Saturday, March 21, 2020

'It's a Very Large Package': Coronavirus Stimulus Plan Now Costs More Than $1 Trillion

By Billy Binion - March 21, 2020 at 04:15PM

The coronavirus stimulus package, a series of financial measures meant to provide relief to Americans in the face of the pandemic, will likely exceed the original $1 trillion price tag, according to Larry Kudlow, director of the National Economic Council.

Indeed, it may exceed $2 trillion, though the White House said that figure includes the impact of Federal Reserve action on loans and that lawmakers are working to keep the legislation under $1.5 trillion. The hypothetical price tag continues to grow as the Senate works to hammer out a final version before a Monday vote.

"The package is coming in about 10 percent of GDP, it's a very large package," said Kudlow.

Released on Friday, the last iteration contained bailouts and loans businesses large and small, as well as direct payments to some Americans. Specifically, it allocated $300 billion in loan guarantees for small businesses, as many such companies have had to temporarily close or limit service to comply with government-enforced social isolation. Airline carriers would receive $50 billion, cargo carriers would receive $8 billion, and additional "distressed sectors" of the economy would receive $150 billion—all in the form of loan guarantees, which put the federal government on the hook in the event that those companies fail to repay their debts.

In order to curb that risk, the stimulus bill also gives the federal government an equity stake in some of the big businesses that would receive loans. It also forces airlines to limit executive compensation until the loans are paid off and requires that they continue service. The latter stipulation may generate pushback amid orders to stay home and self-quarantine.

Direct payments would be available to Americans whose 2018 tax returns show them making less than $99,000 a year, though benefits start to phase out once an income surpasses $75,000. Married couples who file jointly must make less than $198,000 to receive a check, and benefits would gradually decrease for those couples who make more than $150,000. An additional $500 would be available per child. 

But that proposal only carved out $600 for those with little to no taxable income, which drew the ire of some Republicans and Democrats. "Relief to families in this emergency shouldn't be regressive. Lower-income families shouldn't be penalized," tweeted Sen. Josh Hawley (R–Mo.). Sen. Debbie Stabenow (R–Mich.) echoed that sentiment: "I couldn't believe that they were talking about lowest-income people getting $600 and somebody making $75,000 getting twice as much as that, $1,200," she said, according to The Hill. "Those numbers don't make any sense."

Costs are also expected to escalate as Democrats lobby for increasing Social Security benefits, bolstering unemployment insurance, and expanding Medicaid. Negotiators reportedly were successful in inserting a payroll tax holiday for small businesses. Also on the table is a stabilization fund to help state governments with revenue shortfalls and financial assistance for healthcare institutions slammed by an influx of coronavirus patients.

from Reason Magazine Articles