The coronavirus is outlasting the stimulus
Illustration: Aïda Amer/Axios
The coronavirus pandemic is lasting longer than Congress and the White House anticipated when it committed hundreds of billions of dollars to individuals and small businesses.
Why it matters: These bailouts were meant to stop the bleeding, to buy time while the wound cauterizes. Unfortunately, the injury was more severe than originally diagnosed.
Treasury Secretary Steve Mnuchin told CBS that "the entire package provides economic relief overall for about 10 weeks."
- The CARES Act was signed by President Trump on March 27.
- Mnuchin's 10-week window expires on June 5.
- No one expects to see a phase 4 stimulus by that date, nor a full-scale economic reopening.
Paycheck Protection Program (PPP) loans require that small businesses effectively maintain staffing levels for eight weeks. For early recipients, that means their payroll obligations could run out by month's end.
- The program's coffers were refreshed at the end of April, but small businesses are not allowed to reapply.
- Companies receiving PPP loans today would be outside the program's purview before July.
Axios asked several congressional leaders to explain why eight weeks was picked as the expiration date but was unable to get a direct answer.
- House aides from both parties directed our questions to the Senate, and Senate staffers directed Axios to the Treasury. Treasury directed us to prior public comments by Mnuchin, such as that "there's no great models for [this] because so much of what is driving the economy is the health issue."
Direct checks of up to $1,200 to individuals were only expected to help cover expenses for one month, even though many states already are well into their second month of lockdown.
- Enhanced unemployment benefits last longer, through July 31, although some GOP senators have pledged to block any extension.
All of this makes economic reopening even more complicated.
- The federal government has effectively created a "back to normal" deadline for small businesses, even though such decisions are supposed to be made by the states.
- The deadline was set via legislation signed by President Trump on March 27, thus it's unable to adapt to subsequent public health data and guidance.
The D.C. consensus is that the March bills were never intended to be the end of the stimulus.
- "The first bill was about the art of the possible and getting things through," a senior Senate GOP aide told Axios. "It was supposed to be something that we monitor. You can’t write a bill that’s just a blank check."
But Democrats and Republicans remain far apart on what the next stimulus bill should look like, let alone when it should come to the floor, as already-appropriated funds continue to dwindle.
- Republican leadership has said it doesn’t plan to continue passing stopgap measures to replenish immediate aid. Instead, it wants the next bill to be more focused on long-term recovery and reopening America.
- Democrats say states, businesses and the health industry still need emergency relief and that Republicans are unwilling to meet the moment
The bottom line: The small business loans and individual checks were designed as bridges to reopening, but if they only delayed layoffs and economic pain by a couple of months, then they may end up being remembered as bridges to nowhere.