Will regular people benefit from the bailout?

By Christopher Tidmore
Contributing Writer

On the afternoon of March 19, Senate Majority leader Mitch McConnell introduced the Third Coronavirus Relief Bill in under a week. At first glance, the newest legislation helped alleviate worries that corporate bail outs – which dominated the first two bills – would come before citizen-focused checks. Many Louisianans feared a repeat of the aftermath of Hurricane Katrina, where very little of the billions in federal aide ever made it into the average pocketbook.

That worry persists, of course. As of The Louisiana Weekly’s press time, under the current proposal, the nearly 250-page bill does feature direct financial help for Americans. Every person earning up to $75,000 would receive a direct payment of $1,200. The caps would be doubled for filers, and would further include an additional $500 for each child – as well as relief for small businesses, help for impacted industries like airlines and efforts to bolster the health care system.

The new legislation – along with its two predecessors – jumps the value of the total rescue package to $1.5 trillion – a sum greater than the nation has ever spent in an emergency, and pushing the U.S. debt limit well above 100 percent of GDP. (Total federal debt – the accumulation of past annual deficits – is now $23.5 trillion, which includes debt held by the public and debt held by government agencies such as Social Security trust funds. At the rate the debt is about to grow, it could surpass levels reached after World War II, as a percentage of gross domestic product.

The legislation would also suspend student loan payments and continue work-study salaries for students even while colleges and universities are closed.

Critics like Kentucky Republican Sen. Rand Paul expressed worries that the proposed debt levels would become unsustainable as a result, triggering inflation, and sought to pay for the measure by cutting other federal programs and ending the war in Afghanistan. Only seven other U.S. senators voted with him and against the second bailout bill. Notably, the bipartisan reaction fears that the pandemic could cause nearly 20 percent unemployment, as Treasury Secretary Steve Mnuchin warned, overcame debt concerns. The $1,200 payment in the third bill has been seen as a necessary supplement to unemployment compensation – and underemployment salary cuts. Put another way, the maximum unemployment benefit in Louisiana is just $427 per week.

Moreover, Secretary Mnuchin suggested that should the pandemic continue to close down the economy six weeks from now, a second set of $1,200 checks would be distributed to help maintain homes and fill refrigerators. Will these direct payments prove enough, though?

A representative of one of the largest SBA/USDA private lending partners, who asked not to be identified, maintained to this newspaper that these $1,200 checks themselves may constitute only a first step to maintaining ongoing salaries. The remaining bailout, he contended, will further guarantee that money makes it to the employee salaries first. Speaking to The Louisiana Weekly, he acknowledged that the Katrina and the 2008 financial crisis rescue packages left many workers without options. “I’ve been on daily calls with Senator Schumer and Senator McConnell. There’s a definite focus on making sure the money makes it straight to the employees.”

Essentially, he explained, “employers will be offered zero interest loans that must be used strictly for employee salaries…at the end of the year they will receive a tax credit to eliminate their debt liability.”

These incentives would be on top of the $2 million per company emergency “disaster” loans currently being offered by the Small Business Administration. Company owners and nonprofits in Orleans and Jefferson parishes can apply for these loans, at 3.75 percent and 2.75 percent interest respectively – with a repayment which can be extended up to two decades.

Applications can be filed online at www.disasterloan.sba.gov/ela/. Initially, $50 billion has been approved for these fast-track loans, and decisions are made within three weeks, according to representatives of the SBA. As decisions are made on a first come, first served basis, they cautioned not to delay one’s application.

This article originally published in the March 23, 2020 print edition of The Louisiana Weekly newspaper.