After back and forth debates in the two chambers of Congress, both sides of the aisle on Wednesday said they have struck a $2 trillion deal that would breathe fresh air into a suffocating economy due to coronavirus.
The bill would be the largest economic stimulus package in modern day history, giving relief to consumers, businesses, large corporations and the medical sector.
The bill was expected to pass the U.S. Senate by Wednesday’s end and be sent to the U.S. House of Representatives. President Donald Trump intends to sign the bill into law.
The most immediate effect would be direct payments to taxpayers.
Policymakers plan to release $1,200 direct payments to taxpayers with annual incomes up to $75,000. Families would receive $500 per child.
Guy Williams, president and CEO of New Orleans-based Gulf Coast Bank and Trust Co., said direct payments to taxpayers is a “great idea” and “the sooner, the better.”
“What’s happening right now is that people who are in blue collar occupations don’t get paid if they don’t work,” Williams said. “Even if you sign up for unemployment there’s a lag; you have to get in the system and then get a check, but it doesn’t replace your income.”
Williams said a tourism-based economy like New Orleans is getting hit the hardest. Restaurants have been reduced to curbside pickup and bars have been shuttered, resulting in temporary or permanent layoffs of managers, cooks, waiters, janitors and bartenders.
“All of those folks are out of work,” Williams said. “They haven’t received a check yet, but their rent is due, they have to buy groceries and put gas in the car and keep their life going.”
J. (Dub) Lane, chair of the department of economics and finance at the University of New Orleans, said the economy “desperately needs this stimulus,” but he is uncomfortable with some of its unintended consequences. He said writing sweeping checks to all who make under $75,000 regardless of unemployment may not directly stimulate the economy.
“I don’t know if (the money) is always getting to the right people,” said Lane, who worries about gig workers, or independently contracted workers, being helped enough.
In the meantime, Williams encourages consumers to spend money at restaurants during this time period.
Gulf Coast Bank has contacted all of their restaurant and hotel customers and told them payments on loans are being deferred for 90 days.
“If you want your favorite restaurant to be there when this is over, you better support them now,” said Williams, adding that restaurants can often have razor thin margins.
Trump has suggested reopening the economy by Easter, though some medical experts remain skeptical that’s enough time to contain the virus.
“Whether Easter is too soon or May 1st is right, having an end date so folks can plan is a wonderful thing,” Williams said of the uncertainty. He said Easter may be too soon but May 1 or June 1 is more logical.
Nonetheless, Williams said if the economy is destroyed there are definite negative consequences.
“The depression caused by the quarantine could kill more people than the disease does,” Williams said regarding suicides. “It’s not risk-free to close the economy forever.”
“It costs about $1 trillion to be closed for a month,” Williams said. “That is real money. That has to be repaid at some point – either in future taxes or a lower standard of living. It’s not magic money.”
With that said, Williams said it’s crucial to weigh the current crisis with the long-term health of the U.S. economy and its ability to fund expenditures like infrastructure and education.
The bill provides federally guaranteed loans offered at community banks to small businesses that agree not to lay off their workers through the pandemic. The loans would be offered during a time period ending June 30 and would be forgiven if the employer continued to pay workers throughout the crisis.
The Washington Post reported last week that individual loans could cover six weeks of payroll, capped at $1,540 per week, per employee.
“Those loans won’t be available for a couple of weeks, and we’ll start processing,” Williams said.
Ron Samford, president and CEO of Metairie Bank, thinks some stimulation to get cash quickly in the hands of small business owners, so they can make payroll and pay their rent, is imperative and will ripple throughout the economy. “Allowing the banking system to make SBA guaranteed loans that are forgivable in certain instances is a great way to take the bureaucracy out of that process and speed the recovery,” Samford said.
The bill also calls for a $425 billion bailout of distressed companies like the airline and hotel industry. Hospitals stand to receive $100 billion.
“Those larger industries that are having trouble, including the airline, cruise and hotel industries, are in need of government-backed loans as well,” Samford said.
However, Lane said it remains to be seen whether money funneled to corporations will go to keeping workers employed or merely help the company’s bottom dollar.
Brian W. North, president and CEO of Fifth District Savings Bank, said that with previous disasters New Orleans has dealt with, such as floods and hurricanes, individuals and businesses had some level of insurance to help offset losses.
“In this case, there is no insurance,” North said. “Businesses of all sizes and individuals will rely on assistance from the federal government to get through this.”
The bank is working with individual loan customers who are requesting assistance.
“To date we have seen only a small percentage of customers ask for loan deferrals, but I expect more to reach out,” North said. “We stand ready to assist out customers as we all work to get through this crisis.”
Samford said attempts by legislators to get earmarks incorporated into the massive stimulus package are “irritating and not helpful.”
“Some of the ‘pork’ being introduced to the measure is just foolishness and an impediment to those responsible legislators who are trying to act sensibly and timely to get this done now,” Samford said.
The Louisiana Oil & Gas Association said it was unhappy that a provision was blocked in the bill that would have created an additional $3 billion market for Louisiana producers to sell oil into.
LOGA said its recent survey of its members shows that if nothing changes in the price markets, “over the next 120 days 65% of Louisiana’s oil and gas workers could be laid off as independent businesses are forced to adjust to low energy prices.”