Phase IV of Stimulus on the Horizon
With the CARES Act still being rolled out, supplemented, and guidances changing parameters on the fly, politicians are now giving us more to consider with the next stage of stimulus being discussed. Although nothing has officially been announced or decided upon, politicians in both the House and Senate are talking about what they'd hope to see in the next round of stimulus spending.
One such plan would put direct cash into the hands of small business owners. The direct cash allocation would equal 30% of the company's gross receipts, with a maximum amount of $75,000. To qualify for the direct cash allocation the company would be required to have less than $1 million in gross receipts and have less than 50 employees. No details have been offered on whether there would any limits on what a company could spend the money on. However, from the tone of the economic hardships, we imagine that at least a portion of that amount would need to be spent on payroll.
A more general proposal that has caught steam among many senators is the idea of putting the money directly into the hands of local authorities and allow them to decide the best way to use the money in their locality. Considering the mess that the CARES Act has been, putting the decisionmaking into local governing bodies is appealing to federal lawmakers. The idea would be to give up to $50 billion to cities, counties, and states to provide grants and loans to local small businesses.
The most expansive plan discussed is a payroll guarantee program. The details are relatively loose at the moment but include grants for up to 80% of employees' wages for any size companies affected by the COVID-19 outbreak. The wages would be limited to the national median wage, which as of 2017 was about $59,000. This means the federal government would pay for $47,200 of each employee's salary who makes $59,000 or over. This guarantee would last for "the duration of the national emergency." This plan is by far the most expansive and costly. As there has been lingering and subtle talk about limiting the national debt we believe that this plan is unlikely to come to fruition.
Of course, over the next few weeks the scope of the outbreak, state lockdowns, and economic effects will dictate and change the Phase IV plans. We will monitor the situation and update as it evolves.