In Washington, D.C., one of the city’s largest streets connects monetary policymakers at the Federal Reserve with their fiscal counterparts in Congress. It’s a telling metaphor for the shared race both teams seem to be on: buffeting the economic fallout from the coronavirus.
Officials at the Fed haven’t sat still, with the U.S. central bank slashing rates to zero in a surprise meeting Sunday and implementing six additional policies to keep money flowing freely throughout the economy. Now, all eyes are looking toward Congress.
President Donald Trump on Wednesday signed a $100 billion-plus emergency virus relief bill, which established paid and family sick leave policies and expanded unemployment insurance — all of which have the potential to impact your wallet. It comes less than two weeks after Trump signed the first $8.3 billion response package into law on March 6.
But lawmakers in Washington are about to drop a bazooka: a third economic relief plan totaling more than $2 trillion when it’s all said and done. The details still await a final Senate and House vote, as well as a signature from the president, but it’s expected to be enacted in the coming days. The relief plan is the largest fiscal care package in modern American history.
“The Federal Reserve only has so many tools in its toolbox. They are powerful, but they are not a panacea,” says Mark Hamrick, Bankrate’s senior economic analyst and Washington bureau chief. “This is why attention has been laser-focused on Congress and the Trump administration as we look for a fiscal response. In a variety of forms, these measures are intended to address the solvency of both individuals and businesses. The fear is, without such measures, the economy will experience an even more severe and prolonged contraction.”
With the news cycle moving at a breakneck pace, it can be hard to wrap your head around all of the economic proposals that have the potential to impact your wallet. Here’s a breakdown of five measures, along with where they currently stand — plus how they could help backstop your finances against an ailing economy and where they may fall short, according to experts.
1. Send checks of $1,200 or more to many Americans (proposal)
Next steps: Senate, House vote and president’s signature
As part of its massive $2 trillion-plus relief package, lawmakers would be sending direct checks to many Americans in low- and middle-class income categories.
Individuals making up to $75,000 a year are expected to receive $1,200, while couples making up to $150,000 would receive $2,400 and an additional $500 per child under age 17.
After that, payments would start to be phased out to individuals who make more than $75,000, while individuals making more than $99,000 wouldn’t receive a check at all. For couples, that threshold is $198,000.
Checks would be based on 2019 tax returns, if they’ve already been filed. If not, they’d be based on a 2018 filing.
The White House struck a deal with Republicans and Democrats in the Senate late Tuesday. After the text is drafted, the Senate is expected to vote on the proposal Wednesday, sending it on to the House, where Speaker Nancy Pelosi said lawmakers could vote by voice to expedite the process. Once approved and passed, the bill would travel to the president’s desk, with his signature bringing it into law.
Lawmakers have rationed $250 billion out of the $2 trillion-plus total government relief for these checks. Senate Minority Leader Chuck Schumer said checks would go out to Americans as soon as April 6, holding true to the Treasury Department’s original plans.
If the economic and financial crisis persists, individuals in the U.S. could receive a second installment in the mail starting May 18, though it remains to be seen if that’s still the plan in the current iteration of the bill.
“Americans need to get cash now and the president wants to get cash now,” Treasury Secretary Steven Mnuchin said March 17 in a White House press conference after announcing the idea of the handout. “And I mean now — in the next two weeks.”
The idea behind giving Americans checks is to quickly circulate money back into the economy faster than a tax cut. It also comes with less restrictions, with Americans being able to use it however they choose.
2. Delay the tax deadline to July 15 from April 15 (enacted)
Implemented through national emergency declaration
The IRS is extending its tax deadline to July 15 from April 15 to help individuals who have felt the economic woes of the coronavirus. Individuals won’t be charged any interest, fees or penalties.
The executive order includes both filing and making payments — a change from Trump’s initial announcement, which originally required individuals to still file by the original deadline.
Not only is it a historic move, but it can help individuals in the U.S. who still owe money.
Bill Hoagland, senior vice president at the Bipartisan Policy Center, says it’s not a move to be underestimated. As he sees it, having that delayed payment could potentially pad wallets with a few extra dollars for those who owe money for 2019.
“Quite frankly, for anyone that owes taxes, that could be the most beneficial in the short term as opposed to them getting a thousand dollars,” says Hoagland, who specializes in analyzing economic and fiscal policy at the think tank.
3. Defer interest on student loan payments for a year (enacted)
Implemented through national emergency declaration
On March 13, President Donald Trump announced that he would defer student loan interest payments on federally administered loans until further notice. That waiver could offer a slight reprieve to borrowers who might need to pause their payments.
Currently, federal student loans offer provisions that allow borrowers to pause payments if they face financial hardship, under a system known as forbearance. The U.S. Department of Education Secretary Betsy DeVos said Friday borrowers can suspend payments for at least 60 days if they’re facing financial hardship, according to CNBC.
But under normal circumstances, that wouldn’t stop interest from accruing, and borrowers know interest adds up. If you have a $10,000 loan with a 6 percent interest rate, for example, you would rack up about $49 every 30 days.
Under Trump’s March 13 order, however, that interest won’t accrue.
If you’re still financially able to make your monthly payments, you could make headway on what you owe. You may be able to successfully decrease the life of your loan if you pay a substantial amount of your principal amount off over this period.
If you believe you need to pause making payments, be sure to reach out directly to your loan servicer for guidance.
4. Establish paid sick leave policies for individuals, families (enacted)
Established March 18 in second relief bill
The second coronavirus relief bill created new measures supporting individuals who need to take time off work — either to recover from an illness or to care for an ill family member. Under these new provisions, individuals can take a two-week sick leave or a three-month leave to care for a child out of school or daycare. Sickness includes not just those who are infected but those who are quarantined with possible infection, according to the bill.
It’s an update to the Family and Medical Leave Act of 1993, Hoagland says.
There are, however, some restrictions. The new provision applies only to firms with less than 500 employees. With the caveat, it will likely exclude a lot of people, judging from Labor Department data. Nearly half (or 48 percent) of workers in the private sector have jobs at firms with 500 or more employees.
Paid leave also isn’t guaranteed to emergency responders or health care providers, given that their presence is needed to fight the outbreak. Meanwhile, firms with fewer than 50 employees can also be exempted if the Department of Labor deems that the measures would “jeopardize the viability of the business.”
Some large employers have chosen to provide leave with pay. Large companies like Walmart said that they would give their employees sick leave. Other retailers, such as Old Navy, announced that they will continue to pay employees, even though they’ve temporarily shuttered to halt the spread of the virus.
Still, 11 percent of private-industry workers at firms with more than 500 employees do not have access to paid sick leave, according to the Department of Labor.
When it comes to pay, individuals may see their income drop as a result. Those on sick leave would be paid no more than $511 each day, while those who are caring for a family member would be paid up to $200 each day, according to the bill.
5. Expand unemployment insurance (first wave enacted, second wave proposed)
First wave established March 18 in second relief bill
Next steps for second wave: Senate, House vote and president’s signature
Congress’ second coronavirus relief plan provides $1 billion to expand unemployment insurance. Half of that amount is reserved for building out staff to administer and process unemployment insurance applications, as an unprecedented uptick in applicants overwhelms the system. The other half will be used as an emergency grant for states that experience at least a 10 percent jump in unemployment.
That would be based on jobless claims, meaning states wouldn’t have to wait several months for the Labor Department’s broader monthly jobs report to release, says Michele Evermore, senior policy analyst at the National Employment Law Project who specializes in unemployment insurance.
Applications for unemployment insurance surged by 33 percent in the week that ended on March 14, the fourth largest on record. The state-level increase was even bigger. Applications for unemployment in Nevada rose by 199 percent from the previous week, and by 184 percent in Washington, the earliest outbreak site in the U.S, according to the Labor Department. Experts say the worst is still yet to come.
The third coronavirus bill would extend unemployment insurance to four months, while also offering individuals an additional $600 each week. Eligibility requirements would also be expanding, allowing gig economy workers and freelancers to apply for benefits. They were originally excluded.
Where the proposals may fall short
Much of the current debate so far has centered around the effectiveness and implementation of sending hundreds of millions of American a check.
Experts have said that these handouts would need to be targeted and quickly delivered. The system, however, isn’t perfect. Some critics have argued that capping income requirements could potentially exclude individuals living paycheck-to-paycheck in larger metropolitan areas with higher costs of living. Meanwhile, determining who gets a check based off of tax returns from even just a year back might not take into account who has lost their job in response to the outbreak.
The decision to “means-test” checks is important for appeasing officials who might be worried about budgets and deficits, according to Bob Greenstein, founder and president of the Center for Budget and Policy Priorities, a nonpartisan Washington think tank. Though now is not the time to worry about budgets and deficits, he says, officials should prioritize limiting who gets a check rather than decreasing how much each person receives across the board.
“Let’s say you have someone making $100,000 a year who is still working remotely,” Greenstein says. “Getting them a check isn’t going to lead to that much additional purchasing. Compare that to an unemployed worker who made $35,000 a year and has been laid off and has no income at all, every dollar you give that person is likely going to go back into the economy.”
There is also an issue of how quickly the federal government could realistically distribute money. In 2009, similar checks were sent out to qualified Americans. President Obama signed the bill into law in February, but the monies weren’t mailed out until May. That could be the case for these current handouts, even with Washington’s plans to distribute them in early April.
The federal government would likely work with the IRS for distribution, says Bipartisan Policy Center’s Hoagland. Those checks could either be sent through the mail or potentially through a direct deposit, which could be faster.
But as Greenstein sees it, using tax codes to identify who gets a check could potentially exclude “the very people who need the payments most,” such as elderly individuals who are not on anyone’s payroll or individuals who make an extremely low income.
When it comes to student loan payments, critics have argued that the executive order didn’t go far enough. New York, for example, moved to suspend all loan payments taken out within the state, such as mortgages and other types of loans. Meanwhile, other policy analysts have argued that the second bill’s leave policies didn’t do enough to protect employees at larger corporations.
Regardless of the action, a policy response is going to be important, Bankrate’s Hamrick says. Many Americans were living from paycheck-to-paycheck before the outbreak, according to a Bankrate survey from May. The current environment will only exacerbate the thorny consumer finance problem.
“Between unemployment aid, direct cash assistance and loans, the idea is to help Americans keep current on their bills and keep food on their tables,” Hamrick says. “Ideally, if businesses both large and small can avoid more wide-scale layoffs, workers can avoid the worst-case scenario in terms of the economic fallout from the global pandemic.”
What you should do in the meantime
There’s a chance the longest expansion on record has already been derailed by the outbreak — and if it hasn’t, a recession is likely coming. Some experts are cautiously optimistic that activity will perk back up once Americans’ way of life returns. Others, not so much.
“We face the prospect of an economic downturn that could easily be deeper and more serious than the Great Recession,” Greenstein says. “We need to think big and act boldly to meet the crisis and keep the economy from suffering [from] what could otherwise be its most severe setbacks in decades.”
Experts aren’t convinced any kind of economic response can stave off that recession. As long as businesses are shut down, there won’t be anywhere substantial to spend the money that Americans do have.
“If you’re sequestered away and supposed to stay hunkered down in your house, you’re not going out to your restaurants,” Hoagland says. “At the end of the day, what will really cure this recession will be a clear understanding that we’ve got this virus under control and who knows when that will be.”
But staying up-to-date on these happenings in Washington is important, as it will help you receive much needed assistance sooner rather than later, Hamrick says.
“The president has likened the current situation to a war-time footing,” Hamrick says. “In cases where someone has suffered some economic hardship, they should make sure they remain informed about programs aimed at addressing their challenges, such as unemployment assistance or the responses from financial institutions and others working to help people get through the current crisis.”
Until that happens, it’s important to place a priority on your personal finances as best as you can. Separate what you need to do into a short- and long-term scenario, Hamrick says. That includes saving for emergencies and retirement, as well as paying down debt.
For your emergency savings, consider opening a high-yield savings account, which still offers a rate that beats the market average.
“At some point, we will emerge from both these health and economic crises as we have from every other challenging period in our nation’s history,” Hamrick says.