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US COVID-19 Stimulus Package Nears Agreement, but is Trump Set to Buck the Lockdown Trend?

Kitty Miv, Editor
25 March, 2020

As the number of countries globally deciding to impose stringent lockdown measures in order to hopefully combat the spread of the highly infectious COVID-19 virus increases, it seems, at the time of writing, that US President Donald Trump may be planning to take things in the other direction, hinting instead at a loosening of social distancing restrictions in the country in order to kick-start the economy.

However, a week is a long time in politics – in the current climate, in fact, five minutes is a long time in politics – and whether Trump goes against the advice of his key medical personnel and that of the World Health Organization, and indeed the desires of some of the state authorities, remains to be seen. In the meantime, Republic and Democrat lawmakers in both the upper and lower houses have been attempting (well, as much as they ever do), to pull together in order pass stimulus measures to provide support to the country's healthcare providers, and to struggling businesses and taxpayers, and as I write this, it looks as though they may just manage it. (However, I refer you again to the caveat of a week being a long time in politics; as the situation currently is evolving minute-by-minute, things may all have changed up again by the time that I sit down next week to write my next column!)

With that in mind, let's take a look at the stimulus package as it currently stands (which, according to most of the parties involved, is awaiting final approval by the Democratic-controlled House and Presidential signature, with the bulk of the legislative content agreed, and just a few remaining 'i's to be dotted and 't's to be crossed...)

Reported to be the largest economic stimulus package in US history, at USD2 trillion. the Republican-sponsored package of measures has been sent back to the drawing board a couple of times by the Democrats, arguing that sufficient support had not been included for workers, families, and healthcare providers, and that there were not enough safeguards built into the package for businesses which are to receive bailout monies.

A Democrat-sponsored alternative, costing USD2.5 trillion, and which would have made COVID-19 related healthcare free of charge, among other measures, was put forward by House Speaker Nancy Pelosi this week, in an attempt to drive the agenda towards securing such protections, but according to reports, Pelosi has stated that the Democrats are now willing to support the package as currently agreed.

The measures are said to include:

  • Direct payments to US taxpayers (including two USD1,200 payments for those earning up to USD75,000 per year)
  • USD350bn in loans for small businesses
  • USD500bn to assist affected businesses (such as airlines) with cashflow and liquidity issues arising as a result of the pandemic
  • Up to USD130bn in assistance for hospitals (at the time of writing, the exact amount was still under discussion, with the amounts proposed by Republicans, hospital authorities and Democrats diverging on this)
  • USD10bn for drug development and USD4bn for crucial medical equipment such as gowns and masks
  • USD250bn to expand unemployment insurance provision
  • USD150bn in assistance for state and local governments; and
  • USD45.8bn for federal agencies (again, the amount needed was reportedly under dispute at the time of writing, with both Republicans and Democrats seeking additional provision in this area.)

Although the final agreement on the stimulus package, when it comes, will be welcomed, hints made by the President at a press conference, and via his preferred communication medium of Twitter that the White House is keen to open up the country for business again, potentially as soon as Easter, (following the end of the initial two week lockdown period) will have been less welcome. As previously stated, advisors in the President's own administration, experts from global bodies such as the WHO, and various state government officials, notably New York Governor, Andrew Cuomo, have all urged caution, warning that the lifting of social distancing measures and other restrictions on activities too early risks any progress in "flattening the curve" of the number of cases detected, and the number of deaths which result.

With either course of action likely to have significant economic and social consequences, the choice before a president mindful of his legacy is a stark one, especially when he is seeking re-election later this year.

Until next week...


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About the Author


Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net

 

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