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More Than $2 Trillion in Government COVID-19 Aid Spent, But Precious Little Impact (Yet)


President Donald Trump gestures while on a conference call to discuss implementation of the Paycheck Protection Program with bank leaders from across the country on April 7, 2020, as Treasury Secretary Steven Mnuchin looks on.

Federal lawmakers have approved three COVID-19 related relief measures over the last several weeks that together total well more than two trillion dollars in spending. But despite that massive price tag, only a very small amount of aid authorized by policymakers has actually been provided to American families, businesses, health care providers, or state and local governments thus far.

President Donald Trump signed the first piece of legislation, H.R. 6074, the Coronavirus Preparedness and Response Supplemental Appropriations Act, just over one month ago, on March 6. In comparison to the size of what is being contemplated for the fourth stimulus package (an overview of what may be in that not-yet-written legislation can be found here), this bill was minuscule, providing “just” $8.3 billion in emergency funding. It included money to develop a vaccine, procure medical supplies, and aid other countries in their relief efforts.

H.R. 6074 also included $1 billion for loan subsidies to “help small businesses, small agricultural cooperatives, small aquaculture producers, and non- profit organizations which have been impacted by financial losses as a result of the coronavirus outbreak.” On March 12, the U.S. Small Business Administration (SBA) explained that these Economic Injury Disaster Loans (EIDL) would provide companies with fewer than 500 employees loans of up to $2 million that could be used to pay fixed debts, payroll, accounts payable, and other bills that could not be paid because of the disaster’s impact. Interest rates on these products would range from 2.75 percent to 3.75 percent, the SBA said. The EIDL program also was to offer a $10,000 grant available within three days to businesses. (The grants would not have to be repaid.)

The EIDL loan program is up and running, but, according to Fast Company, small businesses reportedly may not be getting their grants. Yesterday, the magazine reported that “many business owners say they are still waiting for their advances days after applying, according to a deluge of angry social media posts and Reddit threads.” The magazine added that SBA “has not made it clear when businesses that applied will receive the much-needed funds.”

As you will soon read (and probably already have heard), this program is not the only one encountering problems.

Even while the SBA was working to get EIDL operational, lawmakers were working on a second bill, H.R. 6201, the Families First Coronavirus Response Act. The House approved this legislation on March 14. The Senate agreed to it on March 18 and President Trump signed it the same day. According to the American Action Forum, the Families First legislation will cost taxpayers about $184 billion.

This bill guaranteed that Americans would not have to pay for COVID-19 tests, expanded funding for food aid programs for families in poverty, added more money for Medicaid, and gave states $1 billion in support for their unemployment benefit programs. It also established a paid sick and family medical leave program for workers impacted by COVID-19.

That program, which went into effect on April 1, provides up to 12 weeks of leave to most employees who have to take off work because they are sick, or because they need to care for a family member who is ill. The requirement to offer paid leave applies to businesses with fewer than 500 workers. (Businesses with less than 50 employees can apply for an exemption.)

To compensate businesses for this leave policy, the law provides refundable tax credits that reimburse companies dollar-for-dollar. The Internal Revenue Service has issued guidance regarding these credits that is available on its website. The Journal of Accountancy explains, “eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes for all employees.”

Lawmakers immediately knew the Families First legislation would not be enough and, before the IRS and DOL had even written the regulations for the paid and family sick leave program, Congress had begun writing H.R. 748, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, or what became referred to as the third stimulus bill.

The $2 trillion CARES Act, which the Senate approved on March 25 and the president signed on March 27, represents the single largest financial aid package ever enacted by the U.S. government. It included aid to individual Americans; small, medium, and large-sized businesses and nonprofits; the airline industry; municipalities; and hospitals and health providers. The legislation also created an Employee Retention Credit, a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020 and before January 1, 2021. The IRS has said “employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make.” The IRS also noted “if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.”

American families, meanwhile, are still waiting to get their CARES Act payments. While electronic payments are likely to come within the next few weeks, financial institutions have raised concerns about fraud and theft to the U.S. Treasury Department about sending a massive number of paper checks to Americans for whom the government does not have the necessary account information to initiate electronic payments. And so some Americans may see even further delays in receiving their CARES Act payments.

The CARES Act also was supposed to provide at least $454 billion for the U.S. Department of the Treasury and the Federal Reserve to set up loan programs for businesses with 500 or more but less than 10,000 employees. Businesses had expected the federal government to release information about this program earlier this week, but nothing has become public yet. In a television interview this morning, Treasury Secretary Steve Mnuchin promised details will be coming sometime this week.

One of the centerpieces of the CARES Act, a grant/loan program for businesses with less than 500 employees, launched last Friday, but it already is running into serious problems.

The $350 billion Paycheck Protection Program (PPP) is supposed to offer businesses with fewer than 500 employees forgivable loans to pay employees during the COVID-19 crisis. Small businesses and sole proprietorships could apply starting April 3. This Friday, independent contractors will be eligible. PPP loans will be fully forgiven, according to the SBA, “if the funds are used for payroll costs, interest on mortgages, rent, and utilities.” (At least 75 percent of the forgiven amount must have been used for payroll.)

Multiple news outlets have reported that small businesses and nonprofits are running into significant PPP obstacles, including lenders’ refusal to offer aid to entities that were not already customers. The Treasury Department’s and the SBA’s rules governing the program also, at times, directly counter lawmakers’ intentions for the program. (The terms of the loans are shorter, for example, and the interest rate is significantly lower than what some members of Congress had intended for the program.) Lenders have said the SBA’s system for processing the loans has been crashing.

The single biggest problem, however, might simply be that there is too much demand for the PPP. As of Tuesday, the Small Business Administration said it had recorded 220,000 loans totaling roughly $66 billion.

That’s why, within the next couple of days, members of Congress are expected to approve what we will call “phase 3.5” of the federal government’s COVID-19 stimulus plan. This legislation could approve at least another $250 billion for the PPP. House and Senate lawmakers are back at home, but if leadership agrees both chambers could pass a phase “3.5 bill” by voice vote or unanimous consent—meaning there would not have to be a roll call vote of senators and the bill could pass with just a single senator in the chamber.

If your head is spinning, you can be forgiven. Keeping track of everything is nearly impossible, but, thankfully, Skopos Labs, a self-described team of artificial intelligence researchers, data scientists, software engineers, financial professionals, attorneys, and policy experts, is tracking every piece of federal legislation related to COVID-19 that has been written. You can watch their efforts here: https://coronavirus.skoposlabs.com

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