Congress may have managed to pull off a Christmas miracle: another COVID-19 relief package.
After months… and months… and months of political wrangling, Congress agreed to a $900 billion mixed bag of benefits, bailouts, and relief for American families, small businesses, and the public sector.
Here’s what’s in it:
- Households and Workers
The deal includes another round of stimulus cash to many middle and lower-income households. Individuals earning less than $75,000 a year (couples earning less than $150,000 a year) will receive $600 per adult and $600 per dependent. This is half of the $1,200 per adult but $100 more than the $500 per dependent that they received from the previous stimulus bill (the CARES Act). The total for these payments: $166 billion.
The plan offers a $300 weekly federal unemployment benefit for three months (half of what the CARES Act provided) and makes it available to workers beyond those who ordinarily don’t qualify such as gig workers, independent contracts, and self-employed workers. It also extends unemployment benefits to 50 weeks (double the typical 26 weeks most states offer). These are provisions that were set to expire after Christmas. The total for these enhanced benefits: $120 billion.
Tenants are getting $25 billion for rental assistance and the federal eviction prohibition will be extended through January 2021.
Households on food stamps will see a 15-percent increase in SNAP benefits for six months.
- Health and COVID Response
The agreement provides nearly $15 billion for healthcare providers, mental health and federal health agencies to study COVID; $22 billion to states for testing, training, and mitigation; and $32 billion for the development, distribution and stockpiling of vaccines and therapeutics.
The plan provides tens of billions in bailouts for airlines, entertainment venues, and farms.
Small businesses can also access a new round of forgivable loans. The agreement provides $325 billion for the Paycheck Protection Program and $20 billion for disaster loans.
- Government, Schools, and Childcare
The agreement gives $82 billion to K-12 schools (mostly public) and higher education and $10 billion to childcare providers. The U.S. Postal Service would get $10 billion. Meanwhile, Amtrak and transit systems will receive a $15-billion bailout.
The biggest point of contention is absent
Missing from the negotiated agreement is a blue-state bailout or direct aid to states and local governments that would have benefitted states like New York and California, whose budgets are busted, at the expense of states that managed their finances better.
While states and local governments won’t get the $160 billion in direct aid that they demanded, they will get plenty of help from other sources such as new funding to schools, transit, and vaccine-related spending.
This plan is a mixed Christmas bag
This agreement fends off the big-ticket spending Democrats passed with its $3 trillion relief bill, but still includes bailouts for specific industries like the airlines and transit system.
Positively, it provides critical aid to the nation’s small businesses, many of which are teetering on the edge of collapse due to government-imposed lockdowns and mandated restrictions. Restarting this program is an important step, but the best long-term business aid is for consumers to engage in activities again like dining out, hosting conferences and parties, and going back to school.
Washington has also agreed to pick up the tab for vaccine development and distribution which ensures that every American can get vaccinated for free. In such an unprecedented health crisis, it’s an important step to protect citizens and relieving them of the worry about how to pay for it. It also allows them to resume normal activities as we seek to reach herd immunity.
Things get dicey with the new round of cash payments. It is not targeted to families that actually need the money, but to everyone below an arbitrary income threshold. The pandemic did not disrupt every household’s income and many do not need the extra cash. They are likely to just save the cash rather than spend it.
In addition, the added unemployment benefit may have the unintended consequence of enticing workers forgo the job search because they earn more through unemployment benefits than in working. Not every unemployed worker will do so, but it is still a powerful disincentive that hampers businesses from resuming normal operations. Despite the high unemployment rate there are millions of unfilled jobs. They happen to be in industries that unemployed workers may not be interested in such as warehousing and construction.
As we have maintained at IWF, stimulus aid should be targeted, temporary, and flexible. Some of the provisions of this agreement are targeted and flexible like the PPP program, which has room for tweaks to head off fraud. Other provisions are big giveaways that will not help the economy much in the short-term or workers in the long run.
Perhaps the most concerning aspect of this package is that it will not be the end. Liberal lawmakers agreed to this skinny agreement as a downpayment for more spending next year under a new administration. Until we fully recover economically, lawmakers will advocate for Washington to prioritize pricey spending packages. Be prepared for more fiscal fights until this pandemic is over.