Economic Impacts of COVID-19
The beginning evidence of the acute economic pain caused by Covid-19 emerged yesterday as the Big 3 automakers announced they were ceasing production, the hotel industry (a good indicator of the nation’s service industry) projected that 45% of all hotel workers would lose their jobs in the coming weeks and applications for unemployment spiked in many states. The stock market has dropped more than a third in the last month. It took the market a year to drop by that much during the 2008 Financial Crisis. Axios has an excellent story this morning on this next phase of the crisis where the public health, economic and political response intensifies.
The 2nd Coronavirus Relief Package
Last night, the President signed into law HR 6201, the Families First Coronavirus Response Act with the technical corrections incorporated by H Res 940, the technical corrections measure passed by the House on Monday. The Senate passed the measure by a vote of 90-8. The new benefit provisions go into effect no later than 15 days from yesterday and the Department of Labor will be issuing guidance on their implementation no later than when the new law takes effect.
There remains a lot of uncertainty about how the individual provisions of that law impact individuals and businesses. Some key documents:
- Bill text. The Final enacted text of the law;
- Technical Corrections Summary. A summary of Changes Made by House "Technical Corrections" Amendment to HR 6201 Relating to Paid Leave Benefits;
- Final Paid Leave Benefits. A summary of the Paid Leave Benefits in HR 6201 that incorporates those changes made by the technical corrections measure;
- Chart on Emergency and Sick Leave. A summary chart of the Paid Public Health Emergency and Sick Leave Requirements as corrected; and,
- Tax Credit explained. The Joint Committee on Taxation's explanation of the tax provisions contained in HR 6201, the Families First Coronavirus Response Act.
The 3rd Coronavirus Relief Package
Given the unprecedented economic and public health threat posed, the Administration and Congress face a very short deadline to enact a third package of relief measures. Secretary Mnuchin told Senate Republicans earlier this week that absent a trillion-dollar intervention by the Federal Government, unemployment could hit 20% - a figure that rivals or exceed the Great Depression.
The Administration. The Administration has proposed a trillion-dollar package (see Treasury Stage 3 proposal memo) that proposes:
- Airline industry bailout: $50 billion
- Other affected industries bailout: $150 billion
- Small business interruption loans: $300 billion.
- Payouts to individual Americans: $500 billion.
- This would be done via two separate checks of equal amounts, one on April 6 and one on May 18.
- The specific dollar amounts would be means-tested, meaning it would be based in income level and family size.
The Senate. Senate Majority Leader McConnell has begun work on a package that he hopes to unveil as early as the end of this week. His approach is apparently to gather recommendations from several task forces in his GOP Senate Conference, then negotiate a final package with Senate Democratic Leader Schumer. It’s likely the McConnell proposal will incorporate most or much of what is in the Administration package. The signals so far suggest McConnell does not want to negotiate directly with House Speaker Pelosi. Schumer unveiled his ideas for that package earlier in the week that focus less on industry-specific relief and instead push for more changes that directly affect benefits for individuals (see his powerpoint here). Schumer and McConnell are scheduled to meet this morning. One key sticking point that is sure to surface is Democrats’ insistence that any loans or financial relief to business must protect the jobs of existing employees and the wages now paid to them.
The House. Speaker Pelosi directed her Committee Chairs to prepare recommendations for this package which they will likely release sometime early next week though events on the ground (including financial market volatility) could alter that timeline. No doubt she will be signaling the House priorities to Senate Democrats in their negotiations with Senator McConnell.