President Donald Trump on Friday signed into law legislation designed to make it easier for millions of small businesses to avoid being stuck with debt after taking government-backed loans during the pandemic, Politico reported. The bill would give businesses more leeway on how they spend funds through the so-called Paycheck Protection Program, which Congress created in March to fight mass layoffs during the Covid-19 outbreak. The program offers low-interest loans that can be forgiven if businesses agree to maintain their payrolls — an incentive that led to the issuance of 4.5 million loans totaling more than $510 billion. Restaurants and other businesses hit hard by nationwide social distancing measures warned that the rules for using the funds were proving to be too burdensome as much of the economy remains locked down for longer than lawmakers anticipated. The new law, which the House and Senate passed with overwhelming support, would give businesses more time to spend the money — 24 weeks instead of eight — and the ability to use more of it on non-payroll expenses while still qualifying for loan forgiveness.
The Senate yesterday passed legislation to ease restrictions on emergency small business loans intended to avert mass layoffs during the pandemic, sending the first major overhaul of the program to President Donald Trump for his signature, Politico reported. The bill, passed by unanimous consent, would relax rules under the $670 billion Paycheck Protection Program to give borrowers more time to spend the money and use it on a broader set of expenses while still qualifying to have the loans forgiven — a key feature offered in exchange for employers maintaining payrolls. The House last week passed the bill in a 417-1 vote. But passing the bill in the Senate proved to be a challenge for Majority Leader Mitch McConnell and Minority Leader Chuck Schumer. Republicans including Sen. Ron Johnson (R-Wis.) resisted at first, with Johnson on Wednesday blocking an initial attempt by Schumer to pass the bill unanimously and demanding assurances about the legislation's intent. He dropped his objections later in the day, allowing the Senate to quickly pass the bill and send it to Trump.
President Trump is planning to meet with his senior advisers as soon as this week to discuss policy options for the next coronavirus relief package as the administration prepares for negotiations with Capitol Hill, according to a senior administration official, the Wall Street Journal reported. The president’s team has assembled a set of proposals meant to encourage the public to return to work and resume normal life, including going out to restaurants and taking vacations, in an effort to jump-start the ailing economy as quickly as possible. “We’ve been through the rescue phase and we’re now in the transitional reopening phase and I think generally speaking we’d like to move into a growth- incentive phase for the future economy,” the senior administration official said. The timing of the meeting, which is planned for this week, could change, officials cautioned, noting that the White House is increasingly focused on the unrest around the country over racial inequality and police brutality. Trump and his Republican allies are headed for another clash with Democrats, who have a sharply divergent view of what should be included in the next package. House Democrats, with the support of one GOP lawmaker, passed a sprawling $3.5 trillion bill last month that Trump dismissed as dead on arrival. Read more. (Subscription required.)
In related news, Senate Majority Leader Mitch McConnell (R-Ky.) said that his chamber would “soon” vote on a House bill passed last week that would add flexibility to a loan program helping small businesses survive the economic crisis caused by the novel coronavirus, Roll Call reported. “I hope and anticipate the Senate will soon take up and pass legislation that just passed the House by an overwhelming vote of 417-1 to further strengthen the Paycheck Protection Program so it continues working for small businesses that need our help,” McConnell said on Monday. The House passed a bill last week that would make a few tweaks to the Small Business Administration’s Paycheck Protection Program, which offers companies forgivable loans that act like grants so long as the money is used mostly to pay employees. The legislation would give small businesses more time to use the PPP funds and allow them to use more money for nonpayroll expenses. Read more.
Two congressional hearings today will examine the economic fallout from the Covid-19 pandemic. The Senate Small Business Committee will hold a hearing at 10 a.m. titled "Perspectives from Main Street: Covid-19’s Impact on Small Business." Click here for the witness list, prepared statements and a link to the hearing webcast. At 1 p.m., the House Budget Committee will hold a hearing titled "Addressing the Economic Impacts of Covid-19: Views from Two Former CBO Directors." Click here for the witness list, prepared statements and a link to the hearing webcast.
Lawmakers on both sides of the aisle are expressing interest in expanding a tax credit designed to help keep workers connected to their jobs, a sign that the idea could find its way into the next coronavirus relief package, The Hill reported. For much of the pandemic, certain businesses have been eligible to take advantage of a refundable payroll tax credit of up to $5,000 per employee for wages and health care benefits paid through the end of the year. Lawmakers are now offering proposals to increase the amount of the credit and make other changes in an effort to keep more workers connected to their employers. There are many uncertainties about another coronavirus relief package, ranging from the timing of the next bill to how lawmakers address issues such as federal aid to states, liability protection for businesses and a $600 per week increase in unemployment benefits that’s set to expire at the end of July. But there are lawmakers on both sides of the aisle who are supportive of the employee retention tax credit (ERTC) that was included in the $2.2 trillion CARES Act signed by President Trump on March 27. Those lawmakers say they’re open to enhancing the tax credit in an effort to allow businesses to keep their employees.
President Trump vetoed a bipartisan resolution on Friday to overturn new regulations that significantly tighten access to federal student loan forgiveness, siding with Education Secretary Betsy DeVos over veterans’ organizations that say her rules will harm veterans bilked by unscrupulous for-profit colleges, the New York Times reported. The veto will allow stringent rules for students seeking loan forgiveness to take effect on July 1. The rules toughen standards established under the Obama administration for student borrowers seeking to prove their colleges defrauded them and to have their federal loans erased. Even if some borrowers can show they were victims of unscrupulous universities, they could be denied relief unless they can prove their earnings have been adversely affected. The resolution “sought to reimpose an Obama-era regulation that defined educational fraud so broadly that it threatened to paralyze the nation’s system of higher education,” Trump said in his veto statement. “The Department of Education’s rule strikes a better balance, protecting students’ rights to recover from schools that defraud them while foreclosing frivolous lawsuits.” It was the president’s eighth veto. Veterans groups said that the rule failed to protect military service members who have long been the targets of predatory tactics by colleges because of their lucrative G.I. benefits.
Congress and the White House are debating a “return-to-work bonus” this summer, aimed at the more than 40 million workers who have lost jobs and filed for unemployment during the deadly pandemic, as a new incentive for those who go back to work, the Washington Post reported. President Trump likes the idea, according to a senior administration official, but talks remain fluid about how big the bonus should be and how long it should last, according to eight lawmakers and staffers familiar with the discussions. Directly giving workers a government bonus for several weeks would be largely unprecedented in the U.S., although it has been done in other countries. Sen. Rob Portman (R-Ohio) has proposed that the federal government give people who stop collecting unemployment and go back to work $450 a week for several weeks. Others, including White House officials and Rep. Kevin Brady (R-Tex.), have discussed allowing workers to get up to $1,200 if they find a job, according to three people familiar with White House discussions and who spoke on the condition of anonymity to discuss internal deliberations. Republican lawmakers have repeatedly expressed concern that the increase in unemployment benefits approved by Congress in March rewards workers for staying home and could lead to increased unemployment. Lawmakers are now considering the bonus to make returning to work more attractive than remaining on unemployment. The idea is to offer an off-ramp from public assistance, without abruptly eliminating federal financial support for millions of people.
Data from the Small Business Administration shows net weekly PPP lending has actually been negative since mid-May, as fewer firms applied for loans, and some borrowers returned funds, Reuters reported. All told, the SBA says that it had approved $512.2 billion in PPP loans as of May 21. That’s nearly $150 billion less than the $660 billion allocated to the program, which was designed to keep Americans on company payrolls and off unemployment assistance. Business owners first saw the program as a lifeline during the coronavirus crisis. They are now worried that confusing and changing rules may keep them from converting the money to a grant, meaning they will need to pay it back. To ensure forgiveness, for instance, firms need to spend three-quarters of the funds on payroll. But for some firms that doesn’t leave enough to cover overhead. Others don’t have enough work to justify rehiring many of their pre-crisis staff. A survey by small business lobbying group Main Street Alliance showed 55 percent of members who were PPP borrowers were worried about loan forgiveness. Potential borrowers are “uncertain when we are going to reopen, uncertain what the demand will look like, uncertain about use of the program funds,” said Bill Keller, president of Oakland-based Community Bank of the Bay. Another barrier to PPP use is competing stimulus programs. Workers who lose their jobs due to the virus get an extra $600 weekly through July as part of enhanced unemployment benefits passed in March, netting many service workers more than if they returned to a PPP-subsidized job.
As unemployment rises and the first wave of federal economic relief nears expiration, lawmakers are increasingly looking to expand an existing wage subsidy to keep workers on payrolls and help businesses stay afloat, the Wall Street Journal reported. The $3 trillion package passed by the House this month features an expanded wage subsidy, known as the employee retention tax credit. That proposal, which would add about $194 billion to a $55 billion tax credit created in March, is gaining bipartisan support even as lawmakers clash over other legislation to aid the economy during the pandemic. For Democrats, the subsidy offers an alternative to the payroll-tax cut President Trump is seeking, which they oppose because it does little for the unemployed. Republican supporters prefer the subsidy to spending programs favored by Democrats and see it as a way to link aid to work. The House plan would give employers enough money to cover up to 80 percent of their wages and benefits, up to $45,000 per worker, plus a credit for fixed expenses like rent. Eligible companies would simply keep taxes withheld from employees’ paychecks. If that isn’t enough to equal the credit, they could get additional money from the Internal Revenue Service. Smaller businesses would get the subsidy for all workers, while larger ones would get it only for furloughed workers still receiving wages or benefits. The break would be scaled to each employer’s revenue loss during the coronavirus pandemic. Read more. (Subscription required.) https://www.wsj.com/articles/tax-credit-for-keeping-workers-on-payrolls…
In related news, the first shoots of an economic recovery from shutdowns caused by the coronavirus pandemic are starting to emerge, but the U.S. is likely to face a sustained period of record-high unemployment, the Wall Street Journal reported. Policy makers confronting that possibility are preparing plans to offer additional stimulus to the economy in the coming weeks and months. White House economic adviser Kevin Hassett said on Sunday that he already sees signs a rebound is occurring, pointing to businesses reopening and credit-card data showing consumers are starting to increase spending. Still, he said that May’s unemployment rate, which measures joblessness in the middle of the month, could “end up with a number north of 20%.” April’s rate, 14.7 percent, was the highest on record back to 1948. The Trump administration is in talks with Congress on a fourth pandemic-relief bill, Hassett said. He demurred when asked if President Trump supports extending a $600 weekly boost to unemployment benefits past July. House Democrats have proposed extending those enhanced benefits into early next year. Read more. (Subscription required.) https://www.wsj.com/articles/unemployment-could-top-20-but-economy-reco…
