Opinion: “Everything You Wanted To Know About In The New Stimulus Bill”
As an update to my October 15, 2020 “The New Stimulus Bill Won’t Deliver: Not In the Long-Term“, my break-down of the massive 5,593 page Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, leaves me still to wonder where the stimulus that would ensure a robust recovery is. The desperately needed appropriations for the stimulus portion of the bill fall far short in key areas, and long-term stimulus and reforms that would ensure a sustained and vigorous recovery are, well, non-existent.
For some background, the Consolidated Appropriations Act, 2021, may be the largest bill ever enacted by Congress. It bundles numerous bills that have already been in play in Congress and combines the $1.4 trillion of appropriations, to keep the government running, with the new stimulus of over $900 billion. Further, and to eliminate any confusion readers might have, the bill originated as the United States-Mexico Economic Partnership Act. That text passed the House and Senate in late 2019 and early 2020, but in non-identical forms. In December 2020, the text of the bill was replaced with the omnibus appropriations and the new coronavirus relief bill, becoming the vehicle for the passage of the Consolidated Appropriations Act, 2021. So, please do not be confused when you link to this Act and think you have landed on the wrong page for an economic partnership act with Mexico.
I want to give a shout out to the bi-partisan Problem Solvers Caucus (25 Democrats and 25 Republicans) who hammered out the framework for the stimulus portion of this bill. While the dollar size of their recommendations started at a much larger number in the early Fall of 2020 – $1.5 trillion – their framework and recommendations remained largely intact and, I believe, if not for them, the Senate would still be dithering.
To begin, as with many bills passed by Congress, the reader is often left to wonder how certain provisions made their way into it. This bill is no different. With the pressure of deadlines and with so many Americans literally hanging by a thread, some of the provisions, particularly in the tax related sections of the bill where giveaways are plentiful, could be interpreted as heartless and abhorrent. There really is no nicer way to put it. In addition, this bill, like the first stimulus bill, does little to create net new jobs that would ensure a strong and sustained economy. Nor are there fundamental reforms that would benefit small business, the engine of our economy, which was under attack before the pandemic and has been decimated since. Just a reminder, small business, defined as companies with 1-500 employees, provides nearly 50% of all employment in the U.S., generates two-thirds of net new jobs and drives innovation with 16 times more patents per employee versus larger corporations. Ensuring that this sector survives and has the ground support to revive and grow vigorously post the pandemic is absolutely vital to the long term health of our economy and its growth.
New legislation will most certainly be needed in 2021-2022, in my opinion, to put the economy, the infrastructure and small business, in particular, back onto a road for a healthy and sustainable recovery. With this bill Congress is simply trying to staunch the bleeding. President-elect Joe Biden has begun to outline further stimulus. I do expect that his administration will attempt to fill the gap left by this bill and also provide the nuts and bolts type of stimulus necessary to get all Americans back to work and quickly. Stay tuned.
A shortened summary of the Stimulus portions of the bill starting with the highlights are:
- Unemployment and Direct Stimulus Payments: Unemployment insurance, which now includes the self-employed and gig workers, is extended for an additional 11 weeks for those still on unemployment for a total of 50 weeks. It also restores the supplement to all state and federal benefits at $300 per week. Eligible individuals and families will receive an additional $600 stimulus check, plus $600 per child. The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married filing jointly) at a rate of $5 per $100 of additional income.
- Small Business: An additional $325 billion is now available for small business with 1-300 employees through the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and other facilities. There are much stricter guidelines than in the first bill and businesses must show demonstrable declines – 25%-plus – in their businesses in order to participate. In addition, $15 billion has been set aside for struggling live venues such as movie theaters and museums. And, another incremental $12 billion is available for Community Development Financial Institutions (CDFI)/Minority Depository Institutions (MDI) providing community lender support. PPP loans may be applied for up to March 31, 2021, while EIDL grants/loans may be applied through December 31, 2021.
- Transportation: An additional $45 billion for Airlines, Airports, Highways, Buses, Mass Transit and Amtrak dispersed as follows: Airline payroll support ($15B), Airline contractor payroll ($1B), Transit ($14B), State highways ($10B), Airports and airport concessionaires ($2B), Private motor coach/school bus/ferry industries ($2B), Amtrak ($1B).
- Health and Human Services: A total of $73 billion to support public health organizations and initiatives including vaccine development, distribution, testing and tracing, grants to hospitals and health care providers, NIH support for clinical trials and rapid diagnostic, substance abuse and mental health and early childhood programs and Head Start.
- Education: A total of $82 billion to support schools and it includes bipartisan legislation to forgive nearly $1.3 billion in federal loans to historically Black colleges and universities, deliver Pell grants to incarcerated students after a 26-year ban and simplify financial aid forms. The bill also repeals a 1998 law that prohibits students convicted of drug offenses from receiving federal financial aid.
- Broadband: A total of $7 billion allocated as follows: low-income families ($3.2B), tribal broadband ($1B), telehealth funding ($250 million), complete broadband maps for dispersing funding to impacted areas ($65 million), small telecom providers for secure equipment ($2B), rural broadband funding grant program ($300 million).
- Housing/Rental Assistance: $25 billion with $800 million set aside for Native American housing entities for rental payments assistance. The eviction moratorium is extended to January 31, 2021.
- Water: $638 million is provided for low-income water utility bill assistance, providing grants to states and tribes who in turn will provide funds to owners or operators of public water systems or treatment works to reduce arrearages and rates to low-income households. Three percent of funds will be set aside for tribes.
To read a detailed summary of the COVID-19 Relief Provisions of the Bill click here.
Unquestionably, all of this stimulus is needed and welcomed. And lawmakers have managed to carve out increased support for the hardest hit communities. However, the situation for many Americans is still very dire. And spokespersons for the Health Care, Housing, Education and Small Business sectors have all said the stimulus comes up considerably short of the real need.
Thus the direct payments and unemployment extensions are, to be polite, skimpy, especially as infection rates mount to record levels. In addition, $25 billion for rental/housing assistance may be a drop in the bucket of the estimated real need for renters and landlords of as high as $100 billion according to National Low Income Housing Coalition. With 30 to 40 million Americans facing eviction a 30-day extension of the national eviction moratorium to January 31, 2021 can be described as nothing short of a gut punch.
The situation is no less severe for Education. While the $82 billion for this sector seems substantial, it is estimated that schools have lost as much as $200 billion during the pandemic as their needs and costs have risen with the new challenges posed. Many universities and community colleges face imminent financial calamity. Here again, it is the less fortunate, hardest working Americans, who are impacted the most. The American Council on Education and other sector representatives have described the aid as “wholly inadequate”. Shall I go on?
Is this really the best Americans can do for each other? As I described in my October 15, 2020 article, “The New Stimulus Bill Won’t Deliver — Not In The Long Term”, the U.S. is on a race to the bottom with tax cuts that, over decades, have had no impact in supporting sustained and broad-based prosperity. In fact, quite the opposite. In the meantime our infrastructure has deteriorated at such a rate that the U.S. ranking has sunk to be – wait for it – not even in the top 10. Let that sink in!
To continue, notable exclusions from the relief portion of this bill just seem outright mind numbingly dumb and they “pull the rug out” rather than help to stabilize. They include:
- Additional funding for state and local governments, a hard fought but lost provision by the Problem Solvers Caucus.
- The first-ever temporary paid federal leave requirement for all employers, including public employers, which was included in the Families First Coronavirus Response Act (FFCRA) and which expired December 31, 2020, was not extended. Why not as infection rates reach record numbers?
- And a new provision, stepping on the Federal Reserve’s ability to create emergency lending facilities under Section 13(3) of the Federal Reserve Act, during a pandemic no less, prohibiting the Federal Reserve from re-starting the Municipal Liquidity Facility (MLF). However, it retains the authority of the Board of Governors, in “unusual and exigent circumstances” and under other conditions, to authorize Reserve Banks to extend credit to individuals, partnerships, and governments.
On the other side of the equation, some small provisions provide a ray of hope that there is sanity such as:
- A strong first step toward the end ‘surprise medical billing’. This is a very costly practice, which sees patients unexpectedly receiving care from providers not covered by their insurers, thereby facing bills far higher than they would typically pay; and
- Heath benefits for Marshall Islanders. The bill corrects a 25-year-old drafting error that denied thousands of Islanders access to federal health benefits that they were promised after resettling in the U.S. How did this take so long?!
As regards the rest of the bill? While remembering that most of this legislation is a government appropriations bill to simply keep the doors open, the more interesting additions fall into three categories, which are “Oh, That’s Nice”, Why and Why Now”, and “Really?”. Those provisions falling into the “Really?” category are most represented in Tax Extenders. These temporary provisions were due to expire at the end of 2020. There were 33 of them. Of those only one was allowed to expire. A handful were made permanent, others were extended for 1 to 5 years. The fact that these types of extensions are being thrown into this bill shines a bright light on the desperate need for tax reform, once and for all, that addresses reality, not some hocus pocus notion that reducing taxes will somehow enable trickle-down economics that will stimulate the economy and create new jobs.
I leave it to the reader to arrive at their own conclusions and categories for each of the provisions in the bill noted below:
- Authorizes the establishment of two new museums in Washington: the American Women’s History Museum and the National Museum of the American Latino.
- Support for the Dalai Lama, “Interference by the Government of the People’s Republic of China or any other government in the process of recognizing a successor or reincarnation of the 14th Dalai Lama and any future Dalai Lamas would represent a clear abuse of the right to religious freedom of Tibetan Buddhists and the Tibetan people.” The legislation also directs the secretary of state to establish a US consulate in Tibet’s main city, Lhasa.
- The right to reproduce Smokey Bear. The bill repeals a provision of federal law criminalizing unauthorized use of Smokey Bear and Woodsy Owl, famous mascots of a US Forest Service public safety campaign concerning wildfires and pollution. Previously, illegally reproducing images of Smokey Bear was punishable by up to six months in prison.
- $2 billion for the US Space Force, tax break for corporate meal expense, tax break for racehorse owners, among others (more detail below).
- Payroll tax subsidy for employers offering workers paid sick leave and boosts the Earned Income Tax Credit.
- Tax Extenders, which the Joint Committee on Taxation estimates will reduce federal revenue by almost $104 billion, , over the 2021-2030 budget window. Among the tax provisions extended are:
- The lower excise tax rates for beer, wine, and distilled spirits passed under the Tax Cuts and Jobs Act (TCJA) of 2017, and related rules. These will become permanent.
- The TCJA’s reduction of the medical expense deduction floor from 10% to 7.5% of adjusted gross income will also be permanent. Other provisions, now permanent, include the benefits to volunteer firefighters and emergency medical responders, the energy-efficient commercial buildings deduction, the railroad track maintenance credit, and a change to education-related extenders which eliminates the deduction for qualified tuition and related expenses in favor of an increase in the income limitation on the lifetime learning credit.
- Another 11 provisions will receive a five-year extension, aligning their new expiration date with the date of the TCJA’s individual provisions. These include:
- The look-through rule for controlled foreign corporations
- New Markets Tax Credit
- Work Opportunity Tax Credit
- Exclusion from gross income of mortgage forgiveness
- Empowerment zone tax incentives
- Oil spill liability trust fund rate
- Employer credit for paid family and medical leave
- Exclusion for certain employer payments of student loans (a CARES Act provision)
- Extension of carbon oxide sequestration credit
- 7-year recovery period for motorsports entertainment complexes
- Expensing rules for certain productions
- Shorter extensions are provided for another 19 provisions, including several related to green energy, shorter asset lives for specific types of investments, and the health insurance tax credit.
Relating to green energy and the green economy, sectors which have shown strong job growth and prospective job growth, Congress agreed to increase funding for the Department of Energy’s Weatherization Assistance program and extend tax deductions for energy efficiency in commercial buildings. This could help get some of America’s 314,000-plus unemployed energy efficiency workers back on the job while also saving money for consumers, businesses and local governments with every monthly electric bill. What a concept!
In addition, the Production Tax Credit (PTC) for wind will be extended through 2021 while the Investment Tax Credit (ITC) for Solar will extend through 2023. Non-business solar tax credits for individuals also are extended through 2023. The bill also expands important federal clean energy research, development, and demonstration programs — including the DOE’s Loan Guarantee Program and Advanced Research Projects Agency (ARPA-E). And there are funding increases for energy storage/batteries and grid modernization. The package also raised the level of funding that could be available next year.
Finally, also included in the bill is the American Innovation and Manufacturing (AIM) Act, which sets standards to phase-down super pollutants known as HFCs, or hydrofluorocarbons, used in air conditioners, refrigerators and other applications. Under the AIM Act, America will cut the use of HFCs by 85 percent over the next 15 years. That will reduce heat-trapping carbon dioxide emissions by 150 million tons, the equivalent of taking 32 million cars off the road. In addition to cutting greenhouse gasses, these measures are expected to create 33,000 jobs and spur $12.5 billion of new investments as building owners, HVAC and appliance companies and others roll out new products to meet the legislation.
Now that’s what I call stimulus.
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