WASHINGTON (AP) – In the coronavirus crisis, even doctors can face a cash crisis.
Dr. Benjamin Ticho, an ophthalmologist in Chicago Ridge, Illinois, has seen his income drop 80% when patients stay home and cancel non-emergency surgeries. It has dramatically reduced its staff hours and is negotiating with its creditors.
"We reached out to many of our largest vendors and said, 'Hey, we could be facing a crash crisis, can you give us a break, or at least defer payments?' Many have been understanding." said Ticho, who owes loans on medical equipment. He is also giving his patients a break by delaying collection of their unpaid balances for now.
The record $ 2.2 trillion emergency package nearing final approval in Congress is aimed at companies like Ticho & # 39; s and people like their patients: caught in a public health blockade that has shut down companies and paralyzed the economic life, they run the risk of running out of money. and not being able to pay bills or cover daily expenses.
The idea is to provide companies and families with a cash cushion to better face the health crisis and the looming recession. When it is safe to go back to work, eat dinner, and book airline tickets again, they are expected to be more financially prepared to return to something closer to normal life.
"It will inject trillions of dollars in cash into the economy as quickly as possible to help America's workers, families, small businesses, and industries overcome this disruption and emerge on the other side ready to skyrocket," said Senate Majority Leader, Mitch McConnell. , R-Ky., Who helped negotiate the package. The House is expected to vote on the plan on Friday.
Therefore, Congress sends a one-time payment directly to the majority of US adults and US residents. USA With Social Security numbers. That equates to $ 1,200 for single adults making up to $ 75,000 a year and $ 2,400 for married couples making up to $ 150,000, plus $ 500 per child. Someone applying as head of household would receive the full payment if they earned $ 112,500 or less.
The payment is reduced by $ 5 for every $ 100 a taxpayer's income exceeds those thresholds, and is eliminated entirely for single taxpayers with income exceeding $ 99,000, $ 146,500 for taxpayers with one child, and $ 198,000 for childless taxpayers.
The package would also help replace the earnings of unemployed workers for four months, providing them with unemployment benefits from their state plus an additional $ 600 per week. For the first time, concert economy workers, like Uber drivers, can also claim unemployment benefits.
Support for individuals and households is especially important because the social safety net in the United States is not as strong as it is in developed countries in Europe.
The package includes $ 50 billion in tax credits for companies that keep employees on the payroll and will cover 50% of those workers' paychecks. Companies may also defer payment of the 6.2% Social Security tax, giving them an incentive to postpone layoffs at a time when ordinary businesses have stopped.
Also included is $ 454 billion in seed capital that will allow the Federal Reserve to make approximately $ 4.5 trillion in loans to larger industries.
At $ 2.2 trillion, the money Congress and the Trump administration are throwing into the economic crisis represents more than 10% of America's gross domestic product, the most comprehensive measure of economic output. By comparison, President Barack Obama's $ 787 billion stimulus plan in the depths of the Great Recession amounted to about 5.5% of GDP.
And that doesn't count what else the Federal Reserve is doing. You have reduced your benchmark interest rate to zero. You are flooding financial markets with cash by buying stocks, including the government and, for the first time, corporate bonds. It is also buying so-called commercial paper, short-term notes that companies issue to cover operating costs, such as payroll. And you're preparing a small business loan program.
Fed President Jerome Powell has made it clear that the central bank will do whatever it takes to support the economy. In an interview Thursday on NBC's "Today,quot; show, Powell said the Fed would lend an essentially unlimited amount, if necessary, to support banks, businesses and city and state governments until the outbreak viral is under control.
The president recognized that the economy will suffer and that unemployment will increase.
"There may also be a good rebound on the other side of that," he said. "By ensuring the flow of credit into the economy and keeping rates low, we want to make sure that that rebound, when it comes, is as vigorous as possible."
"Except for wartime spending during World War II, there is nothing comparable to this in the history of the United States," said Adam Posen, president of the Peterson Institute for International Economics in Washington, D.C.
This rescue is not just bigger. It is also significantly different.
In most economic recessions, even the most severe ones, policymakers aim to convince nervous consumers and businesses to start spending again by cutting interest rates, cutting taxes, or putting people on the move. working on public works projects and giving them paychecks.
This time it will not work that way. No one will go shopping or schedule a cruise when they are quarantined indefinitely in their living rooms. And companies are not going to hire, open new offices, or invest in equipment when they are not raising revenue because they have no customers.
Policymakers now just want to prevent companies and people from sinking as the virus continues, hoping they are in shape to fuel a recovery when the crisis ends.
"They are really focusing on preventing the system from freezing," said Louis Hyman, an economic historian at Cornell University who has studied the labor market and workers.
For now, there appears to be no way to reverse the forces that are driving the economy into recession for the first time in 11 years. Economists expect the April-June quarter to be the worst on record. The economy may fall at an annual rate of 20% or more during those three months. Millions of Americans are expected to lose their jobs in the coming weeks. On Thursday, the Labor Department reported that 3.3 Americans had applied for unemployment benefits last week, breaking the 1982 record of 695,000.
The bailout that the Fed, Congress, and the White House are putting together is designed to reach business owners like New York tour operator Georgette Blau, who has fired his tour guides and leveraged his personal savings to keep his On Operational Location Tours.
Blau is anxious about seeking a loan from the Small Business Administration, and says the monthly payments would be too high. I would consider researching the Fed's plans to provide credit to small businesses. But it won't be easy to ease your financial worries.
"Even something like $ 75,000 is not going to last us long," he said.
The scale of the damage is staggering. More than 180,000 stores are temporarily closed, representing more than 40% of the US retail space. USA, According to GlobalData Retail, a research firm.
"Retailers were trapped in a nightmare," said David French, senior vice president of government relations for the National Federation of Retailers, the nation's largest retail group. "They have people to pay. Rents to pay. They have inventories.
There's no money at Olio, a venue for weddings and events in Peabody, Massachusetts. Owners Sarah Narcus and Ellen Basch have canceled or postponed all events during the spring. They asked for and obtained leniency from their lenders, including the bank that has a million dollar mortgage on their building.
"They were very responsive. Payments have been deferred, except interest and security deposit for 90 days, "says Narcus. The business has yet to pay other expenses, including taxes and utilities.
To prevent an abrupt but short recession from becoming worse, economists say the government must act quickly.
But it won't be easy.
"No existing set of financial pipelines was designed for a crisis that requires payments to more than 100 million people or households in days or weeks," write Peterson Institute researchers Donald Hammond and David Wilcox.
They are concerned that the government relies on income tax lists to identify recipients; But many Americans, especially the poorest, don't pay income taxes and can't be found that way. They suggest using Social Security records and federal aid lists as well.
"We urge policymakers to emphasize the need for speed," Hammond and Wilcox write, even if that means some Americans accidentally get more than one relief check. "In most cases, people who receive multiple payments will be at the lower end of the economic scale and therefore are likely to need help."
Cornell's Hyman expects the government to make mistakes in trying to deploy so much money, so quickly. But still he's impressed with the rescue package.
"It is the largest intervention in human history, and it is all done in a week," he said. "It's crazy. & # 39; & # 39;
Rosenberg reported from New York. AP Economics writers Christopher Rugaber in Washington and Anne D’Innocenzio in New York contributed to this report.