Differing views on the purpose of the stimulus package delay its passage in the Senate

The Democrats are right to demand stronger worker protections, but that shouldn't stop the Senate from passing the stimulus package.

It's Monday, March 23, and Americans woke up to breaking news that the Democrats are blocking the "Coronavirus Aid, Relief, and Economic Security Act," CARES Act. Ten days have passed since President Donald Trump announced a National Emergency Declaration to deal with the Covid-19 virus, and the government is poised to start processing millions of unemployment applications from Americans laid off due to the crisis.

Last Thursday, Senate Republicans announced the CARES Act, an unprecedented emergency response bill seeking to provide economic stabilization to all sectors of the society and boost access and supply of needed medical equipment. This bill accounts for loans to small businesses, the aviation industry, and other businesses that need support. It also expands and reauthorizes public health programs like Healthy Start and Medicare to support low-income families in getting nutrition and seniors to get telemedicine support. 

Overall, the bill sets out to add 1.8 trillion dollars to the economy in the hopes that economic intervention can stave off the worst of an economic recession. 

With so many needed provisions included in the bill, the Democrat's blockage of the bill screams negligence and obstruction. 

Stimulus in response to the recession

Economists and governments are already deeming the current economic slowdown a recession and predicting that the recession may turn into a full-fledged depression.

In a recession, economic production plummets, and as a result, employment also falls. High unemployment lowers the purchasing power of consumers, culminating in a spiral of decreased demand and weak economic growth. Lower interest rates and increased government spending are tools for the government to attempt to stimulate production as well as consumer demand.

Compared to economic downturns of the past, the halt in the global economy is unprecedented. Unlike in 2008, workers are being asked to suspend or limit productivity by not eating at restaurants or going to sports venues and concerts. This multi-trillion dollar reduction in productivity pushed the government to inject 1.8 trillion dollars into the economy in the form of payments for every American adult below certain income thresholds and huge loan opportunities for industries affected by the crisis.

Specifically, the bill sets aside $50 billion for passenger air carriers, $8 billion for cargo air carriers, and $150 billion for all other eligible businesses. American taxpayers can also expect additional stimulus funds in their bank accounts with $1200 for married couples making less than $150,000 with an additional rebate of $500 for every child. 

When can Americans expect payments?

Senate Democrats are currently blocking the stimulus package leading major news outlets to condemn lawmaker's bickering. The Republican's insist the Democrats are holding up the essential legislation and the Democrats are echoing Sen. Bernie Sanders' (I-VT) rallying cry that the legislation proposed by the Republicans helps Wall Street, not Main Street.

Politico reports that Sen. Chuck Schumer (D-NY) said, "' Leader McConnell's proposal is also skewed in favor of corporations rather than the workers and families who much more urgently and acutely feel the pain in reduced hours and unemployment.'" 

The Democrat's significant critiques of the bill fall into two categories: that the legislation does not provide strict enough stipulations on how the Treasury will determine loan eligibility or how the loans from the federal government can be spent, leaving Americans vulnerable to corporate corruption.

Republicans have fired back, calling Democrats negligent for delaying the essential monetary infusion to the economy. Sen. Majority Leader Mitch McConnell (R-KY) indicated that Schumer is unwilling to reach an agreement. Rep. Dan Crenshaw (R-TX) added, in a Facebook post, that the bill already covers every concern that the Democrats put forth by prohibiting stock buybacks and restricting increases in executive pay. He adds that loans stipulate borrowers must maintain payroll as of March 13, the day President Trump announced the National Emergency. 

How it's written in the CARES Act

Read the entire bill here.

Should the bill be passed without additional changes or delays? Will this stimulus bill be a repeat of the broadly condemned 2008 Troubled Asset Relief Program, TARP, which provided government funds to ailing corporations during the 2008 Financial Crisis, which has since been panned as being under-effective and a waste of taxpayer dollars?

Senate Democrats say that the bill gives the Treasury too much freedom in authorizing loans. Analyzing the bill, this seems a legitimate concern. As the bill currently stands, there are no clauses that outline "need" for corporations, it just says, "The secretary shall review and decide on applications for loans and loan guarantees." 

Without conditions or requirements for corporations to receive loans (i.e. is your business in the red? By how much? How big are company assets that could be mortgaged?), they may be given to organizations that aren't in dire need. The American government has a lobbying problem, often those who spend the most money on Capitol Hill receive the best deals, as evidenced by the airline industry, who lobbied the US Government to secure the bailout outlined in the CARES Act. 

The bill does address stock buybacks, stating in section 2209 that stock buybacks are prohibited, with additional clauses covering foreign and US-based companies. This clause is an essential protection of the loan money as many companies base their headquarters in countries with lower tax liabilities and therefore, would have been able to purchase their own stocks with the loan if it only covered US companies.

The most significant sticking point here is there do not seem to be any clauses requiring large corporations to maintain their payroll if they receive a loan. The bill states that small businesses can receive loan forgiveness if they retain their employees through the duration of the "covered period" (March 1-June 30). But for airlines and for-profit companies larger than 500 employees, there are no clauses that state they have to keep their employees. 

As the bill stands, we could pay billions to these corporations, and they are still legally allowed to lay off as many workers as needed begging the question: what is the point of this stimulus bill? Is it to infuse money back into corporations? Is it to help keep American's in their jobs? 

If Congress can't agree on how the money is distributed, then the bill can't move forward, but that shouldn't stop Congress from moving forward to pass other aspects of the bill. The medical supplies and changes to existing public health programs included in the legislation are essential to providing relief where it is needed.