The CARES Act will shape our economy for the next decade or longer. Here's why that's dangerous.
The CARES Act (Coronavirus Aid, Relief & Economic Security) passed a month ago and was a major piece of legislation meant to bail out the economy as it floundered during the first weeks of the coronavirus outbreak in the United States.
Unfortunately, in most aspects, this bill does far more to bail out corporations than to help regular Americans. Even with the additional “interim” stimulus bill, the entities benefiting the most from the recent legislation have been large corporations and the very rich. In fact, the CARES Act may end up serving as the second largest transfer of wealth from the working class to the wealthy in our lifetimes.
So what was in the original CARES act?
The good: a one time payment of $1,200 to every citizen with a recent tax filing, a temporary extension of the unemployment insurance for 4 months with an additional $600 on top of the state unemployment.
The bad: a cap of $300 billion in funding of the PPP (Payment Protection Program), a provision in the bill aimed at funding loans to small businesses through banks.
The ugly: $500 billion to fund big businesses that can be leveraged by the Federal Reserve. Treasury Secretary Steven Mnuchin has stated that the Treasury will actually be able to loan $4.5 – $6 trillion dollar.
It is now well-known that the Payment Protection Program ran out of money within days of the passage of the CARES bill, with much of the funds ending up in the hands of big business and corporations, and many small businesses were left out in the dust.
Under intense pressure from their own constituents, Republicans allowed the passage of an “interim” stimulus bill last week, which allocated additional money to tune of $500 billion to the PPP, and additional funds for both testing and hospitals.
We’ve already seen how little the CARES Act actually does for regular Americans. The first round of funding for the PPP ran out in one week. Banks have said the second round of funding will run dry within 2 days. Since the CARES Act puts a cap on the PPP, some small businesses will be unable to get loans, and may fail. These failed businesses are left vulnerable to vulture funds or for big business to take their market share. Inevitably, the failure of small businesses results in a transfer of wealth from the working to the elites.
America has unfortunate precedent in unfair, unhelpful stimulus packages. The bank bailout following the great recession a decade ago resulted in an unprecedented transfer of wealth from the working class to elites, as people lost their homes to corporations & the banks. Corporations used the Republican tax cut for stock buybacks, rather than invest in their companies or workers.
Now we see the cycle repeating again. The COVID-19 pandemic is a shock to the system that large corporations can weather but small businesses cannot. Yet the GOP is using the crisis as an opportunity for a giveaway to big business, including a real estate tax break that they could not get into their tax cut bill.
It’s worth noting that while Democrats fought for - and got - certain concessions that benefit regular Americans in both the CARES act and the interim bill, they largely failed to use their leverage against the worst excesses of the bills. The Democratic controlled house passed both the CARES Act and the interim bill with no debate. As it is now, the CARES Act will result in another decade of speculation on Wall Street & consolidation of main street.
The good news, however, is that we have an opportunity to get a real stimulus package with the upcoming CARES-2 Act. Despite the Republicans’ reluctance to negotiate a new bill, and the ongoing difficulties with convening Congress, we are demanding that our Members of Congress begin addressing the needs of their constituents in this new bill.
We will be sending an open letter to our Members of Congress with our demands for the next bill, and we are asking ISF members to contact their Senators to start drafting legislation with those demands in mind.
Please sign on to our open letter using this Google Form. You can see the draft here.
Contact your Senators (Harris and Feinstein) to tell them that you’re disappointed in the results of the interim bill and ask them to begin drafting a new package that does more to help Americans.