5 things to know about the relief package
Congress has reached agreement on a $900 billion economic stimulus and relief package, after months of battling and stalled negotiations. Here are five things you need to know about the new relief package:
1. More money will go into the pockets of Americans.
Most Americans (individuals earning less than $75,000 a year, couples less than $150,000) will get a one-time payment of $600 per person, half the $1,200 the government distributed at the beginning of the pandemic.
First payments could come as soon as next month for people who have direct deposit set up with the IRS.
Unemployed workers also will receive enhanced unemployment benefits. The agreement established a temporary, $300 per week supplemental jobless benefit to those who qualify, half the $600 per week authorized in the first stimulus bill. The bill also extends a federal program that allows people to collect unemployment benefits for an additional 13 weeks after state benefits, which last 26 weeks, are exhausted.
When the CARES act first rolled out in March, however, the Texas Workforce Commission's website crashed after being flooded with unemployment applications. But things should run smoothly this time around, said James Bernsen, an agency spokesman. If the provisions in the new legislation mirror those of the old, the TWC should be able to deploy the funds in an efficient manner, Bernsen said.
2. More Paycheck Protection Program loans will be administered, but this time it will target smaller businesses.
About $284 billion will cover another round of the Paycheck Protection Program, low-interest, forgivable loans aimed at helping hard-hit businesses. When the program first rolled out, it received a lot of criticism for providing loans to large corporations.
Although the new package is much smaller, it's tailored to the needs of small businesses, Eric Holland, partner in Balch & Bingham's Houston office said.
“The eligibility criteria was so vague that some people that may not have actually needed the loans ended up receiving them,” Holland said. “It's clearly meant to be available to more of the mom-and-pop shops, and small businesses, rather than larger ones that are highly liquid or well capitalized.”
This time around, only employers with 300 or fewer employees will be eligible, down from a limit of 500 employees in the earlier rounds.
Businesses also must show 30 percent quarter-over-quarter loss in gross receipts.
Businesses that received loans in earlier rounds of the program are eligible to apply for additional loans from the new funding. Businesses can choose to take up to 24 weeks to spend the loan proceeds and remain eligible for loan forgiveness.
3. The forgiveness process for the PPP loans will be streamlined
Now, if loans are $50,000 or less, the forgiveness application is simple. Borrowers essentially have to sign a statement saying they spent the money on authorized expenses, such as payroll and rent, and have available records to show that.
Under the new program, that streamlined process for receiving loan forgiveness will be extended to businesses receiving loans of up to $150,000.
Bill Day, a spokesman for San Antonio's Frost Bank, said this would be a tremendous help to small businesses. More than 75 percent of the loans that Frost issued through the program are $150,000 less.
In total, Frost helped more than 19,300 businesses get PPP loans for $3.3 billion in 2020.
“That would be a huge relief for our customers who were PPP borrowers,” Day said. “We're in the middle of the forgiveness process now, and the more we can do to help them the better off the economy will be.”
4. A package of $900 billion probably isn’t enough.
Most economists agree the $900 billion is a down payment on the spending needed to support the economy and position it to recover once vaccinations are widely distributed. Another significant stimulus bill will likely be needed within six months, they said.
“It's bigger than zero, which is really important,” said Dietrich Vollrath, chairman of the Economic, Department at the University of Houston. “I think there's a legitimate argument that it could or should be bigger, because the scope of what's going on is going to linger.”
One important gap that remains unfilled is aid to state and local governments, a provision that was dropped from the bill because Republicans and Democrats could not agree. State and local governments are facing budget shortfalls, which could mean layoffs that undermine consumer spending just as the economy is recovering.
That's what happened after the financial crisis of 2008, contributing to a slow, painful recovery.
“There was a big lesson learned in 2008, that abandoning state and local governments, without any assistance really puts a drag on recovery,” Vollrath said. “States and localities could be banging on the door in Washington to say, ‘We're going to have to fire a bunch of teachers, firemen and policemen unless we get some relief.'”
5. Assistance extended to gig workers
Certain self-employed, gig and other workers who have both wage and self-employment income will also be eligible for an additional $100 a week in benefits, in addition to those they collect under a program established by the CARES Act.
If the bill passes Monday, it will come just in time for millions of gig workers. The CARES Act program that extended jobless aid self-employed and gig workers is set to expire by Saturday.