The prior weekend, Congress had agreed on a $900+ bil. Covid relief package, approved by both chambers a few days later, and finally signed by the President last night. This had been in the works for months, with a few key sticking points causing the long delay and repeated breakdowns in negotiations between Democrats and Republicans. Two major items were additional state and local aid, which was wanted by Democrats, and strongly opposed by Republicans, due to the perception that it would have bailed out fiscally-troubled ‘blue states,’ such as Illinois, California, and New York. Pushed by Republicans was business liability protection (from Covid-based lawsuits). In the end, both items were excluded from the final bill, which is probably the only reason is was able to finally pass. Importantly, this relief legislation was attached to the $1.4 tril. omnibus spending bill, extending legislative fiscal authority until Sept. 2021, and essentially funding the government until then (prior funding is slated to end this week and could have resulted in another government shutdown without the funds).
The key components of the legislation are familiar, including some extensions from the earlier March 2020 CARES Act:
- Direct $600 payments to adults/children up to a limit of $75k single/$150k joint. These are expected to be sent in January. This will end up at a cost of around $170 bil. These payments were the primary reason for the President’s delay in signing the bill, threatening a veto, unless payment amounts were raised to $2,000 per person. (This is being voted on by Congress today, although passage appears less likely.)
- Additional unemployment benefits, including an extra $300/week, have been extended through March 2021, with the duration of benefits extended from 39 to 50 weeks. This includes assistance to gig workers and independent contractors. When combined, with nutrition benefits, rental assistance, and extension of the eviction moratorium, this may reach $120 bil.
- Small business aid, totaling $325 bil., which includes small business loans, including refreshing the Paycheck Protection Program (PPP). Interestingly, expenses paid with all of these loans (including prior rounds) will now be tax deductible. The employee retention tax credit was also extended through next July.
- Additional medical testing and tracing activities, as well as vaccine distribution, which may reach $50 bil. in total. Also included was a measure to protect patients against ‘surprise’ medical bills, related to out-of-network care.
- Other aid is targeted to education, in grants to states of $80+ bil., and $45 bil. to the transportation sector (a portion to airlines, but also major metro area transportation corridor support), as well as subsidies to agriculture and the deployment of broadband to a wider degree. Interestingly, there is a small addition of $1 bil. to be used towards the border wall with Mexico and other security technology, as well as an added tax break for corporate meal expenses, meant to assist restaurants. (It’s practically impossible for bills to pass without small additions in order to help build support among certain legislators or groups, to ensure the total bill’s passage.)
- A handful of tax benefits were included, such as preferential calculations for the child care and earned income credits, as well as charitable contributions, which are ‘above the line’ not only for 2020, but also now 2021.
- Apparently, a good deal of earlier CARES Act funds remain unspent, which would have required states and cities to return unused funds by year-end; this bill provides an extension of another year.
The current thinking is that this may be the last direct relief bill related to Covid, although conditions, of course, remain fluid. A surprise win by the Democrats in the Georgia Senate races on Jan. 5 could certainly produce interest in more and broader stimulus efforts in 2021, assuming these are needed. A higher-probability status quo result, of a partial of full Republican win (retaining the Senate majority) could raise the bar far higher for additional funds. The general assumption is that vaccine distribution will reach a wider swath of the American population by Q2 and Q3, rendering more aid less necessary.
