Actions the Federal Government is Taking to Address the Current Economic Crisis
This article contains breaking news and events related to the current state of politics and the economy. While we try our best to keep our articles as up-to-date as possible, the ongoing effects of COVID-19 are happening in real time and information is subject to change.
The COVID-19 pandemic is having a major impact on the U.S. economy, which is being felt from Wall Street to Main Street.
In response, the U.S. Congress and the various branches of the Trump administration are proposing a wide array of measures aimed at helping workers, families, businesses, and the economy as a whole.
The decisions our government makes during this crisis will have a significant impact on your financial health. At SoFi we want to help you make sense of it all.
Here’s what has been enacted into law
The federal government is in the process of taking unprecedented action to address the economic fallout from the novel coronavirus (COVID-19). Here are some of the key actions it has done to date:
Phase 1: Became law on March 6, 2020
As a first step in the fight against the economic fallout of COVID-19, Congress passed an $8.3 billion emergency package meant to support vaccine research and development for COVID-19.
The law includes funds for states and communities to prepare for and help combat the spread of the virus, including testing and developing prevention treatment.
Phase 2: Became law on March 18, 2020
In follow up to the first aid package, Congress passed a second coronavirus emergency aid bill. The Families First Coronavirus Response Act is a $104 billion package that includes support for workers and families, including paid leave and unemployment benefits for workers who lose their jobs.
Key Provisions of the Families First Coronavirus Response Act:
• Free coronavirus testing for all—those with private health insurance, Medicare, Medicaid, and other federal insurance, as well as those without insurance.
• Additional unemployment aid for those who lose their jobs.
◦ The bill also provides technical assistance to states that want to set up work-sharing programs. This would apply to businesses that reduce employees’ hours instead of laying them off. It gives those employees partial unemployment benefits to help make up for the wage loss.
• Two weeks of paid sick and 12 weeks family leave for employees at companies with fewer than 500 employees. It applies to employees who have worked for the company for at least one month. Here are some more details:
◦ Sick leave will be paid at the usual pay rate.
◦ Paid family leave is to be paid at two-thirds of the usual pay rate.
◦ Those who are self-employed and gig workers are eligible for these benefits as well in the form of a tax credit.
◦ Paid sick leave is capped at $511 per day and paid family leave is capped at $200 per day. As a result, The Washington Post stated that, according to the Center on Budget and Policy Priorities, “paid sick leave would fully compensate employees earning up to about $130,000 a year for that two-week period, and paid family and medical leave would fully compensate employees earning up to about $75,000 a year for the three-month period.”
◦ It includes refundable tax credits for small businesses to help offset the cost of the paid leave benefits. If it’s too difficult for small businesses with fewer than 50 employees to comply, the Labor Department can exempt them if it “would jeopardize the viability of the business.”
◦ For larger companies, it’s expected that the companies have paid leave policies to support employees who get COVID-19.
◦ Increased federal funds for food assistance programs to provide access to meals for those without food security, including state waivers to pay for meals for children who would usually get them at school.
Tax Filing Dates Pushed: Announced March 20, 2020
Treasury Secretary Steven Mnunchin announced that the IRS is pushing back the deadline for filing taxes from April 15 to July 15. Secretary Mnunchin tweeted on March 20, “All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.” However, he encouraged those with potential tax refunds to file now to get their money.
Student Loan Payment Relief: Announced March 20, 2020
U.S. Education Secretary Betsy DeVos announced on March 20 that student loan borrowers could pause their monthly payments for at least 60 days during the coronavirus outbreak. This news comes on top of the suspension of interest rates on federal student loans, announced by President Trump last week.
As a result of this news, anyone can ask their loan servicer to temporarily postpone their federal student loan payments during this crisis. Payments will be automatically suspended for borrowers more than 31 days behind on their bill as of March 13, or those who become delinquent.
Before requesting student loan forbearance, there are important requirements and limitations to consider.
• Borrowers with past-due loans automatically get forbearance. Borrowers on time with payments need to submit a request to stop making payments on their federal student loans.
• Payments not made during the 60-day forbearance period won’t count towards Public Service Loan Forgiveness. Borrowers will still need to make 120 payments to qualify.
Where it stands: Republicans have proposals to enable student loan borrowers to put a hold on their payments without accruing interest.
Specifically, the Senate Republican bill would stop payments and interest on federal student loans for six months, which builds on initial proposals from the administration.
Meanwhile, Democrats are trying to go further by calling for federal student loan debt to get canceled during the COVID-19 crisis and giving each borrower at least $10,000 in loan forgiveness.
Here’s what’s being debated
Phase 3: In progress
Congress is now debating a significantly larger aid package, known as Phase 3, that would support workers, families, and businesses, and seek to prop up the economy as a whole.
Republicans and Democrats in the Senate and House have a number of different proposals in circulation and the Trump administration has indicated it has its own priorities.
The following proposals are currently in negotiation among Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi and Treasury Secretary Mnunchin. On Thursday, March 19, McConnell pledged to keep the Senate working until the legislation passed.
From the Senate
On March 19, McConnell introduced Phase 3 of the COVID-19 emergency legislation on behalf of Senate Republicans to provide further immediate assistance and health care responses to individuals, families, and businesses affected by the COVID-19. This proposal is built off the Treasury Department’s initial $1 trillion relief proposal.
• Two rounds of $250 billion of direct payments to taxpayers. Payments will be up to $1,200, specific dollar amounts would be based on family size and income level.
• Relief for students receiving financial aid.
◦ It would suspend federal student loan payments (plus interest) for three months. The Education Secretary would then have the authority to defer payments for three more months.
◦ Borrowers wouldn’t have to repay their federal student loans or Pell Grants if they drop out in the middle of the semester because of the coronavirus.
• $300 billion in small business loans.
◦ Eligible businesses are described as employers with 500 employees or fewer. These businesses would have to pay all their workers for eight weeks from when they receive the loan.
◦ The government would guarantee six weeks of payroll, up to $1,540 per employee.
• A $50 billion bailout to the airline industry.
• $150 billion for other impacted sectors.
Senate Democrats are calling for the bill to include stronger protections for workers, more restrictions on how taxpayer money could be used to bail out businesses, and more limits on executive compensation. Senate Republicans claim Democrats are trying to add provisions unrelated to COVID-19 to the bill, like fuel emission standards for airlines and more wind and solar tax credits.
Update: On March 25, the Senate reached a deal on a nearly $2 trillion relief bill.
From the House
On Monday night, House Speaker Nancy Pelosi released House Democrats’ proposal to help shore up the economy and support workers. They introduced it as a direct contrast to Leader McConnell’s economic stabilization proposal. House Democrats’ bill would increase support workers and put limits on how taxpayer assistance for corporations could be used.
• Provide direct payments to Americans, including the unemployed
• Offer relief for private and federal student loan borrowers
• Expand paid leave, sick leave, and unemployment benefits
• Strengthen the child and earned income tax credits
• Eliminate cost-sharing for coronavirus treatments and vaccines for all patients
• Offer support for small businesses to help them operate
• Implement an airline rescue package
• Put in place limits on executive pay, stock buybacks, and lobbying
For the economy:
• Save the U.S. Postal Service from going insolvent
• Offer support for hospitals so they would qualify to certain tax credits
• Provide emergency funding for federal agencies
From the White House
• Two rounds of direct payments of $250 billion each on April 6 and May 18 to Americans.
• $50 billion to aid the airline industry.
• The creation of a small business interruption loan program.
• $150 billion for other impacted sectors.
On March 23, the Federal Reserve announced it would continue to buy government-backed debt to support the markets and would take action to boost large and small businesses. Many of these moves were used during the financial crisis in 2008.
Senate Democratic Leader Chuck Schumer and U.S. Treasury Secretary Steven Mnuchin are currently negotiating a compromise package to address the economic fallout of COVID-19. They say they are very close to a deal.
Meanwhile House Speaker Nancy Pelosi will release her own proposal from House Democrats to help shore up the economy. She said her package will focus on immediately helping those in need by reducing burdens on student loan debt and offering direct payments, including expanded unemployment insurance, child tax credit, and earned income tax credit.
The two chambers of Congress will then need to agree on a final bill, which will then be sent to President Trump who can either sign it into law or veto it.
We will continue to communicate with our members through The SoFi Daily, our regular email newsletter, as well as ongoing blog posts and podcasts to keep you updated on the news and information you need during this unprecedented time.
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