, now fearful for their financial and physical safety.
“People are coming back to work in jobs that are very different than they were three months ago,” said Robert Scott, a senior economist at the left-leaning Economic Policy Institute. “They’re very risky and there’s a lot of uncertainty about what’s to come. There’s a rocky road ahead, and a lot of work on the economy left to be done.”
[T]here was a higher-than-expected spike in part-time employment, one of a few indicators that “suggests there has not been a full return to work” for some people. Indeed also found that the highest rate of job growth has occurred within the lowest-wage industries, including some food and beverage stores, raising questions about the extent to which some Americans may be falling behind financially.
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For workers in some of those jobs, their headaches actually are just beginning.
Restaurant servers, bartenders and other workers who rely on a steady stream of customers — and often the tips they leave — have been disproportionately affected by a pandemic that is spread by social proximity. So too has the coronavirus decimated the retail sector, as online purchases cut into some major brands’ in-store revenue. Some major employers, including J.Crew and J.C. Penney, have fallen into bankruptcy, and others have slashed their workforce, cut the hours of those they keep on staff or changed their job responsibilities entirely.
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[T]he effects of the economic downturn are far more widespread, leaving virtually no industry untouched in the broader U.S. economy. A report prepared by the Federal Reserve System, called the Beige Book, found in its May release that sharp reductions to hours and wages have troubled employees nationwide.
Hospitals have placed doctors and support staff on irregular shifts, seeking to save money at a moment of sky-high expenses, threatening some in the medical industry with gaps in their pay. Gig-economy companies including Uber that once offered the promise of a little extra monthly income no longer seem particularly alluring to some Americans, threatening to expose drivers and other workers to strangers who may be sick. Some Uber drivers still on the ride-hailing app say the demand has declined dramatically.
Often, the companies that have continued to operate have demanded more from their workers — without sizable increases in their take-home wages.
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Shuttered businesses, slowdowns in spending and sharp declines in tourism have also cleaved massive holes into local governments’ budgets. Last month alone, governments cut more than half a million jobs from their payrolls, according to the new federal data released Friday. The figure does not include those who have seen their hours and wages dramatically cut, putting their financial futures at risk.
Congress has not yet done enough of the right things to address the economic fallout of the coronavirus pandemic, and Senate Republicans and the president have decided they just don’t care, just as long as their corporate oligarch campaign contributors are satisfied.
