Washington update: how is the U.S. responding to coronavirus?

The U.S. congress has taken unprecedented, swift, bipartisan action to stimulate the American economy in response to the COVID-19 pandemic. Three phases of comprehensive rescue packages have been approved by congress in the past three weeks, a pace of action unheard of for Washington, D.C.

Key takeaways from the coronavirus packages

The first phase, the Coronavirus Preparedness and Response Supplemental Appropriations Act was signed into law on 6 March by President Trump.

This provided $8.3bn of emergency funding for the Department of Health and Human Services – namely the Centers for Disease Control and National Institutes of Health – to fight back against the spread of the virus, distribute testing kits for local communities, develop vaccines, and provide cash boosts for state and local health departments to hire more staff and buy more equipment.

The second phase, the $3.5bn Families First Coronavirus Response Act, was signed into law on 18 March.

This ‘first step’ relief package focused on providing emergency paid sick leave to eligible workers, loosening eligibility for emergency unemployment benefits, setting guidelines for tax credits to employers who give emergency sick leave, providing free COVID-19 tests for all Americans, and expanding food and nutrition assistance for schools and low income families.

This bill creates two avenues for employers to pursue paid sick leave due to coronavirus reasons. Both are only eligible for part-time and full-time workers at companies with 500 employees or fewer and government staffers.

The first option is to take 14 days (80 hours) of paid sick leave at their normal pay rate for coronavirus reasons. This is defined as caring for loved-ones affected by COVID-19 (either in quarantine or isolation), caring for children at home due to school cancellations, seeking personal medical care for COVID-19, or staying home due to having COVID-19.

The second option is 12 weeks of either partial paid or unpaid sick leave. The first two weeks would be unpaid, the following 10 weeks would be covered at two to three the normal pay rate. However, workers are allowed to use company sick days during that first two-week period that is unpaid.

The bill also provides nearly $1bn in emergency food and nutrition funding for elderly, disabled, and low income populations, as well as $82m in additional funding for the Defense Health Program, which instructs the Department of Defense to provide the federal government with lab space, ventilators, and masks.

Notably, the bill makes testing for COVID-19 free for all Americans without co-pays or deductibles and ensures that businesses will receive tax credits for 100 percent of the sick leave they pay out to employees.

The third and final phase, the Coronavirus Aid, Relief, and Economic Security Act, is the largest government stimulus package in U.S. history – almost $2tn in total aid.

It passed in the Senate 96-0 and by voice vote in the House of Representatives. While partisan disagreements threatened the bill temporarily, the end result was praised by leadership in both the Republican and Democratic parties. President Trump signed the bill on 27 March.

The package contains four major initiatives: direct cash transfers to American citizens, a massive increase in unemployment insurance benefits, emergency loans for small businesses to help them maintain payroll, and emergency loans to large industries particularly hit hard by COVID-19.

Coronavirus package distribution

$250bn allocated for direct payments to individuals and families

• Most of this will come as a one-time $1200 payment for adults earning $75,000 a year or less and $500 per child, whereas adults making more than that amount (up to $99,000) will receive lower, phased-out payment
• The Treasury Department believes cash could be in American hands in three weeks, using the IRS as a vehicle to distribute checks via mail or direct deposit
• Treasury Secretary Steven Mnuchin left the door open to a second cash transfer of the same amount in six weeks if the crisis still persists. However, this legislative package only accounts for one payment, so additional packages would have to be approved by congress.

$250bn allocated to dramatically expand unemployment insurance benefits

• Workers who lose their jobs will now be eligible to receive four months of full pay from the federal government – a Democratic proposal after the Republican Party originally proposed three months
• The maximum unemployment insurance benefit was also raised by $600 per week (a significant boost to the current average of $375 per week)
• A new Pandemic Risk Insurance programme will now enable non-traditional workers who are out of a job to seek government assistance. These would include contractors, the self-employed, and workers in the gig economy.

$367bn allocated for 100% federally guaranteed small business loans

• These emergency loans are designed to help business retain workforces at full payroll and benefits, even when being asked to stay home
• They would be available until 30 June and would be completely forgiven by the federal government if recipient companies can prove that they retained their workers and paid them throughout the crisis at normal rates.

A $500bn loan fund backed by Federal Reserve was created for major businesses at risk during the crisis

• $75bn was set aside specifically for the airline and hotel industry
• There are ‘strings attached’ in the loan fund that would prevent businesses from using the liquidity to purchase stock buy-backs or raise C-suite level pay during the crisis.

Beyond these major categories, $150bn was allocated for hospitals and healthcare systems struggling with costs during the COVID-19 crisis, and $150bn was set aside for state and local governments that are cash-strapped due to their response to combat coronavirus.

The CBI Washington office is monitoring these events closely and will be quick to provide updates when new information becomes available. For questions please contact John Dickerman or John Bleed.