As the COVID-19 virus rages across the nation, Americans are hoping for more assistance from the government on a variety of fronts. So far this month, their hopes have been met with a resounding silence from the White House, although members of Congress are trying to come up with answers that both parties can agree upon. I have a couple of suggestions.
The first round of fiscal and monetary stimulus did a good job in addressing the huge spike in unemployment the country has suffered. While the CARES Act at $2.2 trillion provided $500 billion to distressed industries, almost $350 billion in loans to small businesses and $4100 billion to hospitals, it was the $200 billion in additional unemployment benefits and $300 billion in stimulus checks to individuals that got the most attention.
The PPE, the additional $600 a month in unemployment benefits (which is set to sunset soon), the direct payments to taxpayers, plus the Fed's actions in the credit market, did wonders in alleviating the worst impact of the country's economic shut down.
The challenge we face this time around is twofold, in my opinion. We need to continue to help those who have been out of a job, as well as the thousands of workers who are now being laid off as the virus cases delay business re-openings in over half the country. We also need to incentivize those businesses that are struggling to remain open to rehire workers in this period of uncertainty and do more to help small businesses that are facing bankruptcy.
Exactly how to do that in an election year, when neither Congress nor the White House can agree on anything, is a tall order. As in so many things lately, the failed leadership in Washington leads me to look elsewhere for suggestions.
This week the United Kingdom's finance minister, Rishi Sunak, announced, as part of a mini-budget, some novel ideas to save jobs, help Britain's youth find work, and bolster the nation's restaurants. Some of those measures might work here as well.
The UK government, in response to the pandemic, is already paying up to 80 percent of salaries for about nine million workers under their own furlough scheme. That program will begin to wind down by August. But in preparation for the end of that plan, the government is offering more than $1,000 to firms who take on workers, including all those who had been laid off due to the pandemic. They are also spending an additional $2 billion-plus to subsidize the hiring of 16- to 24-year-olds.
Green grants for households and public sector buildings (including hospitals), to make them more energy efficient, are also in the works. As an added incentive, the tax on home purchases will be waived for those thinking of purchasing a home under $500,000.
Restaurants, both here and abroad, are suffering mightily from the virus. The government, in an effort to encourage consumers to go out and buy a restaurant meal, are giving consumers a $12 discount per meal through the month of August.
Most economists on Wall Street think it is a foregone conclusion that a second stimulus package is not only needed, but will pass no later than August. In an election year, both parties want to look like they are helping those in need.
At the same time, the recent surge in virus cases, and the delays in reopening the economy that COVID-19 is causing, makes a second package vital to the future health of the nation. Remember too, that the planned end of enhanced unemployment benefits at the end of this month could cause a drastic increase in delinquencies in consumer-sensitive, financial areas such as mortgage, auto, and commercial loans.
I would expect, therefore, that both the unemployment benefits and another direct payment to certain Americans under a certain income level will be part of CARES Act II. This time, however, I expect the additional unemployment benefits could be reduced, while some kind of going-back-to-work bonus, awarded over a specific time period, might be part of the plan.
If this is coupled with a UK-style payout to the hiring firm, it could tip the scales and stem further job losses. In the small business area, the extension of the PPE program is needed at a minimum, with intense focus and more funds funneled to small and tiny Mom and Pop enterprises. We could expand the UK's restaurant discount idea to all of our service industries. This could easily be accomplished by simply eliminating sales tax on all goods and services for a certain time period.
In any case, I am sure that we could all come up with ideas that might work in getting the economy going again. If you have one, send it to me, and I will do my best to print as many as possible.
Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at email@example.com or leave a message at 413-347-2401.
Pittsfield.com welcomes critical, respectful dialogue. Name-calling, personal attacks, libel, slander or foul language is not allowed. All comments are reviewed before posting and will be deleted or edited as necessary.