The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by congress and signed into law on March 27th. The fiscal stimulus package worth nearly $2.2 trillion was intended to provide quick and direct economic assistance to American workers, families, and small businesses. Assistance for individuals is being distributed through direct payments of $1,200 for single individuals making less than $75,000 annually. Additionally, parents can claim an additional $500 per dependent child in their household. Small business support within the CARES Act was established through the Paycheck Protection Program (PPP) as well as the Economic Injury Disaster Loan Program. The PPP received $350 billion in government funding to provide low interest loans to small businesses that are forgiven if funds are used for payroll costs, interest on mortgages, rent, and utilities. Businesses can borrow up to $10 million in order to cover 8 weeks payroll costs, mortgage interest, rent, and utilities. Forgiveness is contingent on employers maintaining or quickly rehiring employees and maintaining salary levels. The Economic Injury Disaster Loan program provides similar relief in loan advances of $1,000 per employee up to $10,000 for struggling small businesses. While this targeted relief provides much needed support to struggling businesses and consumers in theory, the execution has left something to be desired.
Direct payments to individuals began last week, as the Treasury Department has made a point of trying to get money into consumers’ hands as quickly as possible to offset the pain of losing jobs and shutting down businesses. The rollout of these payments hasn’t been without its struggles, as millions of qualified Americans have yet to receive their funds. The first wave of payments was sent out to Americans whose direct deposit information was on file with the IRS. Otherwise, Americans are responsible for submitting their direct deposit information to the IRS directly through the “Get My Payment” tool on the IRS’ website if they want to receive their payments sooner. Many Americans have lamented that was poorly communicated by the Federal Government and the tool itself has a lot of glitches and has been overwhelmed by site traffic. Individuals who receive social security retirement, survivors or disability benefits, or railroad retirement benefits with children under 17 must use the non-filers tool through the IRS’ website to claim the $500 per child. Beyond this, people who have filed for 2019 and thus can’t use the non-filer tool are still not receiving proper payments for their dependents. IRS spokespeople are unsure as to why this is occurring. Timeliness is key for this stimulus to be as effective as possible because it helps to ensure more struggling Americans can stay afloat financially for longer.
Moreover, the Paycheck Protection Program has also experienced some hitches in its initial rollout phase. Many of the larger banks were unable to begin accepting applications on time because they didn’t receive guidance from the Small Business Administration on implementation until hours before the program was meant to go live. Beyond that, bank websites were overwhelmed by traffic once their application portals were open, leading to site outages and glitches. Scant guidance from the government led larger banks to prioritize processing applications of firms they had an existing relationship with to limit their own liability and to protect their liquidity. This practice has since been reversed but speaks to the confusion and ambiguity surrounding the new lending program. Demand for the program was underestimated initially, as the $350 billion in funding was exhausted within 13 days of it being implemented. Congress replenished the program in the most recently passed legislation, adding another $310 billion once the bill is signed into law. Specifically, $60 billion of that $310 billion is meant for businesses that have struggled to get loans from banks and another $60 billion is meant for the Economic Injury Disaster Loan Program. The speed with which the program was initially utilized by small business owners is a testament to the severity of this crisis. Furthermore, it is likely that more funding will still be needed after this latest injection to provide adequate support to small business owners.
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