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By: Barbara Laidlaw with Josiah Adams
Following Senate Majority Leader Mitch McConnell’s announcement early March 26 that the Senate finalized a deal outlining a $2 trillion stimulus package, Americans still wondered what it means for themselves, their businesses and the country as a whole.
The largest stimulus package in history includes provisions that seek to support individuals, hospitals, and small and large businesses. House Speaker Nancy Pelosi said the House will vote on the bill March 28 and, “It will pass. It will pass with strong bipartisan support.” While the full details of the nearly 900-page stimulus package are not yet clear, a few items have generated a substantial amount of interest among lawmakers, businesses and citizens.
The stimulus package includes a massive $58 billion bailout for the airline industry, with some strings attached. Companies that receive a portion of these funds will be unable to lay off any of their workforce until the fall and will be barred from engaging in stock buybacks until one year after they stop receiving assistance.
The stimulus package also restricts its recipients’ executive compensation and bonuses. While the airline industry will receive a substantial amount of these funds, some $500 billion in total has been allocated for larger industries. This amount has already generated some pushback from progressive Democrats, including Rep. Alexandria Ocasio-Cortez, who called for more worker protections. While this could threaten the chances of the bill passing via unanimous consent, like it did in the Senate, it will have little impact on the overall House vote. In her press conference, Pelosi addressed these concerns, asserting the democrats had “performed jujitsu” on the bill to increase workforce protections and limit corporate handouts.
One of the core pieces of this bill assistance to small businesses. It dedicates $367 billion in loans to businesses with fewer than 500 employees that pledge to retain their workforce during the COVID-19 crisis. The loan period will begin once the bill is signed into law and would last until June 30, 2020. It remains unclear what percentage of these loans will ultimately be forgiven, effectively turning them into grants. At this time, widespread loan forgiveness appears unlikely.
Payroll-tax relief provisions are another critical piece of this stimulus for small to midsize business. Those that continue to employ their workers throughout the crisis will be eligible for tax credits and deferments on payroll taxes for 2020. Some 50% of these deferred taxes would be paid off in 2021, while the remaining 50% would be paid in 2022. Maintaining employment at the small business level is at the core of these allocated funds, but the limited amount of tax and loan forgiveness may deter certain businesses from accepting the aid to keep their workforces intact.
At the individual level, the stimulus package dedicates direct payments of $1,200 to most individuals making up to $75,000 a year or $2,400 to couples making up to $150,000 a year. It also grants $500 per child. The amount decreases at an unspecified rate after the $75,000 threshold and cuts off at $99,000. While this piece of the stimulus has generated a great deal of attention over the past few weeks, these checks will take some time to hit bank accounts. Eligible Americans with direct-deposit bank account information on file with the IRS (roughly 70 million) will see payments “within a few weeks of the bill being signed into law.”
Along with these payments, unemployment insurance has been expanded by 13 weeks and will include four months of “enhanced” benefits, which amounts to an additional $600 per week. Additional individual relief includes suspending federal student loan payments through Sept. 30 without interest accrual and requiring group health plans and insurance providers to cover the costs of preventative COVID-19 services.
Business leaders and individuals should be cautious about this historic stimulus package. Details about implementation and management remain unknown. And even after President Donald Trump signs it into law, it will be a considerable period before you, your business or your communities see real dollar figure relief. This waiting period is absolutely critical on a personal and professional level, and we recommend exercising extreme prudence in the coming weeks and months.
Above all else, we all must continue adhering to all CDC and local guidelines to help expedite our fight against this virus. The true stimulus will come when we have demonstrated control over COVID-19. The sooner we can reach that point, the better for our personal and economic health and well-being.
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Barbara Laidlaw brings 25 years of experience developing and running programs that help companies prepare, protect, and defend their brand reputation through global and national events, recalls, litigation, data breaches, regulatory issues and labor disputes.
Josiah Adams works on Allison + Partners’ global risk + issues management team and provides federal, state and local policy insights.