Published: 14.04.2020, 14:34
8 min read
.On March 27th, 2020, the US House of Representatives approved the updated CARES Act (Coronavirus Aid, Relief, and Economic Security Act). This economic relief plan contains $2 trillion in funding that will be used to bolster businesses, families, state and local governments, as well as public service sectors. In this guide, we will look at how the funds will be divided, what the stipulations are, and how this stimulus package will impact the US.
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Individuals and Families
$603.7 billion, which is 30% of the package, will be allocated to individuals and families. The US government is going to send directly $1,200 to each individual who earns less than $75,000 per year. Married couples with no children will receive $2,400, as long as they collectively earn under $150,000 in a year. On top of this, families will receive an additional $500 per child. This money will not be taxed by the US government.
If a family’s annual income is higher than the aforementioned threshold their funds will be reduced. That is by $5 for every $100 of excess revenue. If an individual earns more than $99,000 annually, or if a couple earns more than $198,000 in a year, they will not be receiving a stimulus check.
The US government is going to use 2019 tax returns to determine who is eligible for financial assistance. If someone has not filed taxes for 2019, their 2018 return will be used instead.
If an individual or a couple did not earn any income in 2019 (and therefore did not file taxes), they might still be able to receive a check. In 2008, the IRS created a special form for these cases, and it is considering using this method again.
College students may receive financial assistance if they are not considered dependents of their parents. If a student is less than 24 years old and their parents pay over half of their living costs, he/she would be considered a dependent.
The US government is also supporting individuals and families by increasing unemployment benefits. These provisions now cover an additional $600 in weekly funds for each recipient. An individual’s benefits can last for up to four months. Furthermore, self-employed workers and independent contractors will now be eligible to receive unemployment funds.
Another key area of the individual/family stimulus funds is the temporary suspension of federal student loans and a pause on their accrued interest. This will last until the end of September 2020. Furthermore, people who have federal loans may request a mortgage freeze for up to six months.
Big Businesses/Small Businesses
Businesses, which are large profit-making corporations (e.g., airlines, Walmart, Microsoft, etc.), will receive a collective $500 billion in federal aid. That is a 25% share of the stimulus package. Such companies will receive loans, grants, tax relief, among other types of assistance. Small businesses, on the other hand, will receive a 19% share ($377 billion). There may also be an additional round of financial assistance for businesses. If these allocated funds are not enough.
Airlines
Passenger airlines will receive approximately $50 billion in aid. These funds will be evenly split between loans and cash assistance. The money should be used for employee costs, such as health care, benefits, payroll, etc. To receive money, the airlines must provide equity or another form of collateral to the US government. And, to receive loans, airlines shall have to maintain employment levels until September. Furthermore, they will not be allowed to reduce employees’ benefits or salary.
$17 billion of the funds allocated to big businesses will be directed to corporations that maintain national security. These companies have not been named publicly. But there is speculation that Boeing will be the primary recipient of the funds. Confidential sources have told the media that Boeing is currently deliberating over funding options. They are determining whether taking the federal aid is worth complying with the bill’s stipulations. These same sources say that Boeing hasn’t ruled out taking some of the $17 billion. Even though the company would have to provide equity shares to the federal government in return. This insider information contradicts comments by Boeing’s CEO, Dave Calhoun, who said that the company is not in need of financial assistance. Calhoun went on to state that they have other options to employ. If the government doesn’t budge on equity requirements.
While we’re on the topic of airlines, the CARE Act gives Elaine Chao (the Transportation Secretary) the authority to mandate that airlines must still fly to cities that they were servicing on March 1st.
Restaurants
Popular restaurant chains, such as McDonald’s and Chipotle Mexican Grill, have also been suffering due to the COVID-19 global health crisis. Restaurants have lost $25 billion in revenue, and 3 million employees have been let go. On top of that, 3% of restaurants that are members of the National Restaurant Association have closed permanently. 11% of the Association’s restaurants may have to close within the next month.
Retail
The retail industry is also facing economic turmoil. RILA (Retail Industry Leaders Association) represents big-box stores, such as Walmart and Target. The Association has disclosed that these companies are having to close their doors due to reduced revenue.
National Retail Federation is comprised of smaller-scale retailers. He has called for lawmakers to increase its members’ access to credit. Large businesses may have the resources to stay afloat during a pandemic. But small stores do not have the funds to retain their employees.
Travel and Hospitality
Certain members of the travel and hospitality industry have found issues within the CARE Act’s provisions. For instance, Chip Rogers (the president of the American Hotel and Lodging Association) believes that the cap on small business loans is too low. Currently, the Act allows the loans to be 250% of monthly payroll. Rogers, on the other hand, is seeking a loan that covers 400% of monthly operating costs. Not just payroll.
On the other hand, the US Travel Association’s president, Roger Dow, has lauded the CARE Act, saying that political leaders heard and met the industry’s need for emergency relief.
Many nations have implemented travel restrictions of various levels, which, in turn, has sorely affected the hotel industry. Hotel occupancy rates are only at 30% within the US. These numbers are even worse in cities that are coronavirus hotspots. Hotel giants, such as Hilton and Marriot, have furloughed some employees and reduced the schedules of other workers.
Casinos
The casino industry is another area that needs assistance. That is to face the economic repercussions of the coronavirus. Almost all US casinos have closed for the time being. To prevent the spread of the virus. Some casinos, such as Wynn Resorts, will continue to pay their furloughed workers. Some of this funding is coming from executive pay cuts, but that will only go so far. Federal funding is much needed to keep these casinos afloat.
American Gaming Association believes that stimulus provisions are essential. That is to combat the long-term effects of this public health crisis. The Association is also lobbying for the Act to be amended in order to include tribal-run casinos.
CEO of MGM Resorts, Jim Murren, has been lobbying for zero-interest loans, among other types of aid. The company is currently enacting measures to cut its expenses, such as cutting jobs. On the other hand, Sheldon Adelson (the CEO of Las Vegas Sands) supports the stimulus package. He is not planning on seeking any loans for his company.
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Theaters
Another area that is receiving aid is the theater industry. Many cinemas have closed due to the spread of the coronavirus. But they may be able to reopen their doors after receiving federal financial aid. A spokesperson for the National Association of Theatre Owners, Patrick Corcoran, has said that Association is satisfied with the US’ business provisions. He continued on to say that theaters are not trying to go against health officials’ guidelines. However, will not open earlier than suggested. Even if they have the funds to do so.
Banks
Banks are definitely going to benefit from the federal assistance provisions. Large banks have excess capital so that they can expand lending by over $1.5 trillion. Community banks, on the other hand, would have been hit harder by this public health crisis. So, the CARE Act will cut the capital requirements for these banks. So that they can loan out more money to community members.
Manufacturers
The CARE Act is allotting $850 billion in loans (as well as loan guarantees) to manufacturing companies. According to a statement made by the National Association of Manufacturers. Funds will help ensure that the companies can drive economic growth. When the public health crisis subsides.
Ride – and Home-Sharing Companies
Businesses such as Airbnb and Uber have been partaking in an ongoing struggle with Congress about extending unemployment assistance to the companies’ independent contractors. They finally accomplished their mission. The CARE Act will be giving relief to people who rely on these services for income.
Cruise Lines
Companies will not be applicable to receive federal financial assistance because of their offshore status. The Cruise Lines International Association made a statement that they are not going to request any assistance. They are satisfied that its employed travel agents will be receiving stimulus provisions.
US President Donald Trump has advised offshore cruise companies to change their residency to the US. This is in order to obtain federal loans.
Big Technology Companies
Facebook, Google, Amazon, and other big tech companies will not receive stimulus funding. These companies have the cash and resources necessary to stay afloat. However, they can even continue hiring during the COVID-19 pandemic.
Small Businesses
A government agency known as the Small Business Administration is going to oversee a financial relief program. Therefore, that provides $350 billion in loans to small businesses. These loans may be eligible to convert into grants under certain conditions. One such condition is that the businesses must retain their employees.
Small businesses are responsible for employing nearly half of the US’ private workers. Federal funding will be very useful to help these businesses stay afloat. The infrastructure is starting to strain. For instance, Small Business Administration’s website keeps crashing due to the overwhelming number of visits.
The Small Business Majority stated that the business provisions of the CARE Act are not enough to offset the current economic emergency.
State and Local Governments
State and local government programs have been granted 17% of the package. That is a total of $340 billion. Most of the funding will go towards government programs that are directly related to COVID-19. The rest of the funds will be divvied out to child-care facilities and schools.
Public Service Sectors
Services sectors will receive the smallest percentage of the stimulus funds. This industry is going to receive 9 percent of the funds. Which is $179.5 billion. $100 billion of this provision will be allotted to healthcare providers. Furthermore, Medicare payments for coronavirus treatments will be increased by 20%.
Some of the money will be set aside for the Center for Disease Control. A small percentage of the funds will be given to food security programs, as well as art initiatives.
