Three Months Into Pandemic, Leaders Adjust Strategies
Three Months Into the Pandemic, Government
and Business Leaders Adjust Their Strategies
Now that the United States is approximately three months into coronavirus pandemic-related shutdowns, government and business leaders have had some time to get past the initial shock and give some serious thought to how best to move forward. The impact of the pandemic has been very uneven across industries, so business leaders are facing a wide variety of difficult questions. Some business leaders are now asking how their business models will need to change in a post-pandemic world. Policymakers in Washington are now debating whether pandemic-related economic stimulus and relief measures should be expanded and extended. (Many initial policy measures were formulated to address a two-month period, which is wrapping up.) State and local leaders are making tentative first steps to reopen parts of their economies.
The calculations for all of these decisions are complicated by the fact that virus numbers are currently gradually declining in some parts of the country (primarily coastal and urban) and rising in others (primarily central and rural). The pandemic is raising a number of difficult questions government and business leaders will need to address.
Congress Debates Additional Economic Stimulus and Relief Measures; The Odds of an Additional Trillion Dollar Stimulus Package Are High, But Not Soon
Since the publication of my last newsletter April 22, Congress has approved its fourth major pandemic-related stimulus and relief measure and has been debating additional proposals. The $484 billion Paycheck Protection Program and Health Care Enhancement Act includes $321 billion to replenish the Paycheck Protection Program and additional funding for hospitals and expanded coronavirus testing. Members of Congress are now debating additional measures totaling $1 trillion or more.
Terms of the Paycheck Protection Program, which has been popular among business owners but plagued by problems and controversy, were also recently relaxed to help small businesses struggling during the pandemic. Last week, Washington approved changes to the program that should make it easier for loans to be turned into grants. The time frame borrowers have to use program funds was tripled to 24 weeks. Additionally, companies were given greater flexibility with how they may use the funds. The percentage of the funds that must be spent on payroll was lowered to 60% from 75%.
About $511 billion in forgivable loans has been distributed through the Paycheck Protection Program to approximately 4.5 million businesses as of June 6. Demand for PPP loans has been relatively flat in the past few weeks due to questions about how easily borrowers will be able to navigate the process of having their loans forgiven.
The PPP and additional stimulus programs seem to be making a difference. Jobs data recently surprised on the upside. On June 5, the Labor Department reported that U.S. employers unexpectedly added 2.5 million jobs in May and that the unemployment rate, which economists had expected to rise to 19.5%, instead fell to 13.3%.
Republican and Democrat leaders have both said that the odds of an additional stimulus package being approved are very high, even if jobs data continue to surpass expectations. The debate centers on the amount and type of stimulus. Democrats are seeking as much as $3 trillion in additional spending to help states and local governments facing revenue shortfalls and to extend unemployment benefits beyond their expiration in July. Republicans and the White House have been seeking a total of about $1 trillion centered on additional tax cuts. Action on an additional stimulus measure is unlikely until at least July.
To put the updated numbers in perspective: So far, the United States has approved coronavirus pandemic-related stimulus and relief measures totaling more than $3 trillion. This amount now equals about three-fourths of what the federal government spent in all of 2019.
Reopening State and Local Economies: Tentative First Steps
In the United States, the practical decisions about the pace with which local stores, restaurants and businesses are reopening are being made primarily at the local and state level. All 50 states are now at some stage of reopening their economies. Some states, and especially rural areas in the Midwest and West, have had relatively few Covid-19 cases and have reopened much of their economies. Other cities and states, like New York City and parts of New Jersey, are taking a much more cautious approach.
While there has been guidance from the federal government about when and how quickly to reopen, states and localities are making decisions based primarily on local conditions and considerations. This has led to very different approaches across the country and even within states and cities. For example, in major urban centers, restaurants are limited to offering takeout and delivery options, whereas in lightly populated rural areas restaurants are open to socially distanced sit-down seating.
In California, the California State University System, the largest four-year public university in the country, announced that it plans to offer primarily online classes this fall semester, with only a few exceptions. Other public and private colleges and universities in California are planning to hold most classes in person. Many public schools, colleges and universities are still deciding about plans for the fall semester. Decisions like whether to reopen elementary schools affect interlinked decisions like how quickly parents return to their workplaces.
New York City is just starting its reopening. Essential services have been open throughout the shutdown. On June 8, New York City began Phase One of its reopening. Phase One allows construction, manufacturing and wholesale supply chain businesses to reopen. Phase One also allows many retailers to reopen for curbside pickup, in-store pickup or drop off. Later, Phase Two will allow a wider range of businesses to reopen, including storefront retailers and businesses in the professional services. Dine-in food services, arts and entertainment will reopen in later phases. In New York State, the phases of reopening are based on meeting multiple local or regional health-related benchmarks.
In parks around Manhattan’s Upper West Side, where I live, you see members of the police force and other public employees handing out face masks to the few people who are outside walking to get exercise. The gesture is important symbolically. Nearly everyone I see is already wearing a mask. When you get down to it, individual actions like wearing a mask and social distancing will probably be the most important factors in containing the virus until a vaccine is widely available.
Individual actions and individual responsibility are important. As we formulate additional policy measures and take additional actions to address the social and economic impact of the pandemic, our federal, state and local policymakers and business leaders need to think about what types of communities we want to live in following the pandemic. Do we want to have small, local restaurants? Local stores? Local nonprofits and cultural life? Do we want locally-based small businesses? If the answer to any of these questions is yes, then policymakers, civic leaders and business leaders need to think about ways to help small business owners, local entrepreneurs and their employees step up and successfully face the challenges raised by the pandemic.