12 weeks ago Congress rushed in to save the US from economic collapse. But now all its assistance programs are ending.
- The federal assistance programs that tided over jobless workers and struggling businesses early on in the pandemic are set to expire this summer.
- Congress is barreling towards the July deadline, setting up a cliff that could lead to critical aid being yanked from struggling people.
- "What really concerns me is people relying on the somewhat rosy jobs picture," labor expert Michelle Evermore says. "That was the kind of thing that pushed the Great Depression into a double-dip, easing stimulus too soon."
Nearly four months ago, Republicans and Democrats scrambled to assemble a colossal $2.2 trillion spending package to stave off total economic collapse due to the coronavirus pandemic. President Donald Trump signed the Cares Act into law at the end of March, kicking off an unprecedented federal effort to tide over individuals as well as companies large and small through the shutdown.
Now, as spring turns into summer, that patchwork of assistance programs keeping people and businesses afloat are nearing their expiration date in the midst of a recession. The $600 federal boost in weekly unemployment benefits is set to phase out on July 31. In addition, most people have already received and spent their one-time, $1,200 stimulus checks on rent, groceries, and other basic essentials.
Nearly $500 billion in loans have gone out to 4.5 million small businesses under the Paycheck Protection Program, though $130 billion still sits unused.
The deadline is nearing for Congress to debate the scope of another spending package many experts say is needed to bolster an economy in recession — before the federal lifeline is yanked for struggling businesses and the unemployed, and worsening the downturn.
Michelle Evermore, a senior policy analyst at the National Employment Law Project, said lawmakers shouldn't place too much faith in an unexpected jobs report showing the American economy adding 2.5 million jobs in May.
"What really concerns me is people relying on the somewhat rosy jobs picture," Evermore told Business Insider. "That was the kind of thing that pushed the Great Depression into a double-dip, easing stimulus too soon."
The White House — in tandem with Senate Republicans — have adopted a wait-and-see approach, saying they'd rather gauge the results of programs already in place and growing alarmed over rising federal debt. With the unemployment rate dropping to 13.3% last month, some GOP lawmakers downplayed the need for another round of government spending.
But economists cautioned against pulling the plug too soon on federal aid, given the economic devastation wrought by the coronavirus.
"No wind should be taken out of any sails. 13.3% unemployment is an economic and human disaster," Michael Strain, the director of economic policy studies at the conservative American Enterprise Institute, said in a tweet last week.
He continued: "Peak unemployment in the Great Recession was 10%. Workers, families, and small businesses need Phase 4. There's no doubt about the need."
Roughly 44 million people have filed for unemployment in the past 12 weeks, and around 19.5 million jobs have been lost so far. A critical piece of the aid package was the beefed-up unemployment benefits, which Democrats are seeking to extend through January. But Republicans argue it's hobbling the recovery by disincentivizing work.
But the unemployment rate is projected to be around 10% for the rest of the year, and the prospect of a hiring blitz by employers is scarce. Without any replacement for the plussed-up unemployment checks, many workers would virtually fall into poverty overnight, Evermore says.
"It would be absolutely ridiculously bad," she says.
And as people begin heading back to work, some workers will find it easier than others to do so. The jobs report showed unemployment ticking up for Black workers, while dropping for white ones.
"It's clear that the pace of recovery is not even for all groups," Valerie Wilson — the director of the left-leaning Economic Policy Institute's program on race, ethnicity, and the economy — told Business Insider.
Republican Senate Majority Leader Mitch McConnell said any stimulus legislation would be taken up towards the end of July. Democrats, however, passed a $3 trillion spending package in the House last month known as the Heroes Act.
It would include the ramped-up unemployment checks, send another round of direct payments to households, and provide federal cash to states grappling with plummeting tax revenues. Yet Republicans roundly rejected it as a grab-bag of liberal priorities.
The GOP is weighing whether to push for a temporary weekly hiring bonus ranging from $450 to $1,200, as well as other measures aimed at spurring people to return to their jobs. Republicans are calling for a liability shield guarding businesses from coronavirus-related lawsuits.
Federal Reserve Chair Jerome Powell has said more federal aid would likely need to be authorized by Congress to prevent a painful recovery.
"My assumption is there will be a significant chunk... well into the millions of people, who don't get to go back to their old job... and there may not be a job in that industry for them for some time," Powell said Wednesday.