Aid for Small Businesses, State Governments Among the Sticking Points in COVID-19 Relief Talks
Should Congress provide more relief for small businesses and state governments?
by Causes | 11.20.20
What’s the story?
- The ongoing impasse between Democrats and Republicans over coronavirus (COVID-19) relief legislation looks likely to linger over the Thanksgiving recess and into December, and it’s far from certain the two sides will be able to reach a compromise before the end of the year given the number of unresolved sticking points in negotiations, including aid to small businesses and state governments.
Small Business Aid
- One area where there is a degree of bipartisan support is for another round of Paycheck Protection Program (PPP) loans, which allow small businesses to receive forgivable loans that can be used to keep workers on payroll and cover overhead expenses like rent and utilities. About $525 billion was provided to over 5 million small businesses before the PPP lending window closed with about $133 billion in funding capacity remaining.
- While the PPP helped many small businesses and workers over the spring and summer, loans can no longer be originated because Congress set an early August cut-off date that hasn’t been amended. The USAFacts chart below features data gleaned from a Small Business Pulse survey from late October, which showed a substantial proportion of businesses across the country reporting a “large negative effect” due to COVID-19 and associated lockdowns:
- The states with the most small businesses reporting a “large negative effect” due to COVID-19 were Alaska (42.7%), Hawaii (41.2%), and New York (40.7%); whereas only 13.7% of Idaho small businesses did the same.
- Republicans proposed a standalone bill to allow the disbursement unused $133 billion to small businesses in need, which Democrats blocked in October. Additionally, GOP lawmakers filed a “discharge petition” that could force the House to vote on a standalone PPP extension if 218 lawmakers sign on to it.
- So far, the petition has 186 signatures, and Minority Leader Kevin McCarthy (R-CA) on Friday wrote a letter to the 23 Democrats who in September warned House Speaker Nancy Pelosi (D-CA) that they would sign on to a discharge petition if she failed to act, to urge them to join the GOP in bringing the bill to the floor. Democrats’ $3.4 trillion HEROES Act didn’t include funding for the Paycheck Protection Program, although their $2.2 trillion Updated HEROES Act would allow for another round of PPP loans.
Aid for State Governments
- Another area where there is bipartisan agreement that COVID-19 relief is needed, but Democrats and Republicans have been unable to reach a compromise is additional aid to state governments. Under the bipartisan CARES Act, which was enacted in March 2020, provided $150 billion for states and larger localities, and as of late August they had spent only a fraction of that amount.
- Beyond their impact on businesses and workers they employ, COVID-19 lockdowns have caused many states to experience a decline in tax revenue year-over-year as this USAFacts chart shows:
- The states that experienced the largest declines in tax revenue during the second quarter (Q2) of 2020 relative to Q2 of 2019 were Alaska (-53.6%), Connecticut (-53.4%), and North Dakota (-50.4%). Only three states saw their tax revenue increase in Q2 2020 compared to the prior year ― Idaho (+4.8%), South Dakota (+1.5%), and Maine (0.5%).
- In Congress, Democrats and Republicans have remained relatively far apart on the issue of additional relief for states during their intermittent negotiations over the last several months.
- Democrats’ HEROES Act sought to provide $500 billion to state governments, in addition to $415 billion to local, tribal, and territorial governments, to use in conjunction with addressing fiscal impacts of the COVID-19 pandemic.
- Republicans viewed that as excessive given the amount of unspent CARES Act aid left in late August, and instead offered $105 billion in funding for states to use toward in-person and/or virtual school reopenings. They also expressed concern that Democrats’ proposal could allow states to use federal relief funds to pay down debts or address other budgetary liabilities that existed long before the COVID-19.
- The bipartisan Problem Solvers Caucus, a group of 50 House lawmakers evenly divided between the parties, struck a middle ground in its proposal: $130 billion in remaining CARES Act funding would go to past state and local COVID-19 expenses; $120 billion in new money for documented local general revenue shortfalls through 2021; plus $250 billion in new money for documented state general revenue shortfalls through 2021, for a total of $500 billion. Democratic leaders rejected the Problem Solvers’ proposal.
— Eric Revell
(Photo Credit: iStock.com / GoodLifeStudios)
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