Us Stimulus Package : Everything You Need To Know
On March 27, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act.
This $2 trillion U.S. stimulus package is the largest emergency relief bill in American history. The bill plans to help people, families, businesses, and the economy cope with the disastrous effects of the COVID-19 pandemic.
So, how will it help?
Well, this U.S. stimulus package includes one-time cash payments of up to $1,200 to Americans who qualify.
In this article, we demystify everything you need to know about the 2020 U.S. stimulus package: what it is, who receives it, how much theyll receive, and what to do to get it. Well also specifically hit on how small businesses can receive money.
Lets dive in.
What The New Stimulus Package Means For You
According to the U.S. Bureau of Labor Statistics, the U.S. was still down 9.5 million jobs in February vs. the same time last year. This is despite a hopeful upturn in employment recently, thanks to the vaccine rollout and the leveling off of coronavirus cases in many areas.
In response, earlier this month Congress passed the $1.9 trillion American Rescue Plan . This new stimulus package focuses more on providing economic relief to households rather than businesses, like previous bills. As a result, economists predict the number of Americans living in poverty will drop by as much as a third. Especially for to low-income families and those whose earnings fluctuate from month to month.
Ã¢ItÃ¢s a big deal,Ã¢ David Wessel, director of The Hutchins Center on Fiscal and Monetary Policy at The Brookings Institution, told CBS News. Ã¢ItÃ¢s one of the most significant steps weÃ¢ve taken to life children out of poverty. In many other countries, the government subsidizes families with children because they are the ultimate investment in the future.Ã¢
The Tax Policy Center estimates the bill will result in a 20 percent increase in income for the bottom 20 percent of earners .
The ARP also includes aid to state and local governments, K-12 schools and colleges, and some businesses. It also provides billions of dollars to aid in the pandemic response. In addition, it offers a bailout forâ¦
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Stimulus And Relief Package : The Cares Act
The thirdand largestrelief package was signed into law on March 27, 2020. By nominal dollar amount, it is the largest single relief package in U.S. history. This law, which is called the Coronavirus Aid, Relief, and Economic Security Act and nicknamed the CARES Act or Phase Three, appropriated $2.3 trillion for many different efforts:
- One-time, direct cash payment of $1,200 per person, plus $500 per child
- Expansion of unemployment benefits to include furloughed people, gig workers, and freelancers until Dec. 31, 2020
- Additional $600 of unemployment per week until July 31, 2020
- Waived early withdrawal penalties for 401s for amounts of up to $100,000 until Dec. 31, 2020
- Mortgage forbearance and a moratorium on foreclosures on federally-backed mortgages for 180 days
- $500 billion in government lending to companies affected by the pandemic
- $367 billion in loans and grants to small businesses through the PPP and the expanded Economic Injury Disaster Loan program
- More than $130 billion for hospitals and healthcare providers
- $150 billion in grants to state and local governments
- $40 billion for schools and universities
Benefits provided to unemployed individuals under the CARES Act expired on Sept. 5, 2021. These programs include the Pandemic Unemployment Assistance , the Pandemic Emergency Unemployment Compensation , and the Federal Pandemic Unemployment Compensation .
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Primary Dealer Credit Facility And Money Market Mutual Fund Liquidity Facility
On March 20, 2020, the Fed relaunched a Great Recession-era program: the Primary Dealer Credit Facility , which has given loans to primary dealers backed by a wide variety of securities as collateral. There was no set limit to the amount of credit issued. The program ran until March 31, 2021.
To add more liquidity to money markets, the Fed announced the Money Market Mutual Fund Liquidity Facility on March 18, 2020. This program lent money to financial institutions so they can buy money market mutual funds.
This program was similar to the AMLF program launched in 2008 after the collapse of Lehman Brothers caused a major money market fund to fail. It did not have a specific lending limit but ended on March 31, 2021.
The Treasury Department gave the MMLF $10 billion of debt credit protection for the program. On May 5, 2020, the central bank said that participation in the MMLF wouldnt affect the liquidity coverage ratio of participating banks.
New Stimulus Package Will Provide Fiscal Aid To Usps
The November presidential elections will allow people to vote via mail. Keeping in mind the tough logistical issues, both the Republican Party and the Democratic Party have decided to introduce advanced programs to financially aid the US Postal Service. Previously, the House approved a bill regarding the same. However, it did not pass the Senate. Moreover, the skinny stimulus bill proposed by the Republicans also included this provision. However, this was struck down in the chamber floors.
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Nol Carryback Period Extended To Five Years For Eligible
The provision was enacted as part of the American Recovery and Reinvestment Act of 2009 . On March 16, 2009, the Internal Revenue Service issued guidance on this new provision. Under the guidance, in order to use this special carryback, some taxpayers will need to make the election by April 17, 2009.
Jobkeeper Payment For Employers And Employees
The Government is extending the JobKeeper Payment by a further six months to March 2021. Support will be targeted to businesses and not-for-profits that continue to be significantly impacted by the Coronavirus. The payment rate will be reduced and a lower payment rate will be introduced for those who work fewer hours. Other eligibility rules remain unchanged.
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How Do Stimulus Packages Work
Stimulus packages comprise a range of different government taxation and spending measures. When it enacts fiscal stimulus, the government hands over cash, via direct subsidies, loans or tax incentives, to individuals, companies and even entire industries impacted by an economic downturn.
According to the Center on Budget and Policy Priorities , The federal government provides fiscal stimulus when it increases spending, cuts taxes, or both, to shore up households and businesses demand for goods and services during a recession.
But economic hardship isnt just about supply and demand for goods and services. The human toll of a recession may be the worst part of any crisis.
A 2010 research paper by the International Monetary Fund tabulated these human costs, including loss of lifetime earnings, loss of human capital, worker discouragement, adverse health outcomes, and loss of social cohesion. Recessions also leave intangible scars in addition to economic lossesall of which may be preventable, or reducible, with a well-structured and timely stimulus package.
Theyre called packages for a reason: Stimulus generally include a bundle of different subsidies, bailouts, tax rebates and supplemental unemployment benefits to address different economic factors.
Some measures are focused on industries and economic sectors facing unique headwinds in a downturn. Others aim to help people whove lost work. And some are broadly targeted to boost spending across the entire economy.
What About Money For Coronavirus Vaccine Distribution
More than 161 million vaccine doses have so far been administered in the US and over 207 million distributed. More than a month early, the country reached Bidens goal of 100 million jabs during the first 100 days of his administration , with a new goal of 200 million shots in the first 100 days.
The presidents plans set aside $160 billion for a nationwide vaccine program thats been helping state and local governments get the vaccine into peoples arms.
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What Is An Economic Stimulus Package
An economic stimulus package is a combination of economic measures utilized by a government to stimulate a struggling economy. The stimulus package can be used as a preventive or reversing measure to stop or prevent a recession by lowering interest rates, increasing government spending, and quantitative easing, etc. aimed at increasing employment and consumer spending.
Economic stimulus follows the ideologies presented by British economists John M. Keynes and Richard Kahns theories on the fiscal multiplier concept. In more colloquial terms, economic stimulus is also known as pump-priming or priming the pump.
Funding For Broadband Infrastructure
The legislation includes $7 billion for expanding access to high-speed internet connections, nearly half of which will go toward helping cover the cost of monthly internet bills by providing up to $50 per month to low-income families.
The deal also sets aside $300 million for building out infrastructure in underserved rural areas and $1 billion in grants for tribal broadband programs.
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Vaccines Funerals Farmers And Food
The bill includes a funding surge to help put vaccine shots in Americans arms.
It includes $14 billion to distribute and administer vaccinations, $48 billion for testing and contact tracing and $50 billion for Federal Emergency Management Agency relief. As part of the FEMA aid, the government will cover costs of disaster-related funeral expenses connected to the pandemic.
It includes loan assistance for socially disadvantaged farmers and ranchers who belong to groups that have faced ethnic or racial discrimination.
And it extends a 15 percent boost in SNAP benefits, commonly known as food stamps, through the end of September.
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What To Expect From The New Stimulus Package
The new stimulus package provides much needed Covid-19 relief for families and businesses affected financially by the pandemic. How will you benefit from the latest round of Covid relief aid? Do you qualify for a $1,400 direct check? Read on to find out.
- The $1.9 trillion stimulus package will not hike the minimum wage.
- Those eligible will receive $1,400 direct stimulus checks.
- The relief package also includes an expanded child tax credit and an income tax credit.
- The unemployed will receive $300 weekly federal unemployment payments.
The package provides much-needed COVID-19 relief for families, businesses, schools, local governments, and vaccine distribution centers all over the nation.
How will you benefit from the upcoming round of pandemic relief aid? Do you qualify for a $1,400 direct check? Read on to find out.
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How Will The American Rescue Plan Help You
Specifically, President Bidens American Rescue Plan will:
- Mount a national vaccination program, contain COVID-19, and safely reopen schools, including by setting up community vaccination sites nationwide, scaling up testing and tracing, eliminating supply shortage problems, investing in high-quality treatments, providing paid sick leave to contain spread of the virus, addressing health disparities, and making the necessary investments to meet the presidents goal of safely reopening a majority of K-8 schools in the first 100 days.
- Deliver immediate relief to working families bearing the brunt of this crisis bysending $1,400 per-person checks to households across America, providing direct housing and nutrition assistance, expanding access to safe and reliable childcare and affordable healthcare, increasing the minimum wage, extending unemployment insurance, and giving families with kids and childless workers an emergency boost this year.
- Support communities that are struggling in the wake of COVID-19 by providing support for the hardest-hit small businesses, especially small businesses owned by entrepreneurs of color, and protecting the jobs of the first responders, transit workers, and other essential workers we depend on.
Mount a national vaccination program, contain COVID-19, and safely reopen schools
President Bidens rescue proposal will:
Deliver Immediate, Direct Relief to Families Bearing the Brunt of the Crisis.
President Bidens plan will:
Ongoing Federal Reserve Programs
Besides direct asset purchases, the Fed set up several new lending programs, both as part of the CARES Act using funds from the U.S. Treasury Departments Exchange Stabilization Fund as seed capital, and entirely on its own. A number were set up as SPVs, separate legal entities that allow the Fed to lend in ways it normally doesnt. All of these programs have been discontinued except for one: the Paycheck Protection Program Liquidity Facility .
To help small businesses, the Fed launched the PPPLF on April 9, 2020, in concert with the CARES Act. This program lends money to banks so they can, in turn, lend money to small businesses through the Paycheck Protection Program . On April 30, 2020, the program expanded the types of lenders who can participate in the program.
There is no current limit to the amount of credit that can be extended through the program, but it stopped extending credit on July 30, 2021. On June 5, 2020, the Fed said that participation in the PPPLF wouldnt affect the liquidity coverage ratio of participating banks.
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A Look At Whats In The Stimulus Package Trump Signed
The $900 billion package provides more relief beyond the $600 checks that have become the focus in Washington.
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WASHINGTON The $900 billion stimulus bill that President Trump finally signed into law on Sunday evening goes well beyond providing the $600 checks that became a huge sticking point in getting the legislation across the finish line.
The relief package casts a wide net with a variety of measures aimed at addressing the needs of millions of Americans, including those who have lost their jobs, as well as small businesses, nursing homes, colleges, universities and K-12 schools.
The package extends some provisions of the original stimulus package that was passed in the spring, while adding new measures to help working families who have continued to suffer amid the pandemic.
The full text of the bill ran almost 5,600 pages. Heres a look at whats included.
How Do I Get My Stimulus Payment
You may now be eligible to receive Economic Impact Payments under the American Rescue Plan Act. In addition, you are still able to claim payments from last year via the 2020 Recover Rebate Credit if you didnt receive any stimulus payments in 2020.
Payments are being sent in phases by direct deposit, check, or debit card, and should be made automatically. Use the IRS Get My Payment tool to view your payment status and find out when it’s scheduled to occur.
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Risks Of Government Stimulus Packages
Government stimulus packages involve direct government intervention in the economy to keep people employed and spending. Although it may be necessary, it draws criticism from schools of thought that believe capitalism is optimal with as little government intervention as possible.
When enacting a large stimulus package, a government will need to take on a significant amount of debt to fund the package. High levels of debt levels lead to an increase of bankruptcy risk for a countrys government and can lead to credit downgrades in the sovereign debt of the country.
Theoretically, a government should increase taxes and decrease spending in order to pay back the debt in years of economic growth. Unfortunately, in practice, it is rarely the case, and debt levels continuously increase.
Government stimulus packages also rely on the assumption that when sich policies are enacted, people will spend their increased disposable income. However, if consumer confidence is low, people may decide to save money instead of spending money, which will not affect the economy in the way the government originally anticipates.
Types Of Stimulus Packages
In times of economic recession that is less devastating than the COVID-19 pandemic, a stimulus package typically includes a number of incentives and tax rebates offered by a government to boost spending in a bid to pull a country out of a recession or to prevent an economic slowdown. A stimulus package can be in the form of either a monetary stimulus or a fiscal stimulus, or quantitative easing.
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Quantitative Easing And Repo Operations
One of the simplest asset-purchasing programs has been the quantitative easing program, in which the Fed directly buys assets like U.S. Treasuries and mortgage-backed securities . The Fed, which originally created the program during the Great Recession, restarted it on March 15, 2020. The scale of the program has been open-ended, with the Fed saying it would buy in the amounts needed to support the smooth functioning of markets.
The Fed enormously expanded its repo operations on March 12, 2020, by $1.5 trillion, then adding another $500 billion four days later, to ensure there was enough liquidity in the money markets. Repo operations have effectively allowed the Fed to loan money to banks by purchasing Treasuries from them and selling them back to the banks at a later date.
Regulation Changes And Policy Updates
The Fed made regulation changes to further add liquidity to the markets. For instance, the Fed made a number of technical changes to hold on to less capital so it can lend more. It temporarily removed the asset restrictions placed on Wells Fargo after its fake accounts scandal, so that Wells Fargo could lend more.
On Dec. 16, 2020, the Fed announced that its policy of quantitative easing would continue until substantial further progress has been made toward inflation and employment goals. The Fed expects this progress to take years, based on projections it also released that day.
On March 19, 2021, the Fed announced that it was letting its policy of relaxing bank reserve requirements expire on March 31, 2021, as scheduled. The policy, originally announced on May 15, 2020, temporarily allowed banks to exclude Treasuries and deposits with Fed banks from their balance sheets for the purpose of calculating reserve requirements, allowing them to lend more.
On March 25, 2021, the Fed announced that the temporary restrictions on dividends and buybacks that it placed on banks in 2020 would end after June 30, 2021, for banks that meet capital requirements during the 2021 stress tests. Restrictions were extended for banks that fail to meet capital requirements.
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