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After months of gridlock, Washington approved and passed a new $900B COVID-relief bill in law in December.
Despite its delay, the new relief funding reaches many of the most burdened cross-sections of the national economy.
The new Biden Administration recently announced its own $1.9T Coronavirus Relief Package—which among other items includes a proposal for an additional $1,400 payment to qualifying individuals, along with an enhanced test and tracing regime.
Analysis
After months of gridlock and little substantive momentum, the clock winding down on 116th Congress proved the impetus needed to pass the compromise-heavy 2021 Consolidated Appropriations Act. As part of its passage, Congress approved $900B of new COVID-relief stimulus. Before the ink even had the chance to dry, attention quickly shifted to whether the second round of stimulus is too little too late.
Following an unsuccessful 11th-hour push to raise the individual payment amounts to $2,000, President Trump signed the legislation into law on December 29th. While much of the political and media focus has remained on the individual payments, the package also includes:
Assistance for Small Businesses
COVID-safety Funding for Schools
Partially Restored Supplemental Unemployment Benefits
An Extended Moratorium on Evictions through January 31st, 2021
Funding for Renter Assistance
Funding for Vaccine Distribution
The infusion of new federal assistance comes as the United States is fighting through a challenging and deadly winter. On New Year's Day alone, the nation recorded 147,000 new COVID-19 cases and 2,373 deaths. In Los Angeles County, hospital ICU capacity has sat at 0% for weeks, while national vaccine distribution lags CDC targets. In the labor market, the job growth recovery slowed through late-Summer and Fall and has now started to reverse as of the BLS’s latest release. While markets remain bullish as we move into 2021, observers stretching from the Federal Reserve to Main Street have joined in chorus, citing fiscal stimulus as the bellwether-ingredient needed to get the economy back on track.
Seen as late by many, this spending package remains significant in its breadth. Just as it was in last year's CARES Act, this package targets Americans under an income threshold of $99,000 per year for direct relief.[1] Every adult taxpayer at or below that income level is eligible for the $600 payment, with an additional $600 payment per dependent child. This form of blanketed stimulus based on income, regardless of employment status, helps offset wage cuts and assists households in covering unexpected expenses related to the pandemic. For some, the stimulus will merely be extra cash in the bank to spend— a boost to consumption that many businesses will welcome. Though for many, the $600 payment represents some desperately needed relief in hopes of getting through to the next billing cycle.
Beyond the direct payments, the new package revives supplemental jobless benefits for the unemployed, with eligible recipients receiving up to $300 per week— half of the maximum amount provided in the CARES Act. A separate program assisting independent contractors or "gig-economy" workers during the pandemic that was set to expire on December 31st was also extended. In addition to these more pointed relief provisions, Congress injected $284B into the Paycheck Protection Program to assist small businesses while earmarking $25B towards an emergency renter assistance program.
Despite its less-than-ideal timing, the new stimulus measure is impressive in scope, with its funding reaching many of the most burdened cross-sections of the national economy. The healthcare and education sectors, both of which saw dramatic upheaval and drastic adjustments through the crisis, are receiving a much-needed credit line. However, missing in the package was any aid directed to State and Local governments, a political football punted down the road along with another partisan wedge, corporate liability protections. Though the political outcome was unsurprising, the consequences are considerable. According to the NY State Comptroller, New York City faces a deficit of $3.8 Billion in its upcoming budget year, with the potential to grow if expected funding from the State dries up. Transit agencies are on track to take the brunt of cuts in many cities, with the DC Metro Board advancing a plan to cut one-quarter of its $2B budget for 2021. Cities across the nation, both large and small, are facing similarly tough choices, from Fire Department cuts in Oakland to potential reductions in school funding across Texas. With a new administration now in the White House, with a Democratic majority in both the House and the Senate, the likelihood of an additional stimulus package containing State and Local aid is elevated. In the interim, municipal resources across the country will remain limited, likely impeding the capacity of cities to rebound from the crisis.
Another potential consequence of a smaller and delayed bill is the likelihood of a protracted recession. The CARES Act passed within a month of the nation's first stay-at-home orders and totaled $2.2 trillion, dwarfing the $900 billion included in the latest bill. This swift and ambitious policy response provided a higher floor for economic growth as the pandemic ensued. While during a typical economic downturn, it may make sense for a follow-up relief package to be both smaller and deferred, the pandemic has presented unique challenges in reigniting the engines of the economy. In addition to the 2nd and now 3rd COVID-case waves, consumer demand remains tepid, and job growth has turned negative. Even as some States adopted laissez-faire containment strategies in the name of local economic success, they have since learned that uncontrolled viral spread and lasting economic growth are two incompatible concepts.
Pressing ahead, both policymakers and the private sector will have to manage multiple priorities to pursue renewed normalcy. As stimulus relief gets distributed throughout the country, effectively administering the vaccine will require an equal amount of effort and attention. The Biden administration has signaled its intention to address the ongoing logistical backlog facing distribution efforts as one of its earliest priorities, with a “100 million vaccinations in 100 days” echoing as a signature pledge. To do so, it is considering releasing all of its remaining vaccine supply to the States. Though the merits, efficacy, and achievability of this approach are current topics of debate, if successful, it would provide the foundation for alleviating public safety concerns and boosting economic activity.
As the vaccine becomes widely distributed through 2021, the legislative focus will shift to designing a sustained economic recovery. On Thursday, January 14th, the then-incoming Biden Administration announced its Coronavirus Relief Package. Among other items, the plan proposes an additional $1,400 payment to qualifying individuals, along with an enhanced test and tracing regime aimed at establishing a more robust federal management of the pandemic response. Biden's initial plan is unlikely to pass as is— even with his party in control of both congressional chambers. Still, the framework suggests that a more comprehensive package is likely on its way. As administrative talking points give way to bills debated in Congress, the Chandan Research team will follow this synopsis with a similar breakdown and analysis of the total Federal response.
[1] Based on 2019 Tax Returns