With the virus still surging with associated economic headwinds, lawmakers have agreed to a roughly $900 billion follow-on COVID-19 relief package designed to further bridge the economy through this extraordinary period.
This plan follows the $2.2 trillion CARES Act, which passed in March and will be helpful to further shallow the economic damage that has been inflicted by the outbreak. While some details could change before final approval, major provisions included in
the package are discussed below.
Cash to Individuals
There is about $340 billion in additional relief that will go directly to consumers. This package includes $600 per taxpayer (or $1,200 for joint filers) in direct
payments with a phase-out beginning at $75,000 (or $150,000 for joint filers). This is half the amount that was passed through the CARES Act. The bill also includes a $600 payment for each dependent child.
It provides a supplemental unemployment insurance (UI) benefit of $300 per week for all workers receiving UI through March 14, 2021. This is less than the $600 per week included in the CARES Act. It extends a CARES Act program that allows UI benefits for those not traditionally eligible for UI benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus. It extends UI payments for all beneficiaries to 50 weeks (most states provide 26 weeks of UI), longer than the extension to 39 weeks provided through the CARES Act.
The bill also includes an additional $100 per week benefit for workers with multiple jobs suffering income losses. It includes additional support in the form of an extension of the eviction moratorium (through January 31), $25 billion in rental assistance, and $13 billion to temporarily increase Supplemental Nutrition Assistance Program (SNAP) benefits by 15%. There is additional funding for food banks and senior nutrition programs, and to ensure college students have access to SNAP, and funds for child care and paid leave.
All of this should provide further needed support to consumers that have had their livelihood disrupted.
Further Support for Small Businesses
The Paycheck Protection Program (PPP), which has provided critical support for many small businesses since the start of the crisis, will get $284 billion in new funding to allow eligible
small businesses to receive a first or second time forgivable loan. Eligibility will be limited to small businesses with 300 or fewer employees that have sustained a 30 percent revenue loss in any quarter of 2020. The goal of the revenue decline test
and reduced employment threshold is to preserve the assistance for those who need it most.
Forgivable expenses are expanded to include investments in facility modifications and personal protective equipment to operate safely. Business expenses paid for with the proceeds of PPP loans are tax deductible while the loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. The bill also provides $15 billion in relief for entertainment venues such as museums, movie theaters, and live venues.
Support for Airlines and Other Transportation
The bill includes $15 billion in payroll assistance for the airlines that should last about four months. As in the CARES Act, funds will
go directly to frontline aviation workers’ wages, salaries, and benefits. The bill also provides $1 billion in payroll support for airline contractors. It also includes $29 billion for various modes of transportation such as $14 billion for
transit agencies, $10 billion for highways, $2 billion for buses, $2 billion for airports, and $1 billion for Amtrak.
Support for Education
The bill contains $82 billion in relief for schools with $23 billion going
to higher education institutions and $54 billion going to K-12 schools.
Support for Public Health
There’s $48 billion set aside to make vaccination free, assist with distribution, and support testing. Specifically,
$20 billion is set aside for the purchase of vaccines that will make it free for anyone who needs it, $8 billion for vaccine distribution, and $20 billion to assist states with testing.
This follow-on stimulus package is in addition to all of the aggressive moves by the Federal Reserve since the start of the crisis. These Fed measures significantly eased financial stresses that developed as a result of the crisis and the Fed remains strongly committed to its easy monetary policy for the foreseeable future.
While the virus will remain a headwind as we enter 2021, we remain optimistic on our outlook for next year. The consumer was healthy heading into this crisis and the March CARES Act and now this follow-on package are providing significant bridges for those most impacted by the pandemic. Importantly, we have two vaccines approved with more most likely on the way soon - the prospects of a post-pandemic world have brightened considerably.
There have been significant improvements in many sectors of the economy since the hard lockdown of the second quarter ended and we expect further improvements in 2021 as the economy ultimately fully reopens – supported by this follow-on fiscal relief, an accommodative Federal Reserve, vaccines, and pent-up consumer and business demand that should be released as the pandemic fades.
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