With PPP Ending, Lawmakers Eye Ways to Repurpose $130 Billion Left Over
The emergency coronavirus relief program for small businesses is set to stop accepting new applications just before midnight, having approved about $520 billion in forgivable loans as of Monday — but leaving more than $130 billion in funding left untapped.
Lawmakers are considering how to repurpose the remaining money from the expiring Paycheck Protection Program to deliver more aid to businesses. The Washington Post reports:
"Sens. Marco Rubio (R-Fla.) and Ben Cardin (D-Md.) are leading a group considering how best to use the remaining funds to help small businesses as they begin to reopen. The issue is not expected to be resolved, however, until the Senate gets to work in late July on what Majority Leader Mitch McConnell (R-Ky.) has said will be the final major coronavirus relief bill."
Treasury Secretary Steven Mnuchin said Tuesday that the Trump administration supports the idea of using the money to help businesses hit hardest by the pandemic, including restaurants and hotels. "I’ve already had conversations with the SBA committee in the Senate about re-purposing that $135 billion and think that should be done, and look forward to working with both the House and the Senate so we can pass legislation by the end of July," Mnuchin said, according to the Post.
A draft copy of Rubio-led legislation obtained by the Post would expand the possible uses for the money and would dedicate $25 billion to businesses with fewer than 10 employees. It would also prevent hotel and restaurant chains from receiving more than $2 million.
Democrats, meanwhile, have proposed extending the application deadline by six months and targeting the new funds to businesses with 100 or fewer employees and those hurt most by the virus.
Rubio said that there may be better ways to use the money than extending the current PPP program, which, despite a chaotic rollout and frustration from some borrowers and lenders, has provided money to nearly 5 million businesses and helped mitigate or reverse some of the labor market devastation caused by the pandemic shutdowns.
"PPP has been widely successful. There are more companies that could benefit from it. It would be great if extending the deadline would help them. But my sense is the greater need right now is in companies that have received that assistance but now need new or different kinds of assistance," he told the Post.
Why it matters: "Small businesses employ about half of America’s nongovernment workers, and a fresh wave of deep reductions or permanent closures would quickly cascade through the national economy," Stacy Cowley writes at The New York Times. "The pain would be even more acute in hard-hit industries, like the service sector, and communities that disproportionately rely on small employers."
Read more at The Washington Post or The New York Times.
National Face Mask Mandate Could Prevent 5% GDP Hit, Goldman Sachs Says
The widespread use of face masks is a simple and low-cost way to slow the spread of the coronavirus, and according the Jan Hatzius, chief economist at Goldman Sachs, a national mandate to wear masks could have a huge positive effect on the economy.
In a note to clients Tuesday, Hatzius and other Goldman economists said a national mandate to wear masks would increase the percentage of people doing so by 15 to 25 percentage points and push the growth rate of the virus down from 1.6% to about 0.6%.
A renewed shutdown could have similar effects, but at a great economic cost.
"These calculations imply that a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP," the Goldman team said. "It is important to recognize that this estimate is quite uncertain because it is based on a number of statistical relationships that are all measured with error. Despite the numerical uncertainty, however, our analysis suggests that the economic benefit from a face mask mandate and increased face mask usage could be sizable."
Tax Deadline Won’t Be Postponed Again, Treasury and IRS Say
The Treasury Department and Internal Revenue Service announced late Monday that the July 15 tax-filing deadline, pushed back from April 15 due to the coronavirus pandemic, will not be postponed again. They said taxpayers who can’t meet the deadline can still file for an automatic extension until October 15 as usual, though that extension applies only to filing a return, not to paying any taxes due.
"After consulting with various external stakeholders, we have decided to have taxpayers request an extension if more time is needed," Treasury Secretary Steven Mnuchin said in a statement. "I would encourage Americans to file their taxes as soon as possible, so those who are due refunds can receive them quickly."
The IRS encouraged people who cannot pay in full, including those affected by Covid-19, to pay what they can now to avoid additional interest and penalties and explore other payment options available, including those on the IRS website, for the balance.
The IRS said that, as of June 19, it had received more than 138 million returns, down 4.4% from 2019, and had processed nearly 127 million of those filings, down 11.4% from last year. The number of refunds issued, more than 93 million, was down by nearly 11% while the total amount of those refunds — some $258 billion — was down about 10%.
Quote of the Day
"Folks, this is going to be really hard work and Donald Trump has made it much harder to foot the bill. But even before the crisis, his irresponsible sugar-high tax cuts had already pushed us into a trillion-dollar deficit and imagine what we could do now if we weren’t in that circumstance. … I’m going to get rid of the bulk of Trump’s $2 trillion tax cut and a lot of you may not like that but I’m going to close loopholes like capital gains and stepped up basis."
– Joe Biden, the presumptive Democratic presidential nominee, in remarks to potential donors at a virtual fundraising event Monday
Unemployment Payments Top $100 Billion in June
With one day in the month to go, the U.S. Treasury Department has paid out $108.5 billion in unemployment benefits so far in June — the most so far during the coronavirus crisis, according to Bloomberg News.
Payments have risen every month, from $4.2 billion in March to $48.4 billion in April and $93.7 billion in May. Even so, payments are still falling short of the estimated total cost of claims, according to an analysis by Bloomberg, due to an enormous backlog that is still being cleared up by state unemployment offices, some dating back to the beginning of the crisis.
The $600 per week federal boost to unemployment benefits makes up a substantial chunk of the payments, and if Congress allows that temporary enhancement to expire at the end of July, the Treasury’s monthly outlay for could start shrinking. If the benefit is renewed, however, the monthly tally could continue to grow into the fall.
Clarification: Yesterday’s newsletter said that the government price of a dose of Gilead Sciences’ Covid-19 treatment remdesivir would be $390 a vial, or $2,340 for a five-day course of treatment. But that price will only apply for some U.S. agencies, such as the Department of Veterans Affairs, but not to programs including Medicare and Medicaid that don’t directly purchase drugs, according to The Wall Street Journal.
RIP, Carl Reiner.
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Military Contractors Hide the True Cost of War: Report
Since the 9/11 terror attacks, the Pentagon has relied on private contractors to handle a huge array of tasks, ranging from laundry and dining services to transportation and security at military bases overseas. Conservative think tanks and some lawmakers have long encouraged the arrangement, touting the efficiency and cost-savings theoretically associated with private enterprise, but critics have charged that military contractors are models of waste and bloat.
A new study from the Costs of War project at Brown University comes down firmly in the latter camp, arguing that contractors in what it calls the "camo economy" have led to a surge in spending while systematically hiding the true costs of the nation’s war-fighting efforts.
According to the report, more than half of last year’s defense budget was spent on contractors. The $370 billion total in 2019 rivals the peak level seen at the height of the "Global War on Terror" in 2008, when the Pentagon spent about $380 billion. Annual spending on contractors is more than twice as high as it was in 2001, before the 9/11 attacks.
Those contracts pay for services and personnel that cost more than they would if the Department of Defense simply did them itself, the report claims, due in large part to a lack of competition. Nearly half of all Pentagon contracts were classified as "non-competitive" in 2019, the report says, and even some supposedly competitive contracts were written on a "cost-type" basis, which provide no incentives to keep costs low.
"Between 2008 and 2019, the Department of Defense (DoD) spent over $1.2 trillion on such cost-type contracts, none of which were subject to the cost-reducing pressures of private markets," the report says. "Other contracts include lifetime service agreements and sole-supplier contracts, which effectively create monopolies."
The use of contractors also helps hide the full human cost of the war. There were 35,000 U.S. troops in the Middle East in 2019, but also 52,000 contractors — and together those figures produce a higher total than is oftentimes discussed in the media. Similarly, about 7,000 U.S. soldiers have died in Afghanistan since 2001, but 8,000 contractors have died as well, more than doubling the gruesome tally. "By hiding the full human cost, military contracting makes war more politically acceptable and less publicly opposed," the report says.
For more details, see the Watson Institute report here, and an analysis by The Washington Post here.
- How Congress Can Scale Back Unemployment Benefits – Michael R. Strain, Bloomberg
- Big Pharma’s Got a Brand New Coronavirus Grift – Libby Watson, New Republic
- Private Health Insurance Is in Crisis – Ryan Cooper, The Week
- How Trump Gave Insurance Companies Free Rein to Sell Bad Health Plans – Dylan Scott, Vox
- Trump’s Bet on a Vaccine Could Come at a Cost – Dan Diamond, Politico
- Obamacare Versus the G.O.P. Zombies – Paul Krugman, New York Times
- HEROES Act Would Help Families Weather the Ongoing COVID-19 Storm – Lisa Graves, The Hill
- Don’t Let Covid-19 Cause a Surge of Evictions – Bloomberg Editorial Board
- Capitalism After the Coronavirus – Al Gore and David Blood, Wall Street Journal
- House Transportation Bill Fails to Unite When It Is Needed Most – Ian Jefferies, The Hill
- Rethinking Government Services in the Wake of COVID-19 – Shannon Kellogg, Morning Consult
- ‘We Just Need Some More Optimism’: Rand Paul’s Crusade Against Anthony Fauci Takes a Curious Turn – Aaron Blake, Washington Post