CARES Act

The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) is an economic stimulus bill that was passed by the US Congress in March 2020 in response to the economic recession caused by the COVID-19 pandemic. The bill provided $2.2 trillion in economic relief to various sectors of the economy. It included $300 billion in spending for one-time cash payments to individual citizens. The majority of the stimulus money was used to increase unemployment benefits, create a forgivable small business loan program, and provide financial aid for corporations and state and local governments. Funds were also used for healthcare needs as well as vaccine research and development. The bill was signed into law by President Donald Trump on March 27, 2020. It is the largest stimulus package in American history.

Background

In March 2020, the World Health Organization (WHO) declared the spread of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), primarily known as coronavirus disease 2019 or COVID-19, a global pandemic. In response, countries all over the world began organizing measures to prevent the rapid spread of the disease. Many hospitals across the world were not equipped to handle a massive influx of COVID patients. Patients who experienced the worst symptoms required life-saving respiratory technology to survive, and millions of hospitals across the globe did not have enough of these machines to treat large inflows of patients.

A number of state governments across the United States began issuing social distancing guidelines to citizens to reduce the COVID-19 infection rate. Citizens were advised to stay within state lines. As cases continued to rise, some states issued stay-at-home orders, advising people to only leave their homes to purchase essentials such as groceries. Mandates were later issued banning indoor public gatherings and other group-oriented activities. Many businesses where people typically gathered indoors, such as bars and hair salons, were ordered to close, leaving millions of workers unemployed. The pandemic began to take an economic toll on the country as spending decreased, unemployment increased, and businesses struggled to stay afloat.

Financial experts predicted that an economic catastrophe would occur without government intervention. The National Restaurant Association issued a statement addressed to Congress requesting federal aid for the restaurant industry, which had suffered hundreds of billions of dollars in losses as well as between five and six million lost jobs. Other industries, such as the airline industry, warned of impending bankruptcy due to the drastic decrease in travel. Congress soon began working on a stimulus package that quickly summed to trillions of dollars in aid. Democrats and Republicans disagreed on aid amounts and distribution procedures for more than a week before an agreement was reached. The Senate passed a finalized version of the CARES Act on March 25, 2020. The House passed the bill on March 27, which was signed into law by President Donald Trump hours after its House approval.

Overview

The provisions of the CARES Act are broken down into five sections: Title I—Keeping American Workers Paid and Employed Act; Title II—Assistance for American Workers, Families, and Businesses; Title III—Supporting America’s Health Care System in the Fight Against the Coronavirus; Title IV—Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy; and Title V—Coronavirus Relief Funds. A sixth section provides instruction for miscellaneous provisions such as funds for the arts, migration assistance, diplomatic aid, and volunteer organizations. In total, the bill provides $2.2 trillion in aid relief.

Highlights of the bill include loan programs designed to stabilize employment and boost unemployment benefits. The act introduces the Paycheck Protection Program (PPP), which establishes a special type of forgivable lending program administered by the Small Business Administration (SBA). Qualifying small businesses are offered low-interest, short-term loans to cover pandemic-related losses, payroll and benefit costs, and other overhead. These loans extend to self-employed individuals as well.

The CARES Act also establishes other economic assistance programs for businesses, states, and municipalities such as the Economic Stabilization Fund and expands the SBA’s Economic Injury Disaster Loans to cover nonprofit organizations. The bill also provides funds for education and training grants, which are aimed at training businesses about how to apply for federal resources and other related topics.

The CARES Act provides liquidity for those industries and businesses hit hardest by the pandemic, such as passenger and cargo-carrying airlines and businesses deemed critical to national security. It also allots funds to lending programs and facilities for use in aiding businesses, states, and municipalities.

The bill also stipulates a $1,200 direct stimulus payment made to all individuals whose income does not exceed $75,000, or $150,000 for married couples. Tax-paying Americans would receive a check or direct deposit payment of up to $1,200 for individuals and $2,400 for married couples. This amount then decreases as income levels rise. To ease the struggles of unemployment, the bill also allocates $250 billion for extending unemployment benefits and expanding unemployment eligibility, offering unemployed people an additional $600 per week in addition to state payouts for four months. As for employers, the bill allows a delay in 2020 payroll tax payment until 2021 and 2022. The bill removes several retirement-related penalties from withdrawal procedures to make retirement accounts or 401(k) savings more accessible and suspends required minimum distributions from IRAs and 401(k) plans. The CARES Act offers several benefits for student loans including a suspension of student federal loan payments through September 30 and no interest on federal student loans during this period.

Funds are also allocated for healthcare purposes, addressing direct healthcare needs and aid directed at prevention and treatment of the disease. Funds amounting to $100 billion are reserved to boost payments to healthcare providers through programs such as grants and Medicare reimbursements. Another $27 billion is reserved for testing, vaccine research and development, and treatment devices. The bill also provides more flexibility in certain medical laws to account for the emergency situation and introduces some new rules, such as requiring health insurers to cover COVID-19 tests as well as any treatments or vaccines that may develop. The bill also establishes the Coronavirus Relief Fund, which provides up to $150 billion in assistance to state and local governments to help with costs associated with pandemic response and economic disaster avoidance.

Bibliography

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