Cares Act LetterSubmitted by Journey Advisory Group, LLC on March 27th, 2020
As we continue to monitor ongoing developments of Covid-19 (Coronavirus), we wanted to provide an update on legislation passed by the United States Senate aimed at supporting the U.S. economy.
What was passed?
The United States Senate passed the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) on the evening of March 25th by a vote of 96-0. The total stimulus in the Cares Act is over $2 Trillion. The full text is available through the following link: The Cares Act
Who is targeted and key takeaways?
The CARES Act is targeted at individuals, businesses, and Governments that have been negatively impacted by Covid-19. Let’s review some of the key items:
- Eligible individuals will receive one-time stimulus checks of $1,200 ($2,400 for married couples) and $500 per child subject to income limitations ($75K per individual and $150K per couple) and phase-outs ($99K per individual and $198K per couple). Those checks are expected to be sent in early April.
- $350 Billion in small business loans that if spent on payroll, rent, and utilities while limiting pay reductions and layoffs convert to grants and do not have to be repaid. Expenses in other areas do not convert to grants.
- Enhanced unemployment benefits by offering an additional $600 per week for up to four months as well as extending the duration of unemployment benefits from 26 to 39 weeks. Unemployment eligibility is also extended to self-employed individuals as well as independent contractors.
- Deferral of student loan payments through September 30th. Furthermore, interest does not accrue during the payment suspension period.
- $500 Billion in aid to corporations.
- $150 Billion in aid to state and municipal Governments.
- $117 Billion in aid to hospitals and veteran’s care facilities to assist in treating Covid-19.
What does it mean for the economy?
The CARES Act is the most aggressive and unprecedented economic stimulus bill ever passed. By comparison, the Troubled Asset Relief Program (TARP) passed during the financial crisis in 2008 amounted to around $700 Billion. At over $2 Trillion in stimulus, The CARES Act is roughly 10% of GDP. Furthermore, The CARES Act is broadly targeted to provide swift and meaningful assistance across individuals, businesses, and governments.
Will it be enough?
In our opinion, it is too early to tell but the legislation is a necessary first step towards getting the economy back on track, preserving jobs, and providing aid to individuals, businesses, and Governments. Further rounds of stimulus may be required but that remains to be seen.
The bill now heads to the House of Representative for a vote and assuming it’s passed, heads to President Trump’s desk for approval. We continue to monitor the situation closely and will provide timely updates as things develop. As always, feel free to reach out to us with any questions or concerns.