GP Insights # 311, 29 March 2020
On March 27, the US Congress has passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) approving an unprecedented $2.2 trillion aid package to help overcome the economic fallout inflicted by the outbreak of the coronavirus pandemic. The rescue package is roughly 9 per cent of the GDP and is the most extensive economic relief measure ever undertaken in US history.
The package consists of five major measures: cash payments of up to $1200 for almost all Americans; an expansion of the unemployment-insurance system that would raise benefits and enable gig workers as well as regular employees to receive them; a $360 billion assistance program for small businesses; a $500 billion bailout fund for big businesses; plus hundreds of billions of dollars in emergency funding for states, hospitals, and other medical providers.
The Senate session was held under special rules to limit the spread of the disease among members. The necessary emergency relief would help to sustain and stimulate an ailing economy until the virus is contained.
What is the background?
After weeks of delay and a series of missteps along with lost opportunities to contain the virus early, the US now leads the globe with known cases. On March 27, the number of coronavirus cases in the United States exceeded 100,000, and it has already surpassed China's total of COVID-19 cases with more than 82,000 reported infections. There are emerging hot spots of cases of coronavirus in the middle of America including smaller communities like Greenville, Mississippi, and Pine Bluff, Arkansas and large cities like New Orleans, Milwaukee, Detroit, and Chicago. The areas around Cleveland, St. Louis and Kansas City, Missouri, have also seen spikes. As the testing ramped up, the number of known cases rose rapidly in recent days. The Senate, which approved the bill was adjourned until April 20. At least five members of Congress have tested positive for the coronavirus, and more than two dozen have self-quarantined to limit its spread.
After being accused of playing down the outbreak in its early stages, President Trump has ramped up relief measures and has been holding daily briefings on the emergency. He has also announced the signing of the Defense Production Act, allowing the private industry to help meet orders for products necessary for national security. Initially, he had dismissed the role of civil business, suggesting it would be analogous to “nationalizing” businesses.
The CARES Act is the third aid package from Congress to address the threat of COVID-19 in the US. President Trump signed the bill into law a day after unemployment skyrocketed and a record of 3.3 million Americans applied for unemployment benefits last week.
As countries across the world announce their relief packages and declare nationwide total lockdowns, President Trump is determined to lift coronavirus lockdown and ease restrictions by the Easter holiday. However, public-health experts remain worried over this deadline which is too early to a still mushrooming outbreak.
What does it mean?
First, the rare bipartisan action indicates the seriousness of the lawmakers in containing the virus. Despite the risk of contracting coronavirus, hundreds of lawmakers from both parties returned to Washington to cast their votes. Allowing the private industries to manufacture critical medical equipment signifies the extent of measures being carried out.
Second, according to IMF, the world has entered into a recession as bad as or worse than in 2009, and the US economy has also slowed down to a level which it did not experience during the Great Depression. The announced rescue package, an essential move is going to sustain and stimulate the economy of the US during this pandemic.
Third, though the Senate approved the bill with a unanimous vote, the bipartisan spirit was limited to the White House. Neither Pelosi nor Senate Democratic Leader Chuck Schumer was invited to Trump’s all-Republican signing ceremony for the bill. Also, the Senate had to evade the procedural challenge put forth by the Republican Representative Thomas Massie, who had sought to force a formal, recorded vote.