The response to the coronavirus situation is fluid and fast-moving – particularly by Congress’ standards. In response to the coronavirus pandemic, the following legislation has been considered in Congress:
- Phase I: Coronavirus Supplemental Appropriations Act (signed into law March 6th);
- Phase II: Families First Coronavirus Response Act (signed into law March 18th); and
- Phase III: Large ($1 trillion+) economic recovery package (currently being drafted).
Phase I provides approximately $8.3 billion in aid to federal and state agencies to address clinical needs (e.g., developing vaccines and treatments, increasing laboratory capacity, and expanding Medicare reimbursement for telehealth).
Phase II addresses the economic impact of the pandemic and includes: (i) free testing for the virus; (ii) $1 billion in unemployment insurance grants; (iii) temporary increase in the federal share of Medicaid expenditures; (iv) funding for nutrition programs like SNAP and WIC; (v) paid sick leave and extended family and medical leave for coronavirus-related reasons; and (vi) tax credits to help businesses, including the self-employed, absorb the cost of providing the leave. Congress’ official summary and text of Phase II can be found here.
The scope and content of the third legislative package – Phase III – is still to be determined. However, it will certainly be much larger than Phase I and Phase II. On Tuesday, March 17th, the White House sent a proposed economic stimulus package totaling approximately $850 billion to the Senate. Treasury Secretary Mnuchin is in contact with Congress on behalf of the administration, and Senate leaders from both parties are working on proposals and signaling their priorities.
The Treasury Department’s Phase III proposal includes the following:
- $50 billion for an Airline Industry Lending Facility;
- $150 billion for other severely distressed sectors of the economy;
- Use of the Exchange Stabilization Fund to guarantee money market mutual funds;
- Economic impact payments to individual taxpayers; and
- $300 billion for small business interruption loans.
Additionally, the White House and Congressional leadership have been meeting with major corporations and trade associations from every industry to understand the effect that the Coronavirus pandemic will have on each sector. There are early indications that the Phase III relief package will be worth more than $1 trillion and include a number of policy proposals, such as tax deferments; cash injections for large businesses; low- or no-interest loans for small and large businesses; temporary cancellation of payroll tax payments: loan forbearance: loan guarantees: requiring insurers to cover telehealth services; direct payments (varying amounts proposed) to every American; deferring student loan interest; easing tariffs; and purchasing oil for the Strategic Petroleum Reserve.
While much more political negotiation and positioning will take place before a package is finalized, it is important for industries feeling the impact of the pandemic to engage with Congress and the administration as soon as possible. Phase III remains mostly in the Senate as the House is currently not in session. However, negotiations are moving swiftly, and we expect Senate Republicans to release their proposal today (March 19, 2020) and begin discussions with Senate Democrats. While Phase III could pass the Senate as early as this week, the sheer size and consequence of the legislation could slow the process and delay its approval to next week. Even if Phase III legislation passes the Senate this week, the bill will not be considered by the House until its members return to Washington. While the House is in recess, House Democrats are working remotely and are racing to put together a Phase III proposal of their own.
The White House
Additionally, the White House has taken several unilateral actions. The President Trump has declared a national emergency, unlocking disaster relief funding and authorizing FEMA to coordinate recovery efforts. The Small Business Administration is currently providing low-interest disaster loans to businesses and homeowners. The President has also invoked the Defense Production Act in order to ramp up production of certain critical equipment, like masks and other items.
Finally, commercial banks and the Federal Reserve are exploring ways to provide credit to distressed businesses. Large banks are quietly considering increasing liquidity and providing no-interest loans to small businesses to cover payroll, rent, and employee health care during the crisis. The Chamber of Commerce is pressing Congress and the White House for changes at the Federal Reserve which would allow companies with more than 500 employees direct access to the discount window. The Federal Reserve has already cut interest rates to zero.
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