On March 27, President Trump signed the CARES Act, the third COVID-related relief bill, into law which effectively puts much of the U.S. economy on the government’s payroll for a few months. The CARES Act follows the passage of Phase I relief (the Coronavirus Preparedness and Response Supplemental Appropriations Act), which provided $8.3 billion of support, largely for COVID-19 vaccine research and development, and Phase II (the Families First Coronavirus Response Act), which boosted aid by $192 billion for free COVID-19 testing, state unemployment insurance, expanded paid sick leave, and food assistance.
The CARES Act provides over $2 trillion in stimulus, directed majorly at small businesses and middle- and lower-income Americans. In addition, the CARES Act provides around $450 billion for the U.S. Treasury’s Exchange Stabilization Fund to use as loans, loan guarantees, and investments for the Federal Reserve to help distressed companies and industries. Levered up with funds from the Fed, the U.S. government is set to provide subsidized short-term credit, potentially amounting to around $4 trillion, to a wide range of business borrowers.
“The sums, while considerable, are unlikely to be nearly enough to offset income lost due to business stoppage,” noted Chief U.S. Economist Michael Feroli and Senior U.S. Economist Jesse Edgerton. “For this reason another stimulus bill seems inevitable.”
A staggering 16.8 million U.S. workers filed for unemployment benefits over the three weeks ending April 4, and the U.S. economics team projects the April jobs report could indicate about 25 million jobs lost since the March survey week. The U.S. economists also estimate that the CARES Act points to around 3% of GDP stimulus this year with the patchwork of policy supports in the package focusing heavily on income support for rising unemployment, which could spike to 20% in April.