The Times Herald (Norristown, PA)
Staying afloat: $2.2 trillion bill offers economic lifeline
WASHINGTON » In the coronavirus crisis, even doctors can face a cash crunch.
Dr. Benjamin Ticho, an ophthalmologist in Chicago Ridge, Illinois, has seen his revenue plunge 80% as patients stay home and he cancels non-emergency surgeries. He’s cut his staff’s hours sharply and is negotiating with his creditors.
“We’ve reached out to many of our bigger vendors and said, ‘Hey, we may be facing a cash crunch — can you give us a break, or at least defer payments?’ Many have been sympathetic,” said Ticho, who owes loans on medical equipment. He’s giving his patients a break, too, by holding off for now on collecting their unpaid balances.
The record $2.2 trillion emergency relief package that Congress gave final approval to Friday is aimed at businesses like Ticho’s and people like his patients: Caught in a public health lockdown that has closed companies and brought economic life to a standstill, they are at risk of running out of money and being unable to pay bills or meet daily expenses.
The idea behind the measure is to give companies and families a cash cushion to better weather the health crisis and looming recession. When it’s safe to go back to work, dine out and book airline tickets again, the thinking goes, they’ll be more financially ready to return to something closer to normal life.
“It will inject trillions of dollars of cash into the economy as fast as possible to help American workers, families, small businesses and industries make it through this disruption and emerge on the other side ready to soar,” said Senate Majority Leader
Mitch McConnell, R-Ky., who helped negotiate the package.
So Congress is sending a one-time payment directly to most American adults and U.S. residents with Social Security numbers. That amounts to $1,200 for single adults earning up to $75,000 a year and $2,400 for married couples earning up to $150,000, plus $500 per child. Someone filing as head of household would get the full payment if they earn $112,500 or less.
The payment is reduced by $5 for each $100 that a taxpayer’s income exceeds those thresholds, and is completely phasedout for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.
The package will also help replace the earnings of unemployed workers for four months, providing them with their state’s unemployment benefits plus an extra $600 a week. For the first time, gig economy workers such as Uber drivers can claim unemployment benefits, too.
The support for individuals and households is especially important because the social safety net in America isn’t as strong as it is in the wealthy developed countries of Europe.
The package includes $50 billion in tax credits for businesses that keep employees on payroll and will cover 50% of those workers’ paychecks. Companies can also defer payment of the 6.2% Social Security tax, giving them an incentive to put off layoffs at a time when ordinary business has come to a halt.
Also included is $454 billion in seed money that will allow the Federal Reserve to make roughly $4.5 trillion in loans to larger industries.
At $2.2 trillion, the money that Congress and the Trump administration are throwing at the economic crisis amounts to more than 10% of America’s gross domestic product — the broadest measurement of economic output. By comparison, President Barack Obama’s $787 billion stimulus plan in the depths of the Great Recession amounted to about 5.5% of GDP.
And that doesn’t count what else the Fed is doing. It has slashed its benchmark interest rate to zero. It’s flooding financial markets with cash by buying up securities, including government and, for the first time, corporate bonds. It’s also buying so-called commercial paper, short-term IOUs that companies issue to cover operating costs such as payrolls. And it’s readying a loan program for small businesses.