Commentary / Coronavirus

Competing Demands Within The CARES Act

CARESThe Covid-19 pandemic thrust on the U.S. has had far reaching economic consequences. In the face of business closures and stay at home orders, Congress reacted quickly by passing The Coronavirus Aid and Economic Security Act (CARES Act) to assist both businesses and workers.

While the GOP was successful in stripping Green New Deal initiatives and same day voter registration from the bill, one of the pieces of the new law that Democrats insisted be included was enhanced unemployment benefits.  It sounded like a good idea.

Unemployment compensation typically replaces about 45-55% of one’s earnings, a level generally deemed appropriate.  The benefits are already free from Social Security and Medicare deductions to allow one to better meet basic food and shelter needs.  The CARES Act, however, allows eligible workers to receive an extra $600 per week on top of varying state benefits.  According to The Century Foundation, the maximum weekly benefit in Alabama is $275.  It is $450 in California and $713 in New Jersey.

But Senator Lindsey Graham (R-SC) now states, “The unemployment program is competing with the loan program.”  He explained the dilemma now facing many businesses on Fox’s Neil Cavuto Show.

In Graham’s home state, a restaurant that paid its employees $15 per hour ($600 per week) can apply for a loan under the Paycheck Protection Program, which provides a direct incentive for small businesses to keep their workers on the payroll.  As stated on the Small Business Association’s (SBA) website, “SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.”

Graham points out that adding $600 to South Carolina’s weekly benefit of $326 puts those same workers at $23 per hour, or $926 per week.  “We’re paying people more not to work” he said.  Graham noted that the situation not only makes it difficult for those small businesses affected but also the many large companies that are trying to fill critical openings.

The U.S. already had a 50-year record low unemployment rate in February, or what economists deem “full employment,” when the pandemic hit.  Many employers have been struggling to find qualified workers for years.  The current crisis has highlighted urgent needs in areas like health care, warehouses and factories, grocery stores and pharmacies, and for delivery drivers.  Big companies like Kroger, CVS, Amazon, Walmart, Aldi, and others need almost a million workers—right now!

Congress may try to apply a “fix” to the competing demands of enhanced unemployment and small business loans in a fourth phase of a stimulus bill.  Small businesses are the backbone of America, and the paycheck protection program has proven so successful that additional funds may be necessary.  These companies are just looking to stay afloat until such time as they can reopen.  Perhaps Sen. Graham said it best with, “I believe this is an entrepreneurial nation.”

To see Senator Lindsey Graham’s full interview and remarks about the Small Business Program, click here.

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