Eight months, 14.8 million new cases and 275,000 deaths after Congress passed the $2.2 trillion CARES Act in late March to cushion the economic blow of the coronavirus, and lawmakers are inching toward approving a second round of stimulus, albeit one less than half the size of the original.
The current $916 billion proposal being marshalled by White House point man and Treasury Secretary Steven Mnuchin is aimed at staving off a double-dip recession and widespread business closures that threaten to cripple the world’s largest economy.
It also comes at the increasingly urgent behest of business and industry leaders who have cautioned that further delays will prove to be costly and catastrophic.
“We are urging lawmakers to support bipartisan efforts to enact pandemic relief in the coming weeks. While it is critical that lawmakers get the details right, time is of the essence. American families cannot wait until next year,” a U.S. Chamber of Commerce member petition said.
Go Big Or Go Home
While negotiations are still underway and the details of a second stimulus package fluid, the Mnuchin proposal appears to include relief for state and local governments, liability protections for businesses and other institutions like colleges, as well as direct $600 per person payments to qualifying children and adults.
While Democrat and Republic leaders are advancing their own proposals, the Mnuchin plan does not currently include specific additional funding for businesses, like the Paycheck Protection Program (PPP), or money to cover enhanced unemployment benefits. It does, however, release more than $400 billion in leftover funds from the first stimulus plan to help small businesses.
In addition, consumer groups and the financial industry have repeatedly cautioned about the impact of expiring protections for student loans, auto loans and other lines of credit, as well as sunsetting moratoriums on evictions and foreclosures.
Adding to the pressure behind the deliberations is the fact that Congress is set to adjourn for the holidays next week, as well as the looming cost and logistics involved in a mass delivery of a COVID vaccine.
The Stakes
The 11th hour stimulus effort marks the first outreach from the White House since the election a month ago, despite the pleas of business leaders that something desperately needs to be done. In addition to the Chamber of Commerce, executive groups like the Business Roundtable have also joined the chorus of voices calling for immediate action. Roundtable CEO Joshua Bolten has told lawmakers that 83 percent of CEOs also see the near-term passage of additional stimulus measures as a key priority. The Roundtable also said that one in four small businesses have said they will need additional support to avoid closing down.
That said, the White House has repeatedly pointed out the strength and breadth of the economic comeback since the spring. Specifically, the unemployment rate has fallen from a pandemic peak of 14.7 percent in April to 6.7 percent in November. By comparison, the headline unemployment rate in Nov. 2019 was 3.5 percent.
Stimulus Execution
Assuming some sort of stimulus can be agreed upon, that also opens debate as to the fastest, safest way to get money into the hands of people and businesses that need it.
Given the degree of fraud and abuse that accompanied the first round of stimulus, payments professionals clearly have a proven preference for digital direct deposit over paper checks. In addition, they show a preference for outsourcing both the security and delivery of stimulus payments, noting that it is not an area of expertise the government specializes in.
One word can sum up the last go round, where the CARES Act got $2.2 trillion into the hands of individuals, families and businesses: headaches. Big ones. Congress, the Federal Reserve and the Department of the Treasury must confront the ghosts of stimulus disbursements past, where tens of millions of individuals had to wait for paper checks to be delivered by snail mail or paid cards (and at least some of the cards may have been thrown away by recipients by mistake, which led to reissuance).
Then of course, there was the fraud problem to contend with. Trying to get $269 billion into the bank accounts of 160 million Americans in a short timeframe is a Herculean task for any payments system, but there are ways to address the gaps and the cracks.
Tech-driven ways, of course.
Noted Wells Fargo Senior Vice President, Head of Global Payables, Treasury Management Michelle Ziolkowski in a recent PYMNTS panel discussion: “In terms of setting up the process, the fact that we do still from a government perspective distribute so many of our federal payments to individuals in a paper fashion is an incredible challenge.” Electronic methods are gaining traction, she noted, and the pandemic may be the tipping point that finally kills the paper check, especially with the high costs involved in making up those checks and mailing them out.
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