Trump’s demand for larger direct payments delays pandemic relief dollars Yampa Valley businesses need
STEAMBOAT SPRINGS — Earlier this week, it seemed that local businesses were going to get the Christmas present they had been waiting for — then the president tweeted.
In a video posted to Twitter on Tuesday, President Donald Trump demanded direct payments to Americans to be $2,000 rather than the $600 in the pandemic relief bill, which was overwhelmingly approved by both houses of Congress.
The $900 billion COVID-19 stimulus bill, which requires just the president’s signature to become law, is part of a larger $2.3 trillion bill to fund the government until the end of September 2021.
Without a deal, funding for the federal government could lapse on Monday, triggering a shutdown. Even if a shutdown is avoided, nearly 12 million Americans are set to lose unemployment benefits Saturday if a relief bill is not signed by Trump.
In addition to direct payments to Americans, additional unemployment benefits and money to help with vaccine distribution, the bill also earmarked roughly $284 billion for the Paycheck Protection Program.
Not only does the bill revive the popular forgivable loans, but it also expands who is eligible to receive them.
During the first round of pandemic stimulus earlier this year more than $60 million flowed to Routt County businesses to keep employees on the payroll. This is the kind of relief that John Bristol, economic development director for the Steamboat Springs Chamber, said businesses need as soon as possible.
“This threw everybody a curveball, so everybody is just kind of suspended waiting here to see what is going to happen,” Bristol said. “It is unfortunate.”
The long wait
Congressional leaders have been widely criticized for how long it has taken to put together a second round of COVID-19 relief, including by Trump. In March, Congress passed the $2.2 trillion dollar CARES Act, which provided forgivable loans to more than 1,200 Yampa Valley businesses in total through the Paycheck Protection Program.
In April an additional nearly $500 billion was approved to replenish money for programs in the CARES Act. House Democrats passed a $3 trillion package in May dubbed the HEROES Act that would have provided more direct payments for Americans, money for state and local governments as well as hazard pay for some employees among other relief measures.
But the House’s package failed to gain traction in the Republican-controlled Senate. Just before additional $600 unemployment benefits expired July 31, a $1 trillion bill was introduced in the Senate, but has failed to garner enough support.
House Speaker Nancy Pelosi had been negotiating with Treasury Secretary Steven Mnuchin on a deal but an agreement failed to come together with Senate Republicans. Another hurried attempt to pass relief before the election also failed to come together.
The deal reached Monday was a positive sign for businesses that have been in need of relief all summer, but now it seems the president has upended a deal and further delayed the relief.
“The Chamber as an organization has been really advocating for this,” Bristol said. “Restaurants and businesses are in need. Clearly, the economic relief that was provided by the federal government earlier was not sufficient. The pandemic is still going on, we are still dealing with this and additional resources are needed.”
The first round of PPP loans brought more than $60 million to about 1,200 Routt County businesses and is projected to have saved more than 7,800 jobs.
Of that, the vast majority of businesses got a loan below $150,000, some as low as $300. A little more than 100 businesses got a loan over $150,000, with the largest possible loan being $2 million.
Despite some of the payments being so low, Bristol said he has not had any local businesses reach out to him about it. He said it depends on a lot of things like the industry and how much cash a business has on hand to determine what a business needed.
Some businesses in town opted not to take a PPP loan, feeling they were doing well enough without and were weary of the potential risk of the new program.
Adonna Allen, president of Alpine Bank, told Routt County officials last month that the banking industry has been really busy throughout the pandemic, with some of that business devoted to writing PPP loans for businesses. Allen speculated that another round of PPP loans might not be as popular as the first.
“A second stimulus package would be helpful,” Allen said. “I think the difficult part is as always with the (Small Business Association), the devil is in the details.”
Allen said people were eager to get the money fast during the first round of PPP loans. Now that those loans are coming into forgiveness and people are working to ensure the loan they got is forgiven, they are paying more attention to the details of a second round of aid.
“This concept of the federal government saying ‘trust us, we’ll take care of you’ is not really happening as we all hoped and planned,” Allen said.
Direct payments or PPP
Trump’s focus on larger direct payments has stalled the package, but he’s said he wants more funding for small businesses in the bill as well. Bristol said he sees the need for the direct payments as well as replenishing funds for programs like PPP.
“We know that targeted stimulus payments and relief to those on the lower end of the economic scale is needed,” Bristol said.
He said for people of lower income, they would likely spend the direct payments on their basic needs, injecting additional dollars into the economy.
But data from the Federal Reserve Bank of New York shows that about 36% of people chose to save their first $1,200 stimulus check and another 35% used the money to pay down debt, a sign that not all the direct payment are spurring economic activity.
For people with a household income above $75,000, more than 40% of them chose to stash the stimulus money for the future rather than spend it now as hoped by lawmakers.
“It goes into a bank account or whatever sort of savings,” Bristol said. “It doesn’t immediately get injected into the economy and start circulating through.”
The New York Federal Reserve predicted in October that a second round of stimulus would lead to even more saving than the first time around.
“Our survey results indicate that households expect to consume even smaller shares of a potential second round of stimulus payments, while they expect to use a higher share to pay down their debt,” wrote researchers from the bank’s research and statistics group.
Like direct payments, the goal of the Paycheck Protection Program was to keep people at work, earning money so their spending would not disappear from the economy. Bristol said there are different ways of addressing a similar problem.
“These are kind of two routes that are trying to get to the same thing,” Bristol said. “At the end, there is no silver bullet to all this; it is more golden buckshot — the scatter shot approach that is trying to hit multiple issues from different directions.”
Bristol said the new round of PPP loans in the relief package Congress passed is really similar to the first round. It is applied to by businesses as a loan program, and if 60% of the money loaned is used for payroll, the loan becomes a grant and does not have to be repaid.
Most businesses would still be able to apply for two and a half times their payroll costs in loans, but if language in the new bill becomes law, hotels and restaurants would have been able to get three and a half times their payroll.
“That is really the biggest difference, and that is a difference that should certainly be noted in our business community,” Bristol said. “As the data has shown, (hospitality industry) is the greatest impact right now that we are seeing across the nation.”
One of the problems some businesses complained about with the first round of PPP was it was hard to spend enough of the money on payroll for the loan to become forgivable when many businesses had reduced capacity and needed fewer employees.
Bristol said he isn’t sure if the new round of PPP would have any more flexibility than the first as it depends on how the Small Business Administration decides to set some of the rules not outlined in the legislation.
He said he anticipates that it will likely be similar to the first round, which will likely lead to employers finding different work for some staff to do. He said some businesses redeployed staff to do painting and maintenance work when there was not enough traditional business.
“Some business owners have to get really creative in how to utilize those funds and keep staff on payroll,” Bristol said.
If a bill is eventually signed into law, Bristol said he felt it would be a very similar process to the first round of loans, and he advised interested businesses to reach out to their banks as soon as a deal is reached to start the process.
“If you’ve applied before, you’ve gone through the process before and had that conversation with your local lender. Restart that conversation, talk about a second round if that is what you need,” Bristol said. “If you missed out on PPP the first time, potentially one, you didn’t apply or two, you maybe had an issue with your application, try it again.”
Bristol said the last time around it took about a week to get the program up and running and the bill Congress passed has a deadline of 10 days to get the program up and running.
Pelosi has promised to hold a roll-call vote on adding Trump’s $2,000 direct payments to the bill Monday, daring Republicans to rebuke their outgoing leader. Lawmakers also are discussing another stopgap measure to keep the government open past the end of the day Monday.
The bill was sent to Mar-a-Lago Club in Florida on Thursday for Trump to sign, but it is unclear when or if that will happen.
“I’m really concerned about it,” Bristol said of the delay in COVID-19 relief funding. “Any delay in economic relief that we see here is going to impact businesses. It is going to impact businesses across the country and here locally.”
To reach Dylan Anderson, call 970-871-4247 or email danderson@SteamboatPilot.com.
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