Late on Friday May 15, 2020, the most recent round of COVID-19 funding legislation, H.R. 6800, The Health and Economic Recovery Omnibus Emergency Solutions Act (“HEROES Act), passed the House by a mostly partisan vote of 208-199. The bill, which was introduced in the House earlier this week on May 12, 2020, includes approximately $3 trillion in relief for state and local governments, individuals, and the healthcare system.
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.
The new guidance clarifies the terms of the $500 billion lending program for state and local governments. The Municipal Liquidity Facility will be available to U.S. states and the District of Columbia, U.S. cities with a population exceeding 250,000 residents, U.S. counties with a population exceeding 500,000 residents, and certain multi-state entities. The new guidance sets forth revised eligibility criteria, including the requirement that eligible issuers that are not multi-state entities must have been rated at least BBB-/Baa3 as of April 8, 2020 by two or more major nationally recognized statistical rating organizations. The term sheet also sets out pricing details. Pricing will be at a fixed interest rate based on a comparable maturity overnight index swap rate plus the applicable spread (ranging from 150 to 590 basis points) based on the long-term rating of the security for the eligible notes.
On Friday May 8, 2020, the Department of Labor Bureau of Labor Statistics released the unemployment rate for April 2020: 14.7%. During the Great Depression, the unemployment rate is believed to have reached 25%. During the Recession which began in December 2007, unemployment topped out at 10% in October 2008. One note about the current 14.7% rate — experts question whether it captures the full level of unemployment as the circumstances of the pandemic mean that many who are currently not working are not in a position to “actively” seek work. Additionally, unemployment is not borne equally across all populations, posing particular challenges in some industries, regions, socio-economic groups, and communities.
The new guidance extends deadlines that affect participants’ rights to healthcare coverage, portability, and continuation of group health plan coverage under COBRA. Among other changes, the guidance extends the normal 60-day period to elect COBRA continuation coverage and the date for making COBRA premium payments by the length of the “Outbreak Period,” which is defined as the period from March 1, 2020, until 60 days after the announced end of the national emergency due to COVID-19 or such other date announced by the agency. The guidance also extends the timeframe for special enrollment in a group health plan under HIPPA, and the timeframe for participants to file benefit claims or appeals of denied claims.
Section 2102 of the CARES Act established a temporary federal program called Pandemic Unemployment Assistance (PUA) that provides up to 39 weeks of unemployment benefits, and provides funding to states for the administration of the program. An individual receiving PUA benefits who meets certain eligibility requirements may also receive the $600 weekly benefit amount under the Federal Pandemic Unemployment Compensation (FPUC) program. The April 27 guidance from the Employment and Training Administration provides states with additional instructions and FAQ guidance for implementing the emergency unemployment relief. The FAQ provides, for example, that an individual who “refuses to return to work when called back by the employer because he or she wanted to receive unemployment benefits” is not eligible for PUA. Furthermore, the FAQs provide that once the regular 2019-2020 school year is over, individuals eligible for PUA as primary caregivers for children unable to attend school should rely on “their customary summer arrangements for caring for their children.” Absent “some other qualifying circumstances,” such individuals will not be eligible for PUA once the school year has ended.
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 Congressional Budget Office has released preliminary estimates of the budgetary impact of the CARES Act, reporting that: “On a preliminary basis, CBO and JCT estimate that the act will increase federal deficits by about $1.8 trillion over the 2020-2030 period.” The CBO estimate includes:
• “A $988 billion increase in mandatory outlays;
• A $446 billion decrease in revenues; and
• A $326 billion increase in discretionary outlays, stemming from
emergency supplemental appropriations.”
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.
The Department of Labor just released statistics for Unemployment Claims for the week ending April 4, 2020 revealing 6,606,000 new claims. This number marks “a decrease of 261,000 from the previous week’s revised level [which had been revised] upward by 219,000 from 6,648,000 to 6,867,000. The 4-week moving average was 4,265,500, an increase of 1,598,750 from the previous week’s revised average.”
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.
Latest information about the IMF’s work to address the Coronavirus crisis
Statement by the International Monetary and Financial Committee on the Coronavirus (Mar. 4, 2020)
Policy Action for a Healthy Global Economy (Mar. 16, 2020)
IMF Policy Recommendations: Policy Steps to Address the Coronavirus Crisis (Mar. 16, 2020)
Blunting the Impact and Hard Choices: Early Lessons from China (Mar. 20, 2020)
Coronavirus Economic Planning: Hoping for the Best, Prepared for the Worst (Mar. 12, 2020)
Monetary and Financial Stability During the Coronavirus Outbreak (Mar. 11, 2020)
Limiting the Economic Fallout of the Coronavirus with Large Targeted Policies (Mar. 9, 2020)
Fiscal Policies to Protect People During the Coronavirus Outbreak (Mar. 5, 2020)