Perhaps the most important thing about the $2.2 trillion stimulus bill the Senate passed late Wednesday night is that it is not a stimulus bill at all.
- It is not intended to stimulate growth and spending to offset a potential downturn. It is designed to prevent mass homelessness, starvation and a wave of business closures not seen since the height of the Great Depression.
Why it matters: The bill's price tag is around 10% of U.S. GDP, and Congress is already bickering internally — as well as with various lobbyists and policy advocates — about whether it goes far enough in a plethora of directions. Even if the bill passes, the story won't be over:
- We are likely to be in this same situation again, economists say — and soon.
- Another stimulus bill will likely be necessary to get the economy running after the COVID-19 outbreak has been contained.
- More immediately, it's entirely possible that a second massive spending bill will be needed just to stop further bleeding.
What it means: "This should not be thought of as a stimulus bill — this should be thought of as social insurance in a disaster state of the world for the most hard hit," Jonathan Parker, professor of finance at MIT, said during a virtual briefing with reporters Wednesday.
- "The idea is to freeze time for a month or six weeks and let people emerge with not a huge amount of debt — not starving, not being evicted."
- This would ideally produce "a V-shaped recovery where people find themselves roughly where they were when we went in."
State of play: The bill includes unprecedented direct payments to individuals — up to $1,200 a person and $500 per child, even for those who have no income, plus extended and upgraded unemployment insurance, even for gig workers.
- But social service and human rights advocates say the one-time payment is too small and excludes too many.
The legislation includes $150 billion for state and local governments, which run the bulk of the nation’s overburdened public health services.
- But as Axios Cities editor Kim Hart points out, that's the minimum requested by the National Governors Association with “maximum flexibility,” and $100 billion short of a request from the U.S. Conference of Mayors.
It includes $350 billion for small businesses and $500 billion for large companies in loans, loan guarantees and other investments.
- But ratings agency Moody's warns that outright debt defaults and liquidations are still likely for many businesses, especially smaller firms and those with speculative grade credit ratings.
"Most companies can cope with a 15- to-30 day lockdown, but a few additional weeks would likely exhaust available resources for a significant number," Moody's said. "This crisis is beyond what they could have reasonably prepared for."