Congressional rescue aid: a dose of support, but is it enough?

The $ 900 billion financial aid package that emerged from Congress over the weekend will deliver vital aid to millions of homes and businesses that have struggled for months to survive. However, with the economy still in the grip of a pandemic that has increasingly tightened restrictions on business activity, more federal aid is likely to be needed soon.

And it’s unclear if or when the government could provide it.

For now, the package congressional leaders agreed to on Sunday will provide urgently needed benefits for the unemployed, loans to help small businesses stay open and up to $ 600 in cash payments for most people. It will also help families facing evictions to stay in their homes. However, the measure does not include budget help for states and localities that are forced to resort to layoffs and service cuts as their tax revenues dry up, a potential long-term drag on the economy.

Within months, economists say, the widespread distribution and use of vaccines could unleash a strong economic rebound as the virus is eliminated, businesses reopened, hiring is repeated and consumers are free spending again. Until then, the limited aid Congress has agreed to will likely not be enough to stave off hardship for many homes and small businesses, especially if lawmakers resist enacting more aid early next year. And a widening financial gap between wealthy and disadvantaged households is likely to get worse.

“A little help is better than none,” said Gregory Daco, chief US economist at Oxford Economics. “It is positive. But it will probably be insufficient to close the gap from today until late spring or early summer, when the health situation improves completely.”

President-elect Joe Biden has said he will seek another aid package shortly after his inauguration next month, setting up another political fight, as some Senate Republicans have said that with vaccines on the way, they believe more government help may be unnecessary.

The new bailout support offers less aid than Democrats had lobbied for and far less than was provided in a multi-trillion-dollar package for homes and businesses that the government enacted in March. A new federal supplemental unemployment benefit, for example, was set at $ 300 per week, half the amount provided in March, and will expire in 11 weeks. An extension of a benefits program for the unemployed who have exhausted their regular state benefits and for the self-employed and the self-employed will also run until mid-March, long before the economy is likely to have fully recovered.

“It’s not like in March all of a sudden a light switch goes on and we go back to pre-COVID mode,” Daco said.

RELATED: Here’s What’s in Congressional COVID-19 Relief Package

Still, the new aid package may be enough, for now, to avoid another recession. S&P Global estimates that the money should help propel the US economy to its pre-pandemic level for the July-September quarter of next year, roughly seven months from now. Without any support, that level would not have been reached until 2022, estimates S&P.

The economy has been suffering a further decline as the resurgence of the virus has intensified pressure on businesses and consumers have stopped shopping, traveling, dining out, and attending sporting and entertainment events. Key measures of the economy – retail sales, jobless claims, travel spending – have been steadily weakening.

More than 9 million Americans would have faced a complete cut in their unemployment benefits if Congress had not accepted the new package after months of stagnation. More than 4 million have already used all the unemployment assistance available to them, which lasts 26 weeks in most states; may reapply.

They include Warren Calvert, who ran out of unemployment benefits about two months ago, and is several months behind on his electric bill. In the spring, Calvert lost what he considered the best job he ever had: a $ 15-an-hour concession cook at Fiserv Forum Stadium in Milwaukee, where the NBA Bucks play.

Now Calvert and his girlfriend, who also lost a service job at Fiserv, are trying to make ends meet by selling homemade egg rolls in their neighborhood. To try to keep up with his rental, he sells the eggrolls, original fusion concoctions like chili or cheesesteak, at all hours of the day and night. With little money for other foods, most of them eat egg rolls.

“It’s still really tough, I’m still struggling day by day,” said Calvert, 38. “Nobody feels like Christmas right now. Who buys gifts? I’m going to put up some lights, and that’s it. “

Calvert said he will apply for the new unemployment benefits while he continues to look for work. But he fears that it is not enough to prevent him from losing his apartment.

“I am very concerned,” he said. “I’m still going to be short. I feel like Congress is playing with our lives.”

The much larger rescue package the government enacted in March was widely recognized as having averted disaster. By quickly injecting money into the pockets of individual Americans, it served to reduce poverty. But as much of that aid expired over the summer, poverty grew. Many people went through the $ 1,200 direct paychecks that had been distributed in April and May. And a supplemental $ 600 in unemployment benefits expired over the summer.

According to the investigation By Bruce Meyer of the University of Chicago and two colleagues, America’s poverty rate jumped from 9.3% in June to 11.7% in November, an increase of nearly 8 million people.

The new aid package restores the Paycheck Protection Program, which offers forgivable loans to many businesses. But many small businesses complain that the program in the past was too restrictive, forcing them to use most of their payroll money and not enough for other expenses such as rent, the cost of personal protective equipment or other supplies.

According to data firm Womply, about one in five small businesses has closed since early spring. More than half of small businesses have only two months of cash on hand or less, and one in six has two weeks or less of cash, depending on a survey from the Census Bureau.

Most economists say that extra help for small businesses should focus primarily on keeping them alive rather than keeping payroll. If a company closes, they point out, it cannot be rehired once the pandemic is under control.

Sasha Coleman, one of three worker-owners at a cooperative restaurant near Boston called Tanam, said they are barely surviving. They rely on takeout food and cocktails that generate less than a fifth of pre-pandemic revenue.

The restaurant, which closed from March to September, received a loan from the PPP program. But like many small businesses, Coleman and his co-owner-owners would prefer something that lasts longer and is more flexible. The PPP required that most of the loan money be spent on payroll for just eight weeks. They must pay the rent, maintain their health insurance, and help offset the expenses they absorbed to adjust to takeout and outdoor dining, such as buying patio furniture and outdoor heaters.

RELATED: Congress Seals Agreement on COVID Relief and Government Funding

“It has been very frustrating because there is an expectation of staying open and showing a good face to customers, without a lot of help from the government,” said Kyisha Davenport, another worker-owner.

Democrats wanted the new financial aid package to include about $ 160 billion in aid for state and local governments. But Senate Republicans objected. States and cities have already cut about 1.3 million jobs since the pandemic began, contributing to a higher unemployment rate.

“It’s not a stimulus, it’s a survival plan,” Michael Graetz, a Columbia University law professor who studies fiscal and social policies, said of the new aid package. “Will it allow people to survive a little longer than they would have otherwise, given what was about to happen at the end of the year? The answer is yes. Failure to do so would have been negligence. ”

But Graetz, a former Treasury Department official, said that “it is not enough when you think about the fact that evictions are increasing. People cannot pay the rent. Unemployment has risen again. Businesses across the country have been closed again. So this is not the end of the story. ”


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