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There is widespread agreement that the $1.8-trillion economic recovery package that went into effect in March — the CARES Act — averted economic disaster after the coronavirus pandemic began, according to a Bloomberg commentary. With each passing month, the evidence mounts that the CARES Act performed better than even its strongest advocates thought it would. Perversely, its success is undermining the perceived need for Congress to provide additional support, according to the commentary. There are signs that the cushion is losing air. The pace of monthly job gains has slowed considerably since the spring. This fall, consumers pulled back on spending, and their confidence in the economy fell in November to a three-month low. The savings rate has fallen by 20 percentage points as households burn through their reserves. Lines at food banks are growing as nutritional insecurity worsens. If Congress does not pass another stimulus, then the first quarter of 2021 could easily see a shrinking economy and increasing unemployment. Deeper problems could take root. Millions of businesses could be wastefully lost. Labor demand could weaken over the medium term, keeping unemployment higher for longer. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

A slew of expiring emergency programs are setting up an economic “COVID cliff” come 2021, which could see millions of people lose unemployment insurance and get evictions, while a growing wave of small businesses close shop, The Hill reported. March's CARES Act set up myriad programs to give people economic relief in the earliest days of the COVID-19 pandemic, many of which are set to expire on Dec. 31. Unless a divided Congress can reach a deal to extend the programs, the country's economic suffering could skyrocket. Come New Years, one program that extended traditional unemployment benefits from the standard 26 weeks by another 13 weeks, and another program that made self-employed and gig economy workers eligible, will expire. At the same time, provisions meant to shore up tax benefits for low-income earners, such as the Earned Income Tax Credit and Child Credit, are scheduled to go up in smoke, potentially pulling money out of the paychecks of the poorest people who are still working. On top of it all, an evictions moratorium from the CDC is set to expire, teeing up a wave of evictions and homelessness. “We know that eviction filings have been able to continue during this period even with maraotira in place, so certainly the cases are there and ready to be processed and adjudicated,” said Samantha Batko, an expert on housing insecurity at the Urban Institute. The most recent data from the Census Household Pulse Survey, covering the last days of October and early November, painted a grim picture. Nearly a third of all households (32.9 percent) said they were behind on housing payments and rated the chances of eviction or foreclosure within two months as somewhat or very likely. Some 25.9 percent expected a household earner to lose employer income in the coming month, and 12 percent said they didn’t have enough to eat. An analysis by Stout found that absent a moratorium, as many as 6.4 million evictions filed in recent months could take effect on Jan. 1.

The chief executives of the seven largest U.S. airlines made a fresh plea for more payroll relief before the end of the year and pointed to the challenges of distributing a COVID-19 vaccine in a letter to Congressional leaders yesterday, Reuters reported. The letter, seen by Reuters, was sent by the main industry lobby Airlines for America and signed by the heads of the top seven U.S. airlines. “As the nation looks forward and takes on the logistical challenges of distributing a vaccine, it will be important to ensure there are sufficient certified employees and planes in service necessary for adequate capacity to complete the task,” they said. U.S. airlines received $25 billion in federal aid to keep employees on payroll between March and September and have asked for a second round of support after cutting tens of thousands of jobs either through furloughs or early retirements in recent months. They have argued that they need trained employees to help service an economic rebound, with the prospects of a vaccine in the coming months underscoring the urgency. The number of travelers that passed through Transportation Security Administration checkpoints on Tuesday was down two-thirds from the same day in 2019, an improvement from the start of the pandemic but not enough to bring airlines out of their cash hole, particularly with further lockdowns looming as COVID-19 cases rise. Still, the industry’s aid request has received wide bipartisan support but has so far failed to pass as Congress remains deadlocked over a broader COVID-19 relief and stimulus plan. Read more. 

In related news, JPMorgan Chase & Co. Chief Executive Jamie Dimon said yesterday that U.S. politicians are behaving like children by not passing a new stimulus bill that could help Americans whose income has been wiped out by the coronavirus pandemic, Reuters reported. “This is childish behavior on the part of our politicians,” Dimon said about an impasse between Democrats and Republicans over how much additional spending should be authorized. The two parties should split the difference between the amounts they want to devote to coronavirus relief, he said. “Just get it done,” he said, declining to blame one side over the other. The issue came up again in Congress on Wednesday, as U.S. Senate Democratic leader Chuck Schumer said he and House of Representatives Speaker Nancy Pelosi had formally invited Senate Majority Leader Mitch McConnell and other Senate Republicans to bipartisan talks on relief legislation. Earlier in the day, McConnell said Congress should aim for agreement on items where there is little disagreement. But he blamed Democrats for blocking earlier Senate Republican efforts to approve spending packages of $500 billion, which Democrats have called inadequate. Read more.

Deadlines set by Congress early in the pandemic will result in about 12 million Americans losing unemployment insurance by the year’s end, according to a report released today, the Washington Post reported. According to the report from unemployment researchers Andrew Stettner and Elizabeth Pancotti, those Americans will lose their unemployment benefits the day after Christmas — more than half of the 21.1 million people currently on the benefits — due to deadlines Congress chose when it passed the Cares Act in March amid optimism the pandemic would be short-lived. Another 4.4 million people have already exhausted their benefits this year, according to Stettner and Pancotti, who wrote the report for the Century Foundation, a public policy research group. The “benefits cliff” on Dec. 26 includes an additional 7.3 million workers on Pandemic Unemployment Assistance, the supplemental insurance for gig and self-employed workers, which ends that day, as well as 4.6 million people on Pandemic Emergency Unemployment Compensation, the unemployment insurance extension available for people who have exhausted regular benefits after what is typically about six months, depending on the state. A nationwide eviction moratorium expires on Dec. 31, raising concerns that jobless Americans could fall into homelessness. Read more. 

In related news, the Business Roundtable, a group of CEOs from major U.S. companies, is calling for a slew of immediate government actions to address the rapidly growing COVID-19 pandemic and its economic consequences, including a national mask mandate and action on a relief bill, The Hill reported. “It’s not as though it’s either safety or economic recovery. There is no economic recovery without safety,” the group's president, Joshua Bolten, said yesterday. In remarks that were critical of the Trump administration’s response to the pandemic without directly mentioning the president, Bolten laid out a slew of priorities to get the pandemic under control and boost businesses. In addition to a national mask mandate, Bolten said the government needs to issue clear safety guidelines for businesses, implement a national testing strategy and reengage with the World Health Organization. Bolten also said yesterday that one of the most critical things for the economy would be immediate action by Congress on another relief measure. “We’re in the ‘it should be enacted now’ camp,” he said when asked whether such a bill could wait until after the new year. Read more. 

House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) yesterday asked Senate Majority Leader Mitch McConnell to resume talks on a multi-trillion-dollar stimulus package for the U.S. economy, Bloomberg News reported. “We were encouraged by your comments shortly after the election that you believe the Congress needs to act on another COVID-19 relief package and that ‘it’s a possibility we will do more for state and local governments,’” they wrote in a letter to the Republican leader. “We agree with you.” Pelosi and Schumer asked that McConnell join them at the negotiating table this week “so that we can work towards a bipartisan, bicameral COVID-19 relief agreement to crush the virus and save American lives.” The letter comes as the White House and President Donald Trump have pulled back from their involvement in the stalled stimulus negotiations after offering to back a $1.9 trillion package before the Nov. 3 election. Democrats have been demanding a $2.4 trillion package, and McConnell has called for “targeted” relief in the $500 billion range. Read more. 

In related news, President-elect Joe Biden on Monday urged Congress to immediately pass an economic relief package as he warned that the coronavirus pandemic will worsen in the coming months, the Washington Post reported. Federal help can ease the pain for workers and employers as the virus surges across the country, Biden said as he and Vice President-elect Kamala D. Harris expressed optimism that businesses and labor unions are ready to work together to reboot the economy. The holdup is Congress, Biden said, as he criticized Democrats along with Republicans for inaction this fall. Biden called on Congress to pass a large package approved by House Democrats earlier this year and said they cannot wait any longer to act. He suggested that the economic relief needs to be approved during the lame-duck session of Congress while Trump is still in the White House. Read more.

A political fight is brewing over whether to extend critical programs that the Federal Reserve rolled out to help keep credit flowing to companies and municipalities amid the pandemic-induced recession, the New York Times reported. The dispute has the potential to roil financial markets, which have calmed significantly since the Fed announced in March and April that it would set up backstops in response to market turmoil spurred by the coronavirus pandemic. Those programs expire on Dec. 31, and it is unclear whether the Trump administration will agree to extend them. The Federal Reserve chair, Jerome H. Powell, and Treasury secretary, Steven Mnuchin, must together decide whether they will continue the programs — including one that buys state and local bonds, another purchasing corporate debt and another that makes loans to small and medium-size businesses. The officials will probably make that decision by early to mid-December, according to a senior Treasury Department official. The Fed might be inclined to keep the efforts going, but Mnuchin, whose Treasury Department provides the funding backing up the programs, has signaled that he would favor ending the one that buys municipal bonds. And he is under growing pressure from Republicans to allow all five of the Treasury-backed programs to sunset. Sen. Patrick J. Toomey (R-Pa.), who could soon lead the Senate Banking Committee, is arguing that the Fed and Treasury do not have the legal authority to extend new loans or buy new securities beyond this year without congressional approval. While that view is disputed by legal experts, Toomey also believes it was Congress’s intent for the relief programs to end on Dec. 31. The programs’s expiration could come at exactly the wrong moment, as the U.S. faces an expected surge in coronavirus cases this winter and as fiscal stimulus measures that Congress passed in the spring fade. While lawmakers have toyed with passing a new relief bill before next year during the lame-duck session of Congress, President Trump’s election loss makes the outcome highly uncertain. “Cliffing the programs at year-end would be ill advised, opening markets up to a year-end disruption,” said Scott Minerd, the global chief investment officer at Guggenheim Partners, who expects the programs to be extended. Mnuchin has made clear in responses to congressional questioning that he does not favor extending the municipal bond program. While Mnuchin’s comment was specific to that effort, a senior Treasury official laid out reasons for allowing the others to end, mainly centered on a belief that the worst of the economic crisis has passed and the programs should not be a replacement for support from Congress.

Bankruptcy gives over 700,000 debtors a fresh start every year, but student loan debts don’t go away as easily, according to a New York Times report. For decades, politicians have slowly made them harder to discharge, while differing standards in courts across the country mean a debtor’s chances can depend on where he or she lives. The few debtors who attempt it are subjected to a morality play unlike anything else in the world of personal finance: so-called adversary proceedings, where they must lay themselves bare in court as opposing lawyers question how much they pay for lunch or give to their church. More than 43 million borrowers hold over $1.6 trillion in student loans, a sum that has more than tripled in 13 years. It exceeds what Americans owe on credit cards or auto loans and trails only mortgages. Sixty-two percent of students who graduated from nonprofit colleges in 2019 had student loan debt, according to an Institute for College Access & Success analysis. Their average balance was $28,950 — not including borrowing by their parents. Many struggle mightily to pay: Before the government’s coronavirus relief efforts paused federal student loan payments, 7.7 million borrowers were in default and nearly two million others were seriously behind.

U.S. Senate Majority Leader Mitch McConnell (R-Ky.) said on Friday that economic statistics, including a 1 percentage point drop in the unemployment rate, showed that Congress should enact a smaller coronavirus stimulus package that is highly targeted at the pandemic’s effects, Reuters reported. McConnell told a news conference in Kentucky that the fall to a 6.9 percent jobless rate, combined with recent evidence of overall economic growth, showed the U.S. economy is experiencing a dramatic recovery. “I think it reinforces the argument that I’ve been making for the last few months, that something smaller — rather than throwing another $3 trillion at this issue — is more appropriate,” McConnell told reporters. But his call for a narrow package was quickly rejected by House of Representatives Speaker Nancy Pelosi, a Democrat, who has been working to broker a COVID-19 stimulus deal near the $2 trillion mark with Treasury Secretary Steven Mnuchin. Senate Republicans, who oppose a larger package, have twice failed to move forward with smaller legislation worth $500 billion due to Democratic opposition. Pelosi insisted that any agreement must include effective support for testing, tracing and vaccine development, as well as aid to state and local governments. Trump and his Republican allies have balked at Democratic demands for state and local aid, calling it a bailout for Democratic-run states and cities.