By Yusra Sarkar
The USA today announced a USD 2 trillion package to support the nation in the midst of the Coronavirus outbreak and resulting economic volatility. It is the most significant ever rescue deal in the history of the USA. The Senate has approved the legislation, and the House must now vote on the bill. It’s expected that this will happen on Friday.
Cash payments for citizens
In an unprecedented measure, the US has opted to follow some Asian nations with cash payments to most adult citizens on lower wage packages. Those on salaries of USD 75,000 or more will not be applicable to receive a payment, in a move designed to ensure that only the neediest receive government support. The cash payments are meant to ease the immediate strain of the current economic climate and will amount to USD 1,200 per adult and USD 2,400 per couple.
Fiscal aid for large corporations
USD 500 billion has been set aside for business loans to support companies whose businesses have been affected the Coronavirus. Specific amounts have been set aside to support airlines (both passenger and cargo) and companies that ‘support national security.’
Some of the remaining USD 450 billion dollars will be disbursed in the form of government loans and guarantees. The legislation sets out that loans and guarantees will be overseen by an inspector-general, and the bill stipulated that President Trump, his family businesses and members of Congress would not be eligible to receive government support in the form of fiscal packages for corporations.
The plan to support corporate firms had garnered significant contention, particularly as Democrats had pushed for more stringent regulatory measures and better oversight of what the loans would be used for. The requirement for more clarity in the use of government loans was particularly in response to some US airlines that had faced intense scrutiny in recent days and weeks after struggling with cash flow despite significant historical spending on share buyback schemes.
Rising unemployment as a direct result of social distancing measures is a big worry in the US. The bill sets out that unemployment benefits will be raised to USD 600 per week, in addition to state payments for up to four months.
Unemployment benefits had been a point of discussion between Republicans and Democrats, given the government payment of USD 600 per week could significantly outstrip ‘normal’ salary payments. Self-employed and temporary workers would also be eligible for unemployment benefits, even though they are generally not considered for such aid.
Hospitals and healthcare
Hospitals and the healthcare system will receive USD 150 billion in funding for hospitals and front-line medical equipment and supplies.
Some USD 367 billion is proposed for small and medium-sized businesses in the US, which would be deployed in the form of loans and grants to companies with 500 or less employees. It is thought that the Democrats had pushed significantly for a better support package for smaller businesses, rather than just focusing on a bailout package for larger corporations. The aim of the support is to help keep businesses afloat and mitigate job loss.
‘This is an unprecedented support package in terms of its size. The bill addresses the needs of both large companies and smaller businesses which is seen as both a necessary and fair move. Likewise, the more stringent measures with what companies can do with the funds and the fact that job retention is central to the bill is welcomed here in the US,’ says Tomas Alonso, Managing Director, ZEDRA Miami.
For more information, please contact Tomas Alonso, Managing Director, ZEDRA Miami.