What You Need To Know: Government Stimulus Plan
Georgia Public Broadcasting’s new series What You Need To Know: Coronavirus provides succinct, fact-based information to help you get through the coronavirus pandemic with your health and sanity intact.
Virginia Prescott spoke with state fiscal economist Jeffrey Dorfman about the CARES Act and how it will affect Georgians.
The economic rescue plan promises a one time direct stimulus payment of $1,200 to adults making up to $75,000 [and] $2,400 to married couples whose combined income goes up to $150,000 [and] $500 payments per child. Do people have to apply for this check?
They do not have to apply for the check. They simply need to have filed taxes. So if you file taxes in 2018 or 2019— meaning either last tax filing season or this one— you will automatically get the money.
So those will go into direct deposit if you are signed up with the IRS for direct deposit. Can people go back and do that now even if they didn't during the last tax season?
If they have not filed this year's taxes yet, they should filed this year's taxes now if they can. Use direct deposit instructions and they'll get their money faster. If you didn't do direct deposit, the IRS will first verify your address with you by mail and then send you a check.
When can people expect to receive these checks? Treasury Secretary Steven Mnunchin said maybe within three weeks. What is that looking like now?
Yeah. They think they'll be able to start for people where they have direct deposit information. They may be able to start getting money out the door as soon as next week, and then it will take a little while. They can't issue all of them in one day.
How about those receiving Social Security or disability benefits or payments from the government? Will they also get this direct stimulus check?
They will. Any way that the government knows your bank information. So if you are on Social Security and direct deposit your Social Security benefits, they will use that bank account to direct deposit this money if they don't have information from your taxes.
Let's look at unemployment:3.3 million, a record number of people filed unemployment claims last week. For some perspective, that's nearly five times the number of the worst week during the Great Recession of 2008. So who is going to receive unemployment benefits under this plan?
Everybody who normally would receive unemployment is eligible under this plan plus two other groups— workers who are not fired but are on unpaid leave. So if your business said, "Look, I just can't pay you. I don't need you to work right now. I'm not firing you," they're now allowed to actually file unemployment claims for you. They can even file what are called partial claims if, for example, you work in a restaurant that can now only do takeout and they're only giving you 10 hours a week instead of 40, you can collect a partial unemployment claim. And then they've also opened the new program up to gig workers and self-employed people.
How much are people going to get for benefits?
So you would get a normal unemployment benefit, which in Georgia maxes out at $380 a week. So how close to that maximum you get depends on how much you're earning and paying in before. Plus, Congress is adding an extra $600 a week in bonus payments. So some people in Georgia will get almost $1,000 a week.
So these people were just unemployed because of coronavirus. Will they have to prove that?
No. This is essentially everybody who is currently unemployed or on unpaid leave is assumed to be affected by the virus.
How long will these benefits last?
So I think Congress in the CARES Act included enough money for three months and then if we're not all open for business again by then, I assume they will extend it further.
How about small businesses? That's a significant part of this act. Half of small businesses in the country have less than 15 days of cash buffer, and there are about 900,000 small businesses in Georgia employing about 1.9 million people. How much will be available to these businesses?
So there's over $350 billion available nationwide through the Small Business Administration for small businesses. So Georgia's share of that is over $10 billion. And small businesses can apply for an emergency loan through any bank that has ever done Small Business Administration guaranteed loans in the past or any bank that hasn't done them in the past but wants to sign up now.
So virtually every bank in the state should be part of this program. You can also go directly through the SBA. You file a very simple application that demonstrates what your payroll and expenses have been in the past five months and you can get money to cover your payroll, your rent and utilities for two months. It's a six-month low-interest loan. And if by the end of the six months you document, you use the loan to keep your workers employed, the government forgives your loan and you never have to pay it back.
Is there a ceiling on the amount that one can borrow?
No, there is no ceiling.
And that's part of the point. You said people who can do businesses rather than continue to pay those on their payroll. That is one of the conditions that this loan you have to keep your employees employed?
You're supposed to maintain, I believe, 90%. So it's OK if your payroll goes down a little bit, but you're supposed to maintain 90%. The idea here is that the government thinks it is less disruptive to continue to pay workers through their businesses and businesses to lay them all off, and then the government has to pay them unemployment anyway. This way, there's less disruption. People stay attached. Their businesses can operate a little bit. It'll be easier to get the economy going again when this is over.
Now, Gov. Kemp alone announced in late March that small businesses and nonprofits can also file for up to $2 million in low income economic injury disaster loans from the federal SBA to cover some of their fixed debts. Is that program going to continue or is this CARES Act and the emergency relief funds going to take over?
Both of them operate simultaneously. I think most businesses will now choose the new program under the CARES Act because their loans will be forgiven as long as they maintain the payroll.
OK. The amount $2.2 trillion dwarfs previous Washington efforts for economic crises and natural disasters for that point in the 2008 Wall Street bailout and President Barack Obama's first year Economic Recovery Act. How about for corporations? Of course, the airline industry, all of those corporations headquartered here in Georgia. How what is going to be the process for them to apply for these funds?
Sure. So there's about $500 billion in the package for larger corporations. So small business means under 500 employees and then for the ones that are over 500 employees, there's another pot of money for them. And that's going to be dealt with by the Federal Reserve Bank and the Treasury. So those two agencies will decide there isn't so much a formal process. That's more a case by case basis where they're going to talk to the CEOs and the other officials from those big companies and figure out what people need.
What are the conditions of these loans for big businesses or big corporations?
So that's less clear. We know they're going to have to have limits on executive compensation. They're going to have to stop stock buybacks while they have this money. But because they're going to do it on a case by case basis, I think the exact restrictions on that money may differ company by company. So we won't know all the conditions until we see what deals are made.
That $500 billion, rather, $500 billion fund to be administered by the Federal Reserve and the Treasury Department was one of the sticking points in between Democrats and Republicans about whether or not this would pass. How were they able to resolve that?
They resolved it two ways. I think, one, just by realizing how bad things would be if they didn't act. So I think Democrats gave in on a lot of things they wanted to see. And then second, they added more safeguards, some more transparency, an inspector general to watch over things. So, you know, there was a combination of putting some extra safeguards in the bill and also just deciding that something was better. You know, not to make the perfect the enemy of the pretty good.
Before taking this job as State Fiscal Officer, you were professor of economics and also dealt a lot with agriculture. Anything particular in this bill that you see that would be a great relief to farmers who've already been hard hit by a couple of years of bad weather?
Yeah, there is some money in this bill to help farmers. The main thing farmers need right now and really everybody in our food industry— from the person who sells inputs to farmers, to the farmers, to the food processors, to the truckers and the wholesalers and the distributors and then the grocery stores and the food retailers and restaurants— what they really need is just to be given the exemptions from regulations necessary so they can keep doing their job during this crisis and keep us all fed.
We need to remember that while we're staying in our homes, doing our part to keep people safe and healthy. There's a lot of people in our economy who have to keep going to work because we need the stuff they produce. We need to be able to buy that food. We need to be able to get our drugs. We need to have gas at the gas station if we need it. We need our utilities to keep running. So those people are really sacrificing for us right now. And sometimes they're going to need some relief from regulations and there need some understanding of where you have to make sure we don't shut things down that are vital parts of our food industry supply chain. If we can help them with things like that, then I'm sure they can keep us fed and supplied during this time.
Part of this plan is to help ease a rebounding of the economy. Do you think that they got that right? I know there was a lot of back and forth about how to best do that, whether or not to just pay workers directly or to pay companies to employ people. What do you think? How did they do?
I mean, I would guess they probably didn't do very well. Congress doesn't usually do very well, but they're being pretty responsive. They're trying. And I think most of the stuff we need is in there. I think we're wasting a lot of money on stuff we didn't need in there. To me, the smart thing is to keep workers getting paid. I would have funneled pretty much all the money to businesses in exchange for them maintaining their payrolls.
For example, we're sending these payments out to people that are both losing their jobs and not losing their jobs. If you still have your jobs and you work for small businesses, they get this loan. They maintain payroll. Why are we sending you a couple of thousand dollar checks then? You haven't lost any money. But because the government is not set up to respond in a targeted manner, the only choice we have is to essentially waste money in order to get the money to the people who need it. We can't separate out those who need the help, those who don't. And the easiest thing is pretty much sending everybody money.