The effectiveness of the late March 2.3 trillion dollar Coronavirus Aid, Relief, and Economic Security (CARES), Act remains hotly debated. It is the most comprehensive act of government support since the depression, and its cost is similar to expenditures characterizing wartime. Many critics feel it did not go far enough in helping individuals and it actually missed the mark for propping up the most vulnerable businesses. Although voted unanimously in the House, some Republicans criticized the bill for recalling controversial government programs of the New Deal era. Politicians moved in favor of the bill with the realization that something needed to be done quickly to help the unemployed and affected businesses.
On the individual level measures were taken regarding compensation for lost wages that were more generous than in usual circumstances. These allowed gig workers and self-employed persons, typically ineligible for unemployment insurance, to collect at least half of their states compensation and 16 weeks of an additional weekly benefit of $600 at federal expense. Other laid off, or furloughed, workers also are eligible for the additional federal employment monies. For lower wage workers, this income would amount to full replacement value of wages. Some gig and self-employed workers, however, were excluded from the payments and so have no income.
The CARES Act also provided for cash payments to households of up to $1200 for individuals and $500 dollar per child. These payments were based on income reported to the IRS but also excluded some of the most needy who did not file income taxes in 2019. An estimated 30 million seniors, disabled, and veterans did not file taxes and are ineligible for cash payments unless they file, and free tax preparation aid was temporarily discontinued so it will be difficult for many to do so. Another estimated 92 million did not file with direct deposit and consequently will not receive payment for months. Some workers received no aid, such as low paid workers in healthcare and delivery who retained essential employment, though a quarter of whom make less than the federal poverty level. While these programs are a step in the right direction they are time limited, rather than based on the ability of a person to return to full employment. Additionally, some criticized the failure to provide more help to higher paid unemployed workers. These two programs account for 550 million dollars of the CARES budget.
Another 350 billion dollars was allotted to a small business loan/forgiveness program. This program has perhaps suffered the most criticism. Small businesses account for 44% of the Gross Domestic Product (GDP) and 49% of the private sector. The money ran out in days and favored larger companies leaving many businesses with unfunded applications. Many of the unsupported were businesses with women or minority owners or in rural areas. In order to qualify for loan forgiveness, the company has to spend 75% of its loan on payroll per SBA orders but the CARES act did not have that provision. This put owners in a quandary, if they used 75% for payroll they could qualify for loan forgiveness but they were likely to be delinquent on rent, utilities, or paying vendors. The CARES act distribution lacked oversight, opting for spending in the “pubic interest,” and lacking in any guidelines for specific rules. A small business, defined as having less than 500 employees, often did not receive aid while large corporations such as Ruth’s Hospitality Group and Shake Shack did (Shake Shack eventually returned their loan money). These companies had tens of millions of dollars in annual profits. The Act was criticized for securing shareholders’ interests over the financial and physical well-being of labor. These programs also ran out of money, in days, and there were no provisions for automatic extensions or continued aid. A second round of small business loans was better at hitting small businesses and provided for smaller grants to more businesses. In this round, 61% who applied received loans.