In this week’s roundup, we look at the Senate’s stimulus package and what’s in it. We also provide a summary of conflict occurring between lawmakers in the House over its competing multi-trillion-dollar aid package, and the Federal Reserve’s decision to keep interest rates steady at the conclusion of its July meeting.
Senate Unveils $1 Trillion Stimulus Package, Second Round of Loans to Businesses
Businesses will have a chance to apply for a second round of forgivable loans to keep workers on the job during the pandemic under the Senate’s nearly $1 trillion stimulus package unveiled on Monday.
After nearly a week of talks with the Trump administration that delayed a planned release last week, Senate Majority Leader Mitch McConnell, R-Ky., outlined legislation for the “phase four” stimulus package, called the HEALS Act, which lawmakers hope to pass before the August recess next week.
“The American people need more help,” McConnell said on the Senate floor when he introduced the bill. “They need it to be comprehensive. And they need it to be carefully tailored to this crossroads.”
Among the bill’s provisions is an estimated $190 billion earmarked for the Small Business Administration’s Paycheck Protection Program, which includes unspent funding left over from the CARES Act—there is about $130 billion remaining in the program currently. The second round of PPP loans is targeted at small companies, defined as those with fewer than 300 workers and a demonstration that they lost at least 50% of revenue as a result of the pandemic.
The Senate plan—which includes only one-third of the funding House lawmakers have asked for in the HEROES Act—would also cut limits on tax deductions for restaurants, expand tax credits eligible to employers that hire and retain workers, and provide aid to help cover 50% of expenses for virus protection, which includes personal protective equipment and virus testing.
To encourage more people to return to work, the plan calls for cutting back federally funded unemployment bonuses from $600 per week to $200 per week, but most Americans would get a second direct cash payment of up to $1,200 per adult.
Finance Committee Feuds Over HEROES Act
The House Financial Services Committee became divided along party lines as it met Thursday to discuss the multi-trillion-dollar competitor to the Senate’s stimulus plan.
Lawmakers from both parties began feuding during a hearing to consider the HEROES Act, the House’s $3 trillion response to the Senate’s HEALS Act.
“Look, there’s no way to sugarcoat this, so I am just going to say it: This hearing is a waste of time,” said the committee’s ranking member, Rep. Patrick McHenry, R-N.C., during his opening statement at the July 23 hearing.
McHenry and the Republican minority on the committee criticized Financial Services Committee Chairwoman Rep. Maxine Waters, D-Calif., for calling a hearing on the HEROES Act, passed by the House in May. The bill subsequently died in the Senate before being resurrected last week.
The HEROES Act is more than three times the size of the Senate plan, with $900 billion allocated for financial relief to state and local municipalities, and hundreds of billions more earmarked for extension of current federal unemployment benefits, direct cash payments to individuals and families, rental assistance, and additional relief for homeowners and businesses.
While leaner, the Senate’s HEALS Act does not provide comparable rental or mortgage relief, which could become a problem later as large banks struggle to recover revenue from missed mortgage payments—setting up a potential liquidity crisis in the future.
“The HEROES Act provides critical relief and protections for all,” Waters said in her opening statement.
When the House voted on the HEROES Act in May, 14 Democrats voted against the measure. McHenry, citing opposing Democrats, called the bill a “partisan dead-end.”
Ahead of the meeting, McHenry also sent a letter to Waters, urging her to reconsider the hearing. Waters rejected the ranking member’s request.
“To conclude that this time has somehow been a waste is simply incorrect and unfair,” she said in the letter.
Fed: Economy’s Fate Will Depend on the Course of Coronavirus
Financial conditions are improving, but the fate of the economy will continue to be tethered to the coronavirus, officials from the Federal Reserve’s decision-making body said on Wednesday, keeping rates at near-zero levels since March.
While economic activity has increased and jobless rates have improved over the last month, the Federal Open Market Committee voted unanimously to keep interest rates steady at its 0%-0.25% range for three meetings straight. Keeping the benchmark rate which will become critical as the economy enters a new phase, Powell said.
“The path forward for the economy is extraordinarily uncertain and will depend on our success in keeping the virus in check,” Federal Reserve Chairman Jerome Powell said to reporters at press conference following the meeting of the FOMC on July 29.
The number of COVID-19 cases in the U.S. continues to rise, breaking previous records made in the spring. There are currently 4.3 million cases of coronavirus, which have led to nearly 150,000 deaths, according to data from Johns Hopkins University.
The rate of deaths is continuing to peak, with nearly 1,000 per day and little sign of slowing down. “A full recovery is unlikely until people are confident that it’s safe,” Powell said.
Benjamin Glick is Middle Market Growth’s associate editor.