• Jill Schlesinger, CFP

Dollars & Sense: D.C. Grinches may have hearts

Nearly nine months after the $2.2 trillion CARES Act became law, the lame duck Congress passed an additional $900 billion relief bill just before Christmas. The fate of the legislation hung in the balance for a week, after the President threatened not to sign it. But, with benefits expiring and millions of Americans facing financial peril, Trump finally inked the deal on December 27.


Like the ornery Grinch in the animated Christmas classic, the President and lawmakers’ small hearts seem to have grown three sizes in just the nick of time. The bill will provide relief to individuals, small businesses and the economy as a whole. Though not as large as the previous legislation, which according to a CBO analysis likely boosted GDP by 4.7 percent in 2020 and 3.1 percent in 2021, this current round should help prevent some of the suffering and bridge the output gap between now and the time when widespread vaccination is available.


Here’s what made it


• Another round of nontaxable, direct payments of $600 for individuals with income (wages, Social Security, and/or pension) earning under $75,000 ($150K MFJ), PLUS, there will be $600 per child (up from the $500 in the first round) under the age of 17. The amount will phase out for those with incomes up to $99K ($198K MFJ).


• Extension of supplemental federal unemployment benefits of $300 per week (on top of state unemployment programs) for an additional 11 weeks, at least through March 14. (The CARES Act had extended state benefits by 13 weeks, so total will now be 24 weeks.)


• Extension of Pandemic Unemployment Assistance for self-employed, part-time, contract and gig workers for an additional 11 weeks.


• Aid to small businesses, including the continuation of the Paycheck Protection Program ($325 billion).


• Aid for vaccine distribution and schools ($82 billion).


• Extension of eviction moratorium until January 31. Home loan forbearance for federally backed mortgages is available for up to 180 days (after that, homeowners can ask for an additional 180 days). For Fannie and Freddie loans, there is no end date—the agencies will determine when to end their plans. Homeowners with FHA loans must contact their servicer and request an initial COVID-19 forbearance.


• Assistance for Transportation: Airlines $15 billion in assistance to encourage a return of furloughed workers to payrolls; Amtrak ($1 billion); Public Transit systems ($14 billion); State highways ($10 billion).


Here’s what didn’t make it


There was something absent from the bill: aid for states and local governments and liability protection for businesses. Without more money, state and local governments will have to absorb the double whammy of big spending amid the loss in sales and other taxes. Analysis from the Brookings Institute found that state and local revenues, excluding fees to public hospitals and institution of higher education, will drop by $467 billion over three years. Because most state and local governments have to balance their operating budgets each year, the lack of funds may create a second order effect of more job cuts, which could dampen the overall economic recovery.


Why this stimulus matters


The new stimulus is an important development, but there could still be millions of Americans who are struggling. According to the Census Bureau’s Household Pulse Survey covering November 25 through December 7, three data points underscore the dire need for federal assistance:


• People experiencing food scarcity (either sometimes or often not enough to eat in the past seven days): 27.4 million or 12.7 percent


• People experiencing housing insecurity (behind on rent or mortgage payments, or who don’t think household can make next month’s rent or mortgage payment on time): 12.8 million or 9.1 percent.


• People who have difficulty paying for usual household expenses: 85.4 million or 35.6 percent.


Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com.