US Senate’s Final Stimulus Bill: Why It Won’t Be Enough

| Educate!

Above photo: Demonstrators protest the Wall Street bailout – Nicholas Roberts/AFP/Getty Images.

Just after midnight March 25, 2020, eastern time the US Senate passed a compromise bill of fiscal spending to address the accelerating economic decline. Both Democrat and Senate leaders agreed on the terms. US House of Representatives Speaker, Nancy Pelosi, indicated she would rush approval of the package seeking a unanimous voice vote of the House.

Here’s what the terms of the stimulus package looks like, according to initial summaries by the Washington Post and CNN released within minutes of the bill passage:

Middle class and worker households would get $500 billion in the form of direct checks ($250B) and increased unemployment insurance benefits for the next four months ($250B)

Corporations and businesses would get $867B–$367B of which would go to small businesses, and another $500B to large corporations like airlines, defense companies, cruise lines, hotels and other companies.

Additional funding of $130B would go to hospitals to purchase needed medical supplies. State and Local governments get $150B. Other funds would be provided by the government’s Small Business Administration  ($10B) to help pay their debt. Reference is made in the package as well for another $20 in farm bailout, raising that total from the $30B spent to date during the US-China trade war to $50B.  While it appears the $130B for hospitals and $150B for local governments is in addition to the $867B to business and $500B to households, it’s not clear if the $20B farm bailout and $10B additional SBA are included in the $867B or not.

Here’s a further detail in breakdown of these amounts:

  1. $500B to Business

The Airlines get their $58B they’ve been lobbying for. And if past breakdowns still apply, it means roughly half the $58B will take the form of outright grants, not loans, to the airlines and the remainder as loans.  It is also unclear if the loans will be ‘forgiven’ after six months, as had been proposed before in past versions of the Senate bill.

Another $17B of the $500B is earmarked for defense companies considered important to national security. No details are released who these are and why such companies, not affected by consumer demand, should receive such an increase. (Possibly to backfill money that has been transferred from them by Trump to help pay for his wall).

Trump has also indicated he intends to have some of the $500B go to cruise lines and hotels which, along with airlines, are critical to his own company’s business.

The remainder of the $500 is designated for spending to support other industries. Whether in the form of loans, grants, or other forms of assistance is still unclear.

  1. $367B to Small Business

The Senate bill always included $350B in loans for small business, and the provision that the loans would change to outright grants if used to pay wages and payroll costs. It won’t take clever accounting to use the $350 to cover wages and compensation (and payroll taxes, etc.), as companies move the money that would have been used for such purposes to other areas of their income statements. So consider the $350B as money without repayment—i.e. not a loan.

In addition to the $350B, another $17B is added now for small business to cover the interest on their existing loans for six months. Finally, there’s the $10B from the Small Business Administration to help pay debts, which may or may not be part of the other totals.

Add in the $20B for farm support, the $10B from SBA, and the $130B to hospitals, it means Business Large & Small thus get $1,027B in direct assistance by the government in the new agreed on Senate-House stimulus package.

Another item that the Democrats demanded and received in part was to have an Oversight Board to review how corporations and businesses actually spent the government money. In the previous emergency economic recovery legislation in 2009, much of the direct assistance was ‘gamed’ by businesses that received it. Some even used it to buy back their stock and award bonuses to managers. The Oversight Board is supposed to prevent that. It remains to be seen, however. Who will by chosen to manage the Board will make all the difference. It can be assumed the Senate or Trump will.  As Trump has said publicly when asked who will ‘oversee’ the distribution of the funds to business, he replied: “I’ll be the oversight”.

Middle-class families and workers get a total of $500B under the agreement, which is what it was before. It appears that the money was just ‘moved around’.

  1. Direct Household Cash Assistance

Talk of $3,000 per household is now changed to a check of $1,200 for a single household member, or $2,400 for a married couple, plus $500 per child. (It’s unclear if that’s for all children in a family or just up to two).

To qualify for the full $1,200/$2,400 an individual must make no more than $75,000 income annually. Income above $75,000 phases out until $99,000 after which no payment is made. For couples, the phase-out is at $199,000 per household.

  1. Increased Unemployment Insurance Benefits

The package includes an increase of $600 to the state’s defined level of unemployment benefits paid (that vary by state quite a bit). But it’s unclear if the $600 applies to the highest-paid state benefit payment or to all levels of state benefit payments. For example, in California, the top payment is $450/week. The new payment would be $1,050/week. But will those below the top payment level also get $600?

A plus to the unemployment insurance provision is that it will also apply to contingent work: that is, to part-time, temp, contract labor not just to full time employed who are laid off due to the effect of the virus on company shutdowns.

On the negative side, all the improvements in unemployment insurance will take effect for only 4 months, then will expire.

It is clear, therefore, that middle-class families will receive only the $500 billion that had been allocated before—in the form of cash assistance one time worth $250 billion and improved unemployment benefits for four months costing another $250 billion. It appears some of the cash assistance was redirected toward improvement in unemployment insurance benefits, but no net increase in the total $500B on the negotiating table before.

In other words, in the final stimulus bill businesses get more than twice as much as do households and the working class!

  1. State & Local Governments

An additional $150 billion is allocated in the bill to assistance to state & local governments.

THE TOTALS:

The totals in spending thus appear to be approximately $1,650 billion! It is being reported as a $2T stimulus effect and increase in US GDP overall.  AS Trump’s advisor, Larry Kudlow has said on a previous occasion, the $2T represents the spending plus the ‘multiplier effect’. $2T is not, therefore, the actual spending. That is less, around the $1,650T estimated here. The difference is a multiplier effect of about $400B.

But that’s a generous estimate of the multiplier. It’s based on normal economic conditions. And the current collapse of the real and financial US economy is anything but normal. The multiplier will be much less. That is because much of the spending by the government, to business and households alike, will be used to pay down debt, hoard the money due to expectations of future profits and employment insecurity, or to cover price gouging by businesses selling necessities.

The US economy spends monthly the equivalent of $1.7 trillion. The Senate’s stimulus package is thus a one-month stop-gap at best! As this writer has been arguing in recent days, the stimulus needed to get through the summer will have to be $4 trillion, not $1.65 trillion.

The $2 trillion (spending + multiplier) is estimated at around 9% of US Gross Domestic Product, GDP, at present.  A 20% increase of GDP is necessary, raising total government spending in GDP terms from the roughly current 21% of GDP to 40%.

40% of GDP is what the US government raised spending to in 1942, when we went to war at that time. It was an increase from around 15% pre-war.  If the fight against the new enemy, the virus, is a kind of ‘economic war’, then the US will have to mobilize its economy again on a war footing. Trump’s activation of the War Production Act, and then doing nothing about it further, is not a war mobilization. Trump is not a ‘war president’, as he claims. Indeed, he allowed the enemy to actually penetrate our shores and spread amongst us with his delayed action to stop airline travel and cruise travel. It’s not an accident that the largest concentrations of the virus infections are in our coastal ports and airports—Washington state, California, New York, and now increasingly New Orleans, Philadelphia, Chicago, and Miami.

Trump as ‘War President’ & Other Fictions

Unlike our prior war presidents, Roosevelt and Truman, Trump is not mobilizing the production and distribution of key resources and supplies to fight the enemy. He simply asks the private sector to do it and then gives his daily ‘sales pitches’ to the national press conferences to say what he’s doing when he’s not actually doing it. War supplies (masks, ventilators, PPE) are promised and promised but are slow to appear if they ever do.

The question follows then whether the current Senate-House stimulus bill represents a sufficient stimulus to protect the US economy. The answer is no. It’s not even halfway there for Main St.

In contrast, however, the Federal Reserve US central bank has quickly allocated no less than $6.2 Trillion so far to bail out the banks and investors, even before they fail this time. And promises to do more if needed and for as long as necessary. It is writing a blank check for the bankers and investors.

Meanwhile, Congress provides one-fourth that, and only one-third of that one fourth, for the Main St., workers, and middle-class families.

Finally, it is clear from Trump’s statements in recent days that he knows this stimulus is only a one month hit to the economy.  That’s why he—and the capitalist investors who have been lobbying him hard the past week—are turning up the message we should all start going back to work by mid-April.

As Trump put it, the timing is ‘beautiful’, at Easter. But it won’t be so beautiful when a surge in infections and death occur on top of the current surge underway occur by early summer.

But profits and money are more important to this wheeler-dealer, commercial property speculator capitalist in the White House. With the US budget deficit this fiscal year almost certainly to exceed $3 trillion, and his election looming on the horizon, Trump and friends see Wall St. and US business interests as more important than the rising death rate that is inevitable should we return to work prematurely by mid-April.  Such action will all but ensure the eventual overwhelming of the US hospital system three months from now, an even higher death rate, and an even greater collapse of the US economy and financial system in the aftermath.

Trump may think he’s at war with the coronavirus, but it is the virus that is winning! And his poor generalship is aiding and abetting that enemy. Unfortunately, the American public—and especially the old and infirm—are becoming the ‘cannon fodder’ in Trump’s phony war.

  • voza0db

    “That is less, around the $1,650T”, please correct!

  • voza0db

    The usual unaware of REALITY!

    Federal Reserve US central bank has quickly allocated no less than $6.2 Trillion

    This one I correct for you guys…

    “Federal Reserve SRF central bank has quickly allocated no less than $6.2 Trillion”

    Just as a reminder of the 2007/8 party (just $29T)

    https://uploads.disquscdn.com/images/fda04fdc5650e1b4cd89c4023badc5a430225655d32090efb9a01a9a1c04258b.jpg

  • voza0db

    White House economic adviser Larry Kudlow appeared at the White House briefing yesterday evening. Kudlow revealed that the stimulus plan is actually a $6 trillion package — $2 trillion to struggling Americans and $4 trillion to dispense as Treasury Secretary Steve Mnuchin and the Federal Reserve see fit. Since the Federal Reserve has seen fit since September 17 of last year to flood the trading houses of Wall Street with $9 trillion cumulatively in revolving loans, one can reasonably expect that this is where the new $4 trillion will be going.

    $2T to slaves (Theoretically)… $6T to Banks (Reality)!

  • Carl Neuman

    An “outrageous betrayal”, AKA bipartisan corruption at its best:

    https://prospect.org/coronavirus/unsanitized-bailouts-tradition-unlike-any-other/

  • Carl Neuman

    Progressives I’ve talked to on the Hill are apoplectic. “Temporary survival money for workers, trillions in permanent economic inequality saving a bunch of executives and elites,” said one House Democratic aide. There’s particular anger reserved for the big show made of the House Democratic bill, a sideshow that never was part of the Senate-side negotiation.

    https://prospect.org/coronavirus/unsanitized-bailouts-tradition-unlike-any-other/

  • doldrum pant

    “The health crisis has left us without funds for social security and medicare, so we must tighten the belt with austerity measures…” coming soon to a theater near you.

  • gustave courbet

    It would be helpful if the article on Italian death rates included a comparison to normal death patterns in previous years. Without this info, the article’s central point, that death rates may be greatly inflated, is conjectural. It has been widely reported that Covid19 has a much larger impact on those with compromised immune systems and other comorbidities, so the fact that people with other issue are succumbing to this disease isn’t surprising or cause for suspicion.

    The idea that we should expose many millions of people to a novel virus to “get the economy going” is irresponsible in the extreme and flows out of a business-centric perspective. Most of the problems generated by an economic shutdown could be ameliorated with various forms of government intervention, as many countries are doing. We COULD have the best of both worlds: sensible public health policy AND economic social safety programs to protect the vulnerable. I would add that the US has the worst healthcare in the developed world and throwing a major virus outbreak at it all but guarantees needless deaths as well as massive medical debt on top of that which already exists.

    Lastly, the reference to the “deep state” requires evidence, lest it be taken for paranoid innuendo. As someone who has studied the concepts of “deep politics” and “the deep state” for years, it’s problematic to see the term used as an empty signifier rather than an informative descriptor.

  • Richard

    As always the citizens get the shaft and big business gets the gold mine, reminds me of obama. Just more proof neither party is for the people, but at least a few tried to do more for the citizens and one of them was Sanders. Funny, the one person who actually tried to help Americans is the one shunned by Americans, they seem to prefer more of the same old BS. Another election coming up where the people will lose big time no matter which greedy crook wins. Most American voters are dumber than a rock and their elected choices in government are proof positive of it. Up next, the fat lady is going to sing us a song.

  • jonathanpulliam

    Good stuff. Tip o’ me hat. Sad to cast these pearls before such swine

  • ThisOldMan

    You obviously never took calculus.

  • rgaura

    Sanders didn’t lose those primaries, they were rigged in many ways, right in our faces. Blaming voters is participating in gaslighting and propaganda.

  • mwildfire

    Partly true, but enough voters have to drink the Biden Kool-ade for the theft not to be glaringly visible. Thank the media with their continuous propaganda about how Sanders is “unelectable.” Black voters desperate to see the end of Trump fear white voters won’t go for Sanders, so they vote for Biden, thus white voters fear black voters won’t back Sanders–well it’s all a rigged game we can’t win.

  • jwreitter

    In the final stimulus bill businesses get more than twice as much as do households and the working class!

  • Steven Berge

    Easily predicted with a corporate owned government. The more things change the more they stay the same. Go American Yellow Vests!

  • Nylene13

    As my Great-Grandmother used to say-
    The Rich get Richer and the Poor get Poorer.

  • Steven Berge

    It would be nice if all the white house staff and congress worked in close proximity so the heard immunity could work to our benefit.

  • Nylene13

    Typical.

  • Richard

    So that’s how bush jr and obama got a second term when the first was a total failure and hellary won the popular vote. I have always thought the election process was rigged, up until the corona virus hit, now I am not so sure. Lot’s of idiots running around acting like fools and I am sure a lot of them vote the same way.

  • Richard

    Sadly, she was right.

  • Richard

    America could use some Yellow Vests, but they would have to import them because there are not enough people here that would put them on to make any difference.

  • mmckinley

    And look! The tangerine beast’s approval rating is going up, to 55% or more, higher than it’s ever been! And those aren’t all Trumpsters.

  • Nylene13

    She also picked wild mushrooms. She said she could smell the poison ones. Must have known what she was doing, she lived to be 93.

    I wish I had learned it from her.

    Time to start planning veggie gardens People!

    Order seeds now!

    VICTORY GARDENS.

  • mwildfire

    Cheese and RICE, I hope you’re mistaken about that. His handling of this crisis could not have been worse. We are all the way down the rabbit hole now.

  • chetdude

    Direct Household Cash Assistance:

    IF you’re already setup with IRS for direct payments – “expect” your crumb in about four months.

    If you’re not — well, you’re f*cked…

    I have moved from loathing the corporate-owned creatures in Congress (with a few exceptions in the most Progressive wing) to HATING THOSE SONS OF B*TCHES!!!

    I agree with Krystal Ball — this would be the BEST response to this piece of shyte!

    Krystal Ball implores AOC to KILL corporate robbery bill

    cdn dot jwplayer dot com/previews/YvDTsMMJ

  • chetdude

    Oh, it’s even WORSE than that!

  • chetdude

    Sanders HAS NOT LOST the primary.

    It’s far from over, Bernie’s Progressive Policies have gotten about the same number of votes as corporate-Joe Biden, Biden does NOT have enough delegates to be nominated and the Democratic Rank and File have time to come to their senses and vote FOR their values and needs for Sanders when the primary starts up again.

    It’s the corporate media and DNC big wigs who want you to think that it’s over…

  • chetdude

    As usual, the craven, timid, corporate-owned Democrats (especially Pelosi/Schumer) are presenting NO OPPOSITION…

    Only Bernie Sanders has proposed effective adequate responses to the Pandemic…

    C’mon Dems, the primary is far from over, nominate Bernie…

  • I agree but the odds are bad since it’s become crystal clear that the Dem Party leadership including some progressives have lined up against the Sanders campaign. Party “unity” is now first and foremost in people’s minds, even if it means nominating a candidate who is truly horrible in every way.

    We know already that there has been cheating and rigging in the earliest state contests, and there is good reason to suspect that there has been the same in the following contests as well, in addition to a rallying of Conservocrat candidates at the behest of the DNC/Clinton-Obama Right-wing of the party. I do not expect that to change.

  • I fully expect that once the Covid19 outbreaks in the U. S. and elsewhere are contained–and they will be–and once people have begun to calm down, we will see an even bigger wave of neoliberal pleading by and for the business sector–employers–especially corporate employers–and bankers who will uniformly proclaim that they have been hugely injured by the Covid19-driven economic contraction. They want us scared–as they always have–and they’ve largely got us scared.

    This will necessitate austerity measures. We will “all” have to tighten our belts. And Keynsian economics/New Deal-style solutions, anything that bears so much as a whiff of the Welfare State about it–all that is simply beyond the comprehension of the dominant Republicrat leadership of this country.

    Time for us all to get yellow vests and take to the streets.

  • chetdude

    I’m listening right now to NPR piling on — pretending that Biden is “inevitable” — but that’s to be expected from National Propaganda Radio!