Trump faces race against clock to get coronavirus relief out the door

Congress’s $2.2 trillion “phase three” economic rescue package came together in record time, but economists, workers and businesses alike are worried about how quickly relief can get out the door.

Disbursing hundreds of billions of dollars to Americans and businesses large and small in a matter of weeks comes with significant logistical challenges. With each passing day of lost income and revenue, the odds of a sharper downturn increase.

“The longer it takes, the more severe and longer-lasting the downturn will be. And that’s really the nightmare scenario here,” said labor economist Josh Wright, a former researcher at the Federal Reserve and chief economist at the recruiting software firm iCIMS.

“We don’t want to see a monumental shock morph into the business sector and household balance sheets that result in another sluggish recovery,” he added.

The coronavirus rescue package, the largest in history, was put together at record speed. The Senate passed it unanimously Wednesday night, and the House is expected to clear the measure Friday, sending it to President Trump for his signature.

But various provisions in the bill may take time to unfold, even as each day more cities and states close nonessential businesses, call for lockdowns and advise people to stay home in the face of the ever-expanding coronavirus pandemic.

“Some of the provisions to existing programs will be a lot easier to get up and running than the ones that create new programs,” said Erica York, an expert at the Tax Foundation.

Labor Department data released Thursday showed that initial jobless claims spiked last week to nearly 3.3 million, shattering a record that never before exceeded 700,000. An analysis from Cornell said the associated unemployment rate has likely risen to 6 percent, up from a half-century low of 3.5 percent just a month ago.

Treasury Secretary Steven Mnuchin said the direct payments to Americans, one of the most ballyhooed provisions of the mammoth bill, would be landing in bank accounts and mailboxes starting in mid-April.

The Treasury Department will deposit $1,200 in the accounts of adults making up to $75,000. The payments include $500 for every child but will be phased out for adults making more than $99,000.

“We’re determined to get money in people’s pockets immediately. That will be within three weeks,” Mnuchin told CNBC on Thursday.

That would be a major feat, according to York, who noted that in the past, the fastest turnaround time for such payments has been six weeks. An increase in electronic filing and direct deposit, she said, made three weeks an achievable goal, but not everyone will get the checks at the same time.

“Those people who don’t use direct deposit or file electronically might have to wait a little longer for those payments,” she said.

People who don’t file returns or receive certain government benefits may have to wait even longer while the IRS tracks down their location to issue a check. Some may have to file a return for 2019.

But for those who have lost their jobs, the increase in unemployment insurance will likely be more important than the direct payments, adding $600 a week on top of regular unemployment, which averages around $350 a week. Together, that would amount to an average of more than $4,000 a month.

While York says it shouldn’t take too long for the benefits boost to come together, questions remain as to how long it will take the government to implement its new pandemic unemployment assistance.

That program, based on similar ones that have been used for natural disasters, offers help for gig workers, the self-employed and others who don’t have typical access to unemployment benefits.

But the Labor Department will have to coordinate with a patchwork of state programs, according to the National Employment Law Project, meaning some states could take significantly longer to offer the benefits.

Businesses desperate for relief may also have to wait until new programs are up and running.

“From a small business perspective, the faster they can be available the better,” said Amanda Ballantyne, executive director of the Main Street Alliance, a small business advocacy group.

“All I can say is, April rent is due and payroll is due, and the millions of small business owners who keep this economy thriving have bills to pay and have to make decisions now,” she added.

One program designed to get cash out the door fast is the $10,000 Economic Injury Disaster Loan, which should be operating almost immediately, and get just about any eligible business that applies cash within three days.

But some of the key programs meant to help businesses may take a good deal longer to deliver economic relief.

Among them is the Paycheck Protection Program, a government-backed forgivable loan that small- and medium-size businesses can use to pay wages for furloughed workers, as well as rent and utilities.

Economists say that facility could help keep a lot of people in their jobs through the crisis, which would make for a significantly faster recovery once it ends.

But it may take weeks to set up the program and sort out regulation, and it is unclear how long the loans would take to process and disburse.

To speed things up, lawmakers decided to run the program through the existing 7(a) loans administered by the Small Business Administration and doled out by banks and other lenders.

A typical 7(a) loan takes between 30 and 90 days to come through, an untenable timeline for businesses hit by one of the most intense economic downturns in the nation’s history.

“It’s a game of weeks for a lot of people. There are a lot of households and businesses operating on thin margins,” said Wright. “We’re talking about a lot of businesses that will go under in two weeks, and even more after four.”

Rep. Alexandria Ocasio-Cortez (D-N.Y.) has called for loan, mortgage and rent forbearance to provide a cushion to people and businesses feeling the cash crunch.

“I just don’t understand how it’s reasonable to expect what could be millions of people and small businesses, who suddenly had their incomes cut off, to pay rent, mortgages, & major bills on Apr 1st without any payment moratoriums or immediate relief,” she tweeted Wednesday.

Renee Johnson, the Main Street Alliance’s senior government affairs manager, also worries that some business owners, particularly minorities who historically have more trouble obtaining loans, may not avail themselves of the program.

“If I couldn’t get a loan a year ago, because of discrimination or otherwise, why would I get one now?” she said.

But there is hope that the government will move to get those loans out quickly. The rescue package provides $250 million for the IRS and $562 million for the SBA to ramp up their capacity.

Because the loans are fully guaranteed by the government, lenders should see little harm in ferrying them to businesses swiftly.

As people and businesses await financial relief, economists are expecting that more help will be needed down the road.

“We have to accept that next week, and the weeks to come, will likely be worse,” said Josh Lipsky, a business and economics specialist at the Atlantic Council in Washington.

“We will need phase 4, and more beyond that. The work should start today,” he said.