This was a week of eye-popping numbers at the federal level, from the release of the Republicans long-awaited stimulus proposal to the data dropped yesterday by the U.S. Commerce Department that showed how coronavirus has impacted gross domestic product (GDP).
#1. Exactly how much did the GDP lose? Let’s take that last one first, because there is some confusion about the numbers released by Commerce. In fact, you might have seen two vastly different headlines – one saying the economy contracted by 9.5% during the past quarter and one saying it was 32.9%.
To clarify, the smaller percentage, while still devastating, is the true loss during the second quarter. At the beginning of April, GDP was $4.75 trillion and dropped to $4.30 trillion by the end of June, or 9.5%. That’s a whopping $450 billion, but coronavirus did not wipe out one-third of the nation’s economy in three months. The 32.9% figure represents the annualized rate, or what would happen if this quarterly loss continued compounding at 9.5% for the next year.
Whether you go with the quarter-to-quarter or annualized estimate, the drop is of historic proportions.
#2. HEALS vs. HEROES. Back in May, Democrats in the House of Representatives passed their next stimulus proposal, the Health and Economic Recovery Omnibus Emergency Solutions or HEROES Act. Earlier this week, Senate Republicans responded with the Health, Economic Assistance, Liability Protections and Schools or HEALS Act.
Here are the comparisons in major elements of both plans:
- Total package costs: The HEROES Act comes in at about $3 trillion while the HEALS Act is $1 trillion. To put this in perspective, the original CARES Act was $2.2 trillion.
- Both plans call for another round of $1200 stimulus checks for individuals. They disagree on additional funding for dependents; Democrats are calling for $1200 each for up to three dependents while Republicans are proposing $500 each.
- Both plans call for an extension of the Paycheck Protection Program, and the Republican proposal would allocate another $190 billion into the forgivable loan program. Both plans carve out funding for businesses with 10 employees or less. That’s particularly important for our region, where 57% of all businesses have one to four employees.
- Unemployment enhancement. Under the CARES act, those on unemployment received a $600 a week enhancement on top of their state unemployment payout. The federal enhancements ended this past week. HEROES would continue the $600 bonus until early 2021, while HEALS would drop it to $200 a week through September, then employ a formula where the combined state and federal aid would equal about 70% of a worker’s former wages. As a point of reference, the average weekly unemployment check in Arizona without the enhancement is about $280, according to the Bureau of Labor.
- State, County and Local aid. While the HEROES Act approved $1 trillion in relief to local and state governments, the HEALS Act has no new funding. It does loosen restrictions on using a $150 billion pool of money from previously approved funds.
- Schools. Both plans have between $100 billion and $105 billion, but split it up differently between K-12 and higher education. The Republican plan offers more for K-12 schools, but it is tied to ensuring in-person classes.
- Liability Shield. The biggest sticking point in these negotiations may have nothing to do with funding. The HEALS Act calls for a 5-year “liability shield” for businesses, schools and hospitals to prevent them from being sued over coronavirus-related issues. There’s no such language in the HEROES Act and Senate Majority Leader Mitch McConnell says he won’t support a stimulus package without it.
These negotiations may seem far away from us; the numbers discussed are so huge as to become meaningless when we compare them to our everyday lives. But recent infection rates tell us that coronavirus isn’t going away any time soon, and the pain felt by our local residents and businesses is real. How and when Congress addresses this issue will have dramatic impacts on our region.