On June 25, 2020, the GAO released its report assessing and evaluating the major federal actions in response to the COVID-19 pandemic, including the CARES Act expenditures. The report, critical of the delay in comprehensive reporting of government COVID-19 expenditures permitted by OMB, drew on data directly from agencies.
Among the key findings highlighted by the report:
(1) Appropriations: Approximately $2.6 trillion appropriated across the government: “Six areas—Paycheck Protection Program (PPP); Economic Stabilization and Assistance to Distressed Sectors; unemployment insurance; economic impact payments; Public Health and Social Services Emergency Fund; and Coronavirus Relief Fund—account for 86 percent of the appropriations.”
(2) Testing: Reporting to the CDC on viral testing remains inconsistent and incomplete across the country.
(3) IRS payments to deceased taxpayers: The IRS made stimulus payments totaling $1.4 billion (the $1200 payments) to 1.1 million deceased individuals. Although the IRS has access to Social Security death information, Treasury and its Bureau of the Fiscal Service (involved in disbursing payments) did not.
The report makes a series of recommendations on following topics including: (1) Paycheck Protection Program (PPP) integrity; (2) IRS and Treasury access to Social Security death data; (3) better data tracking in state unemployment programs on benefits claims to coordinate with the PPP (under which businesses are expected to rehire or retain workers to qualify for loan forgiveness); (4) Congressional action to direct the Department of Transportation to develop an aviation preparedness plan; and (5) Congress’ need to use revised Medicaid payment formulas to provide appropriate payments during an economic downturn.
Recent policy action on the coronavirus front:
(1) LENDING: On Monday June 15, 2020, the Federal Reserve opened the Main Street lending program initiated in March in the CARES Act.
(2) TESTING: Senator Ted Cruz introduced a bill to provide tax incentives to businesses that test workers for Covid-19.
(3) OVERSIGHT: On Monday June 15, 2020, it was revealed that the inspectors general designated by the CARES Act to monitor spending — the Pandemic Response Accountable Committee — wrote to key Congressional committee chairs last week expressing concern that the administration’s recent legal rulings were blocking their ability to provide oversight of the spending programs.
(4) LIABILITY: States explore limiting liability for COVID-19 related claims, including Iowa legislation signed by the governor on June 18 that limits liability retroactive to January 1, 2020 and North Carolina’s limited liability bill that passed the senate.
(5) PRIVACY: The most recent round of proposed federal legislation aimed at protecting privacy in COVID-19 contact tracing apps, follows on the heels of earlier proposals as well as state level action on the privacy front (see e.g. California bill; Minnesota bill). Around the globe, countries have introduced contact tracing apps — including Japan’s introduction today (June 19, 2020) of its national tracing app.
The next major round of COVID-19 legislation, H.R. 6800, The Health and Economic Recovery Omnibus Emergency Solutions Act (“HEROES Act), was introduced in the house today, May 12, 2020. The package includes approximately $3 trillion in relief for state and local governments, individuals, and the healthcare system.
According to the Democratic staff of the House Committee on Appropriations summary , the bill includes, just in its funding for governments and financial services:
State Fiscal Relief – $500 billion in funding to assist state governments with the fiscal impacts from the public health emergency caused by the coronavirus.
Local Fiscal Relief – $375 billion in funding to assist local governments with the fiscal impacts from the public health emergency caused by the coronavirus.
Tribal Fiscal Relief – $20 billion in funding to assist Tribal governments with the fiscal impacts from the public health emergency caused by the coronavirus.
Fiscal Relief for Territories – $20 billion in funding to assist governments of the Territories with the fiscal impacts from the public health emergency caused by the coronavirus.
CARES Act Coronavirus Relief Fund Repayment to DC – Provides an additional $755 million for the District of Columbia to assist with the fiscal impacts from the public health emergency caused by the coronavirus
Treasury Inspector Generals – $35 million for the Treasury Inspector General for oversight of Coronavirus Fiscal Relief Fund payments to state and local governments, and $2.5 million for the Treasury Inspector General for Tax Administration for oversight of IRS payments.
Community Development Financial Institutions (CDFI) – $1 billion for economic support and recovery in distressed communities by providing financial and technical assistance to CDFIs.
Tax Credit Implementation – $599 million for implementation of additional payments to individuals.
Assistance to Homeowners–$75 billion to states, territories, and tribes to address the ongoing needs of homeowners struggling to afford their housing due directly or indirectly to the impacts of the pandemic by providing direct assistance with mortgage payments, property taxes, property insurance, utilities, and other housing related costs.
Elections – $3.6 billion for grants to States for contingency planning, preparation, and resilience of elections for Federal office.
Broadband – $1.5 billion to close the homework gap by providing funding for Wi-Fi hotspots and connected devices for students and library patrons, and $4 billion for emergency home connectivity needs.
Assisting Small Businesses – $10 billion in grants to small businesses that have suffered financial losses as a result of the coronavirus outbreak. Office of Personnel Management Inspector General Office (OPM IG) – $1 million for the OPM IG to combat healthcare fraud associated with COVID-19.
General Services Administration Technology Modernization Fund – $1 billion in funding for technology-related modernization activities to prevent, prepare for, and respond to coronavirus.
Postal Service – $25 billion for revenue forgone due to the coronavirus pandemic, plus language providing additional protections to Postal workers. An additional $15 million is provided for the Postal Service Inspector General for oversight of this funding.
On April 30, 2020, Christine Lagarde, President of the European Central Bank (ECB), announced new monetary policy measures in response to the economic crisis triggered by the COVID-19 pandemic. At an ECB press conference, Largarde first set the stage for further action, observing (at 8:30 minutes in): “The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime. Measures to contain the spread of the coronavirus (COVID-19) have largely halted economic activity in all the countries of the euro area and across the globe.”
After reviewing prior ECB action, Lagarde outlined (at 10:30 minutes in) new ECB steps including new incentives for bank lending: “Specifically, we decided to reduce the interest rate on TLTRO III [targeted longer-term refinancing] operations during the period from June 2020 to June 2021 to 50 basis points below the average interest rate on the Eurosystem’s main refinancing operations prevailing over the same period. Moreover, for counterparties whose eligible net lending reaches the lending performance threshold, the interest rate over the period from June 2020 to June 2021 will now be 50 basis points below the average deposit facility rate prevailing over the same period.” (See also Largarde’s written statement).
Estimates suggest that “[e]merging markets and developing countries have about $11 trillion in external debt and about $3.9 trillion in debt service due in 2020.” A Brookings Institution posting highlighting these numbers argued that the debt problem is not limited to a few countries: “One indication that the problem is widespread is that already 90 countries have approached the IMF to access emergency financing instruments. It seems clear that this is not just a low-income or an African country problem.” The posting advocates immediate, comprehensive and coordinated action. The major global financial players share similar concerns. At their April 15, 2020 virtual meeting, G20 Finance Ministers and Central Bank Governors agreed, among other actions, to suspend debt service for the poorest countries. The World Bank and IMF have announced their own relief actions. Others have advocated stronger relief measures including cancellation, not merely suspension of certain debt payments.
The OECD has released a report tracking and reviewing countries’ tax and fiscal responses to the COVID-19 crisis. In this April 15, 2020 report, the OECD makes a series of observations and recommendations for the future, noting that “some are already suggesting the need for a new kind of ‘Marshal Plan’ to support the poorest countries.”
An updated version of the Working Paper, Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis by Hiba Hafiz, Shu-Yi Oei, Diane M. Ring, and Natalya Shnitser has been posted. The Working Paper is revised and updated to incorporate the CARES Act (H.R. 748) as well as recent action by the Federal Reserve, the Department of Labor, and other agencies.
Release of the minutes of the Federal Reserve’s March 15, 2020 meeting provides insight into the Fed’s perspective on the financial markets in light of the coronavirus impact U.S. and global markets. In addition to the rate cut, the Fed has pursued other measures intended to support the economy.
As the first three legislative packages addressing the COVID-19 crisis are being implemented, attention now turns to Phase 4. Here, much focus is on funding and supporting infrastructure development, growth and planning. Will this be the moment that the U.S. seriously considers the idea of a National Investment Authority? Two scholars (Robert C. Hockett and Saule T. Omarova) outlined, analyzed, and advocated this idea three years ago, in “White Paper: A National Investment Authority” (Feb. 2018, originally March 2017) and Omarova updates that analysis today for the COVID-19 world, in “Why We Need A National Investment Authority.” In a 2017 review of Hockett and Omarova’s white paper, Shu-Yi Oei (one of the organizers of this tracker site) presciently recommended the article to readers, identifying its two important contributions: “First, a policy proposal for the creation of a National Investment Authority (NIA), a hybrid, public-private entity that directs private financial capital to fund long-term infrastructure and development projects; and second, a theoretical re-envisioning of what public goods are and how to provide them.” If you didn’t read it then, you should now.
European Central Bank Chief Lagarde raised the prospect of “coronabonds” at a meeting of EU finance ministers on Tuesday March 24; some EU members are supportive, others resist plans for issuing a joint debt instrument.
Justice Department Files Its First Enforcement Action Against COVID-19 Fraud
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Office of the Inspector General: Inspector General Warns Public About New Social Security Benefit Suspension Scam
Massachusetts guidance: Protect yourself from scams and fraud