WASHINGTON – The White House and congressional leaders are nearing a deal to pump an additional $300 billion into a new program to keep small businesses from shuttering and their employees from facing unemployment as the coronavirus pandemic derails the economy.
Even before that deal is completed, talk has turned to a larger economic recovery package that could send more cash payments flowing into the pocketbooks of Americans struggling financially because of the coronavirus crisis.
Americans ages 16 and older would be eligible for cash payments of $2,000 per month for at least six months under one proposal under consideration as lawmakers piece together the details of the next economic recovery package. Financial relief for state and local communities could be part of that package, along with assistance to rural hospitals, hazardous pay for health care workers and infrastructure spending.
Many of the proposals won’t make it into the final package, which could be weeks away. Congressional leaders and the White House agree on the need for another economic recovery bill after the $2.2 trillion package President Donald Trump signed into law last month. House Speaker Nancy Pelosi, D-Calif., said the cost of the next coronavirus package could easily surpass $1 trillion.
Here’s a look at some of the proposals that lawmakers are mulling over as they piece together the next economic recovery package:
The checks are arriving: Treasury says first coronavirus checks have gone out, and many will get payments by April 15
Cash payments, paycheck protections
Millions of Americans have received checks of up to $1,200 authorized under the coronavirus recovery package Trump signed into law in March. The IRS is still delivering those checks to millions of others.
Lawmakers fear that one check may not be enough to help Americans get back on their feet, so they are looking for ways to continue the direct payments during the pandemic.
One proposal, by Reps. Ro Khanna, D-Calif., and Tim Ryan, D-Ohio, calls for every American age 16 and older making less than $130,000 annually to receive at least $2,000 per month for at least six months. Married couples earning less than $260,000 would receive at least $4,000 per month. The payments would continue until employment returns to pre-coronavirus levels.
“A one-time $1,200 check isn’t going to cut it,” Khanna said. “Americans need sustained cash infusions for the duration of this crisis in order to come out on the other side alive, healthy and ready to get back to work.”
College students and adults with disabilities who are claimed as a dependent by someone else were not eligible for a check under the recovery bill. They would be eligible under the latest proposal.
Another proposal by Sen. Josh Hawley, R-Mo., calls for the federal government to cover 80% of wages for workers at any U.S. business, up to the national median wage, until the coronavirus crisis is over. Businesses would be eligible for a bonus if they rehire workers laid off over the past month.
Under yet another proposal, all employers whose monthly revenue has dropped at least 20% would be eligible for federal grants to cover a portion of payroll and benefits for at least six months. The senators behind the “paycheck security” proposal are Mark Warner, D-Va.; Bernie Sanders, I-Vt.; Doug Jones, D-Ala.; and Richard Blumenthal, D-Conn.
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Financial relief for states
States and local governments hit hard by the coronavirus pandemic have pleaded for federal assistance to help them provide essential services.
A bill filed by Sens. Bob Menendez, D-N.J., and Bill Cassidy, R-La., from two of the hardest-hit states would set up a $500 billion fund to help states and local governments respond to the health and economic crisis while maintaining essential services.
The money would be divided into three tranches and distributed based upon population, the number of coronavirus cases and revenue losses.
Small-business relief: Congressional leaders near deal on coronavirus bill to replenish small-business program
Rural hospitals would be eligible for financial relief during the coronavirus crisis under a proposal by Sens. Tina Smith, D-Minn., and John Barrasso, R-Wyo. Their proposal would give rural hospitals access to the Paycheck Protection Program, which was created under the coronavirus rescue package and is targeted toward small businesses.
The program provides forgivable loans to employers who maintain their payroll during the coronavirus pandemic.
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Health care workers battling the coronavirus might get “hazard pay” in the next package.
Trump has embraced the idea, suggesting the money could come in the form of bonuses.
Senate Democrats push for similar bonuses.
Senate Minority Leader Chuck Schumer, D-N.Y., and other Democrats unveiled a plan to increase pay for essential workers, including those in the health care field, in sanitation and at grocery stores. The fund would increase pay up to $25,000, or $13 an hour, from the start of the crisis to the end of the year.
Senate Democrats are pushing to ramp up coronavirus testing, which has been a source of contention between the Trump administration and governors.
Trump claimed last month that America’s coronavirus testing was better “than any country in the world” and more recently argued that governors have enough testing to move toward reopening their states. Some governors, including Democrat Ralph Northam of Virginia and Republican Larry Hogan of Maryland, said the lack of testing has been a serious problem throughout the pandemic.
Senate Democrats call on Congress to approve $30 billion to rapidly expand coronavirus testing in the USA. Some of the money would be used for the production of more test kits and supplies and the development of new tests.
“Public health experts have made clear we will need to do hundreds of millions of tests if we want to reduce social distancing and safely get people back to work, back to school and back to some semblance of normal,” said Washington Sen. Patty Murray, the top Democrat on the Senate health committee. “For that to happen, we need testing to be fast, free and everywhere.”
Tax questions: Here’s how your coronavirus stimulus check affects your taxes
Republicans and Democrats have repeatedly cited the need to repair the nation’s aging infrastructure as an area where they could find common ground since Pelosi and Democrats reclaimed the majority in the House more than a year ago.
Trump called last month for a $2 trillion bill to fix the nation’s roads, bridges and tunnels and suggested it should be included in the next coronavirus package. Pelosi argued for making infrastructure the centerpiece of the next relief bill but switched course. It’s unclear whether infrastructure funding will be included in the final package. Some Republican senators suggested they are lukewarm on that idea.
Contributing: Christal Hayes
The US will need to spend trillions more as economy takes until 2022 to fully recover: CNBC survey – CNBC
The economy could take one to two years to rebound to full strength and the Federal Reserve and Congress, having already committed historic sums to fight the coronavirus pandemic, will have to commit trillions more, according to respondents to the CNBC Fed Survey.
With the Federal Reserve’s balance sheet already at an unprecedented $6.45 trillion, the 36 respondents see it rising on average to $9.8 trillion. The additional trillions will be added by the end of the current quarter, the respondents expect. Congress, having already committed about $2.5 trillion, is seen putting in an additional $2 trillion.
“My guess is that the virus itself will largely disappear within a year, but that the structural social and economic impacts will be with us much longer,” John Kattar, chief investment officer at Ardent Asset Management, wrote in response to the survey.
Jack Kleinhenz, chief economist for the National Retail Federation, said, “The policy response has been appropriate, but policy takes time to work its way into the economy and targeted sectors. … Many small businesses stand at risk.”
Despite the massive relief, respondents still see the unemployment rate rising to 19%, hitting that level in August. It’s expected to decline only gradually, to 11% by December and to 7% by the end of 2021. That would leave it at about double the rate before the crisis.
Second quarter of 2022
“With spiking unemployment and rising business closures … the prospects of a sharp rebound (is) far outweighed by the more realistic prospect of a longer-term structural disruption,” said Lindsey Piegza, chief economist at Stifel.
A 33% plurality believes the economy won’t be fully restored until the second quarter of 2022. But 19% believe it will be back by year-end and another 19% believe it can happen even earlier, highlighting a wide range of views about the speed and strength of a recovery.
“During the pandemic, production and consumption have been largely deferred and not lost,” wrote Rob Morgan, director of market strategy at US Energy Advisors. “This leads me to believe the economy will experience a V-shaped recovery beginning in the third quarter 2020.”
On average, respondents see gross domestic product falling by 24% this quarter, followed by a rebound of 4.7% in the third quarter and another strong quarter in the fourth. It won’t be enough to make back the losses in the first half. For the full year, GDP is forecast to decline by 5%.
Mark Zandi, chief economist at Moody’s Analytics, said a vaccine is essential for the economy to gain traction. “Until then, any recovery will remain something of a slog, characterized by halting growth and high single-digit unemployment. And even then, the economy won’t be in full swing and fully recovered until mid-decade.”
The Fed funds rate is seen remaining at zero for the rest of the year and rise to 1.9% in 2021. The Federal Reserve concludes its two-day policy meeting on Wednesday. Answers for CNBC’s Fed Survey from investors and economists were collected Thursday to Saturday.
The S&P is forecast to finish lower on the year at 2,844 than Monday’s close, and rise to 3,141 next year for a 9% gain by the end of 2021.
“I think the risk markets are anticipating a faster return to normalized economic conditions than we are likely to see,” says John Ryding, chief economic advisor at Brean Capital LLC.
Among the risks: Respondents place a 61% probability on a second round of contagion in the fall and winter.
White House reportedly considering another round of stimulus checks – Atlanta Journal Constitution
As the U.S. economy slowly reopens, Americans across the country are still grappling with job loss, furloughs and economic uncertainty. To combat the continued financial struggles some are facing, a White House official says the administration is “studying carefully” another $1,200 payment to citizens.
White House economic adviser Kevin Hassett told the media the administration is determining whether to provide those who qualify another round of stimulus checks, according to NBC News reporter Geoff Bennett. The additional financial support could be included in a phase 4 deal.
No word on when the package would be presented the House, but, with the virus still looming, House Majority Leader Steny Hoyer told the media Tuesday that the House will no longer come back next week after speaking to House physician, according to a tweet by Politico congressional reporter Sarah Ferris.
“We made a judgment that we will not come back next week,” Hoyer told reporters.
While the new stimulus checks are being considered, some Americans have not yet received the first round of checks. The IRS began cutting stimulus checks in mid-April. As of this week, about 90 million people have seen the economic bump in their accounts, according to economic news site Market Watch.
The hope is that the checks, which average about $1,200 a piece, will encourage spending and quell the financial pressure to pay essential bills as the COVID-19’s impact has shuttered manufacturing plants, retail stores and limited business hours for dozens of companies.
The IRS had distributed about 88.1 million stimulus checks as of April 17 and paid out $157.96 billion, according to statistics released April 24. That’s more than half of the $290 billion put aside for direct payments to individuals in the $2.2 trillion bill called the CARES Act.
Consumer confidence is still low
The Conference Board Tuesday reported that its consumer confidence index tumbled in the month of April, as millions lost their jobs and others feared for the current and future work conditions.
The Conference Board said Tuesday that its confidence index plunged to a reading of 86.9, down from 118.8 in March. The index is composed of consumers’ assessment of present conditions and expectations about the future.
The present conditions index dropped from 166.7, to 76.4, a 90-point drop that was the largest on record. The expectations index, based on the future outlook, improved slightly from 86.8 in March to 93.8 in April.
The numbers in the present conditions index “reflects the sharp contraction in economic activity and surge in unemployment claims,” said Lynn Franco, senior director of economic indicators at the Conference Board.
Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, said the confidence declines were worrisome because “consumers’ downbeat views about future income prospects can restrain consumer spending and the overall economy.”
Consumers drive about 70% of all economic activity in the U.S.
Many economists believe the country has already entered a recession that will be the largest economic disruption since the Great Depression of the 1930s.
The Associated Press contributed to this report.
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Goldman Sachs explains why stocks can keep rising even as a record-sized recession beckons – Business Insider
Drew Angerer/Getty Images
- Markets may continue to look past negative coronavirus news, especially if projections continue to show that the economy is expected to rebound after the pandemic, a Monday note from Goldman Sachs said.
- An analysis of GDP forecasts from the bank found that investors tended to discount the next two years of macroeconomic performance.
- Thus, metrics that focus only on growth over the next year “will overstate current valuations, given the large rebound expected beyond this year,” Zach Pandl, a cohead of global FX and EM strategy, wrote in the note.
- Read more on Business Insider.
Markets may continue to look past negative coronavirus news, especially if projections continue to show that the economy is expected to rebound after the pandemic, according to Goldman Sachs.
An analysis by the bank using changes to gross-domestic-product forecasts found that investors typically discounted at least the next two years of macroeconomic performance, a Monday note said.
That means that metrics that focus only on growth over the next year — such as multiples based on 12-month earnings expectations — “will overstate current valuations, given the large rebound expected beyond this year,” Zach Pandl, a cohead of global foreign-exchange and emerging-markets strategy, wrote in the note.
While the coronavirus-induced recession is set to be the deepest contraction in modern history, it’s also likely to be the shortest, Pandl said. Many economists expect that, after a dip in 2020, GDP will rebound in 2021 and 2022. By early April, consensus GDP forecasts incorporated a virus hit, down 4% this year. But forecasts are for 4% growth in 2021 and 3% in 2022 — an unusual pattern, Pandl said.
That means that more disappointing data in the near term may not weigh heavily on markets, as activity is expected to snap back “relatively quickly,” Pandl wrote. “The depth of the downturn matters much less than the duration of the recovery,” he said.
Goldman’s analysis came amid a stock-market recovery from March 23 lows. As US states weigh relaxing strict lockdown measures designed to curb the spread of COVID-19, stocks have slowly gained on optimism that the economy will soon reopen. From March 23 to Monday’s close, the S&P 500 gained about 29%, but it was down about 15% from all-time highs in February.
Still, many economists disagree that any rebound after the coronavirus pandemic will be a quick one. Instead of the sharp V-shaped recovery that Goldman is suggesting, many expect a rebound to take a softer U shape.
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