Everyone gets a check, and those left without a job from the coronavirus epidemic will get full-salary unemployment for the next four months. That leaves a central question still left unanswered, which is this — how will the still-employed fare under the newly minted CARES Act?
The Senate Minority Leader basically took credit for everything else in the bipartisan agreement, natch:
“I think the President has said that he would have it out by April 6th,” @SenSchumer says about the $2 trillion stimulus deal that will send checks to Americans during the coronavirus crisis.https://t.co/r3RgIxhMu0 pic.twitter.com/NcANnpi2dE
— New Day (@NewDay) March 25, 2020
Four years of unemployment insurance? That would be unemployment on steroids, but Schumer clearly misspoke — he meant four months. That was indeed a change from the GOP proposal, but only by one month:
Democrats said the package would help replace the salaries of furloughed workers for four months, rather than the three months first proposed. Furloughed workers would get whatever amount a state usually provides for unemployment, plus a $600 per week add-on, with gig workers like Uber drivers covered for the first time.
“It ensures that all workers are protected whether they work for businesses small, medium or large, along with self-employed and workers in the gig economy,” Schumer said.
April 6 is less than two weeks out, which is pretty fast considering the reduced means testing still in place in this bill. The phase-out makes sense — no one needs to stuff $1200 into the pocket of someone who made a million bucks in 2018, after all. But it still complicates the payout somewhat, especially for those between the full-benefit limit of $75K/$150K for joint filers, and the $99K/$198K limit for any benefit. The rapid cash outlay should help boost local economies and protect at least some jobs in the short term.
What about those still employed, though? How will this bill protect the jobs they have at the moment? That’s still a murky question, one that won’t be answered fully until the language comes out later today. The bill does provide tax incentives to keep people on payrolls, but is it enough for companies with cash-flow crises?
Republicans won inclusion of an “employee retention” tax credit that’s estimated to provide $50 billion to companies that retain employees on payroll and cover 50% of workers’ paychecks. Companies would also be able to defer payment of the 6.2% Social Security payroll tax.
That’s not a bad incentive, but it might not be enough to tide companies over without reliable cash flow. Tax credits aren’t immediate enough to work in a crisis like this, although they can be a big help to those employers who do survive to the end of the tax year. Those issues might be addressed in the other part of the small-business and corporate relief packages, but the mechanisms aren’t clear yet, nor their potential efficacy.
At one point, it seemed like Congress might just provide cash for payrolls directly. That is the approach European governments are taking, which could delay a day of reckoning but not put it off altogether:
In the United States, the economic response has taken the form of a $2 trillion stimulus plan. But while Congress was debating that legislation, and while U.S. companies have been shedding jobs, many European countries have rolled out even more ambitious programs to shield their citizens and businesses.
France, Germany, Denmark, Britain and others have decided to take over the payrolls of struggling companies, so that workers don’t get laid off. The hope is that by paying people to stay home, governments can slow the virus’s spread while also averting an economic depression.
The pricey gamble could work if the coronavirus crisis lasts just a few months, many economists say, since companies would be able to exit their frozen status almost immediately. But if the restrictions drag on, the financial support could saddle European governments with gigantic bills while also failing to avert the collapse of businesses.
That particular downside may not matter much, because a financial collapse would still bankrupt nations and crash the global economy, making those debts meaningless. The bigger risk is that this would inevitably lead to nationalizing the economy. Governments are not going to just fund payrolls without taking over the decision-making behind them. Even a grant program would inevitably come with so many strings attached that it would all but eliminate any independence of operation by business owners. Just look at the climate-change nonsense Nancy Pelosi attempted to graft onto the CARES Act even without funding airlines’ payrolls.
The bet by Congress is that these incentives and the enhanced oversight will keep companies from laying off millions of people until that money runs out. They’d better hope it works, because a massive layoff will backfire on Congress after handing out that much cash to corporate boards.