$1,200 checks for all? What you need to know about the US coronavirus bailout
With swaths of the US on lockdown, stock markets crashing, industries facing collapse and unemployment certain to soar the US government is debating the biggest bailout since the 2008 financial crisis. Here’s what you need to know.
What does the bailout look like?
Right now, the bill is estimated to be up to $1.8tn for money going to businesses, corporations and directly into the pockets of Americans.
Senate Republicans are at the helm of the package, though they need 60 votes to get it passed, which means they will need to compromise with Democrats.
The Republicans’ bill has four main components: direct payment to most Americans $350bn in loans for small businesses that may be forgiven if firms use them to keep workers on payroll
$500bn aid for hard-hit industries and states and $50bn for the airlines
and an increase in payments to the healthcare sector
When will this get done?
Talks stalled in the Senate on Sunday. Democrats are worried the business that:
the bailout gives too little to protection to workers;
fails to put enough restrictions on how businesses that take the money spend the funds;
and that Treasury secretary Steve Mnuchin will have too much control over $100bn in payments. Funds, they fear, could be used to favor friends of the administration
Discussions began again on Monday with both sides saying they hoped to get a deal done soon, although it may now not be done before the end of the week.
What has Congress done so far?
The first spending bill to combat the Covid-19 outbreak in the US was signed by the president earlier this month and is worth $8.3bn. The money is going toward the US health and human services department, state and local health departments and local community healthcare centers. A big chunk was earmarked for international response to the outbreak.
A second bill for paid sick leave and emergency paid leave worth $104bn was passed last week. The legislation excluded workers from large companies with more than 500 employees and allowed companies with under 50 employees to apply for exemptions. The bill mandates 10 days of paid sick leave and creates an emergency paid leave program for parents affected by their children’s schools closing for coronavirus-related reasons. It also expands food assistance programs and aids states’ unemployment insurance programs.
Are US taxpayers really going to get direct checks from the government?
The Republicans’ plan is for individuals to get up to $1,200 and married couples to get up to $2,400, including $500 for each child. The size of a check would diminish gradually for those whose income is above $75,000, while those earning more than $99,000 will not be getting any checks. The checks will be based on a household or individual’s 2018 tax return.
Is there bipartisan agreement on these checks?
No. Some Republicans say the money will be a quick way to boost the economy. “These recommendations would blunt the impact for most Americans and limit the damage to the US economy,” said Senator Chuck Grassley, Senate finance committee chairman.
But Democrats say it will not help struggling Americans in the long run. Instead, the Senate minority leader, Chuck Schumer, said that “beefed-up unemployment insurance” is a more sustainable way to help those who need it most. “A single $1,000 check would help someone pay their landlord in March, but what happens after that?” he said.
Also, the Republicans’ plan to divvy out checks has been criticized for screwing over low-income earners. Those who earn more than $2,500 will get, at minimum, $600. As taxable income increases, so will the amount of the check until it reaches $75,000. At that point, the amount decreases until it reaches $99,000, at which point a person gets nothing.
That means a person whose taxable income is $75,000 will get a larger check than someone who makes $30,000.
How is the government helping small businesses?
The Republicans’ plan consists of offering federally backed loans for small businesses with 500 employees or fewer. The plan estimates $300bn will be given to these businesses through loans, which will be capped at $10m per business.
The plan also includes possible forgiveness of loan if an employer retains their employees through 30 June, incentivizing businesses to keep their employees around for the time being.
On Saturday, Senate negotiators also worked to include a “payroll tax holiday” for small businesses in the plan.
Will there be corporate bailouts?
Democrats and even some Republicans are adamant that corporations are given fair assistance that will not end up in the pockets of wealthy shareholders or corporate executives.
The bill includes a little over $200bn in secured loans to airlines and other hard-hit industries. Specifically, $50bn will be up for commercial airline carriers to borrow and $8bn to cargo air carriers (the amount the industry trade groups have asked for), while $150bn for other industries affected by coronavirus, such as hotels and cruise companies.
So far, Congress has not itemized which industries will be eligible for bailouts, though there are many that are asking for one. The restaurant industry asked the government for $145bn to help offset losses after dozens of states mandated the closure of many full-service restaurants.
Companies who receive government assistance may be banned from stock buybacks, which is when a company buys shares of its own stock to increase the value of its shares, ultimately helping their wealthy stockholders and corporate executives. Trump said he would not be opposed to such a ban.
How is the government helping the healthcare sector?
The Senate’s plan is slated to relieve burden on the healthcare sector by increasing Medicare payments by 15% for coronavirus patients and by putting a freeze on a scheduled 2% reduction rate for all Medicare payments.
But the plan falls short of the $100bn the major healthcare lobbying groups asked for, arguing that hospitals need the money now to strengthen the system before the pandemic hits full force.