My F&M

Fiscal Stimulus – Round Two

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For months we have been waiting to hear whether Congress would agree on terms of a new COVID relief package for struggling Americans. In the last 50 years, the unemployment rate has only hit double digits three times: September 1982 – May 1983 (high inflationary environment), October 2009 (following the Great Recession), and April – May 2020 (COVID).1 Despite a recent reduction in the unemployment rate (6.9% as of October), there are still large sections of the US and world economies whose doors are shuttered or severely limited in their ability to operate.

Americans have been calling for relief. Some politicians have even suggested that rental and mortgage payments should be cancelled until the end of the pandemic. This proposal (H.R. 6515) was introduced to the House on April 17th but has not been voted on.

Instead, Congress has opted for a more traditional path of fiscal stimulus, which has been brokered between the party leaders over the past six months. At times, the process has been very loud, with politicians publicly blaming the other side for not being able to get a deal done. After months of inaction, the two sides have finally reached an agreement: the Consolidated Appropriations Act, 2021. Not as catchy of a name as the CARES Act… but that is because they have attached this relief package to a much bigger bill, the 2021 budget, which will keep the government open, after being scheduled to shut down yet again.

This stimulus package will be similar to what we saw earlier in the year, but more targeted. The broadest piece of the legislation will be an economic impact payment of $600 for any individual who reported less than $75,000 of Adjusted Gross Income (AGI) or $1,200 for any married couple who reported less than $150,000 of AGI on their 2019 return. Families who meet this criterion will also be eligible for $600 for each dependent child they claimed. There are two items to note here: if you make up to $87,000 as an individual or $174,000 as a married couple, you can still receive a reduced benefit. And while the first round of stimulus denied payouts to citizens married to undocumented immigrants, this round will pay all US citizens that qualify. (Note: undocumented immigrants are still not eligible for stimulus, just their spouse.)

The bill also extends federal unemployment assistance at a reduced level. Earlier in the year, unemployed individuals were receiving a $600 kicker from the federal government; the new agreement includes a $300 additional weekly benefit for up to 11 additional weeks. This provision will end on March 14th.

The Paycheck Protection Program (PPP) is also getting new life under the agreement: $285B will be set aside for new loans with the stricter rules about distribution of the funds – like a $2M limit on loans and publicly traded companies being automatically ineligible – to avoid the widespread fraud and public outcry experienced under the first iteration of the program. To date, the House of Representatives has identified more than $4 billion of potentially improper loans and the Small Business Administration fraud hotline has received more than 100,000 complaints this year (compared to a total of 742 in 2019).2 

Other key aspects of the bill will include vaccine and nursing home funding, a $35B windfall to support renewable energy efforts, a 15% increase to SNAP (food stamp) benefits until 6/31/2021, federal funding to improve high speed internet access given the current work from home environment, and an extension on the eviction moratorium until 1/31/2021.

While this round of stimulus is smaller than what we experienced with the CARES Act in March, it appears to be a much more targeted in helping the people who need stimulus the most.

Note: This is only a brief synopsis of the 5,500 page bill. You can find a PDF of the entire bill HERE.

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