Senate passes bill to provide benefits to individuals and small businesses
npr.org
npr.org
For example, a local restaurant where I live, will have to shut down for good in the next few days as they won't be able to afford their lease. If they get a loan for the lease, they'll be on the hook for that money with no guarantee of being able to pay it back and with way too much uncertainty in terms of when they'll be able to reopen the business.
It would be really bad for them to shut down, but it could be even worse if they take out a loan and then are not able to pay it back. Very bad situation to be in.
Same applies to individuals who will soon not be able to pay rent or other obligations. Loans are not a solution.
Really disagree on this point. The primary value of a business is their assets, brands and expertise. All of those things will be just as valuable after the pandemic as they were before. Assets don't just disappear because they're not used.
This is just as true for small businesses as it is for big business. Any business that was profitable on Dec 31, 2019, will very likely be profitable on Jan 1, 2021. The biggest challenge for those businesses is surviving operating cash flow losses over the next three months. This is extra challenging in the current environment because financial markets are freezing up.
Yes, business owners will eat some loss to their personal wealth. Regardless of what happens there's no way to make up for the fact that the economy is shrinking this quarter. At an aggregate level, we'll all be slightly poorer then we expected to be. The point of a well-structured bailout isn't to make sure that nobody anywhere ever loses money. It's to prevent otherwise healthy businesses from permanently failing due to a temporary disruption in credit markets.
If a small business owner loses a year of income it sucks. If an entire small business capsizes, that has widespread economic impact because the economy incurs distress costs and loses its organizational and competitive expertise.
The hope is that not all businesses will default at the same time, and just like the hospital, these loans flatten the default curve, and prevent the economy from spiralling into a deep depression from these defaults.
they continue to survive and make the payments. Yes, profits will tank, but eventually they will pick back up. It's not like there's a better alternative. It's better than shutting doors - you may not be able to pick back up when this all blows over.
How many hundreds of thousands of dollars of debt can $50,000 of net income service, even at .5% interest? Those dollars for debt service come straight out of the dollars for living expenses.
It may be better than nothing, but it may also not be. Trying to start over from scratch may be better than trying to start back up with basically any kind of additional debt.
Then again, if the business is going bankrupt anyway, who cares how much it ends up owing?
Let's say the quarantine results in revenue falling by 70% over the next four months. Without a reduction in fixed costs, the business experiences a $76,000 operating loss. (About equal to 1.5 years of pre-tax profits.) Assume a 10-year amortized loan at 4%.
The cost of servicing the loan comes out to approximately $9500 a year. Which only reduces the ongoing annual cash flow by less than 20%.
You’re modeling makes a lot of assumptions and discounts too many human-driven variables.
That's exactly why the government is giving them loans. To cover the fixed costs during a period of temporary disruption.
A year of no income for these businesses will cripple them, and coming back to a mountain of debt (even if low interest) will essentially ensure that they never become profitable again.
You might be overestimating the extent to which many business owners have any wealth at all.
this doesn't seem true to me. at least the brand loses value over the pandemic, and there's likely complications from cashflow that eat into other assets.
In many cases small businesses derive most of their quality from the actual owner. They don't respond well to drop-in replacements of key staff members and owners.
Or, the new owner could be better than the old. That could happen, too.
Either way, it wouldn't be the same... unless they hired back the key players.
The other challenge is that when customers do start buying again, you have to start whatever marketing engine you had back up again at the same time everyone else is doing the same -- which is going to make it really expensive for everyone (while also ramping up the velocity of Google's money printer).
Loans were, and always will be, a false promise. There's too many variables in the equation that make it not appealing.
TLDR; Small business owners don't have "wealth." Get that out of your head and be sympathetic to what small business owners that you frequent have to deal with.
This is fundamentally incorrect insofar as the only asset of any small business is typically the labor it employs. Large businesses have intellectual property, capital, real estate, vehicle/equipment fleets, and so on, but nearly all small business have a lease, their on-site inventory (frequently perishable), and their people. All of their ability to continue operations is represented by their ability to retain those people.
It only did two things:
- made the existing SBA Disaster Loan program available to businesses affected by CV19
- added $20M to help w/ administration of said loan program
There were talks about actually increasing the budget of the SBA loan program by $xxB. This bill did not do that.
The alternative is to close immediately and stop paying their workers. If that were my business, I'd take the loan, especially since it's federally guaranteed.
I do feel it's generally inappropriate for the government to just give money to a privately owned business, but this is an extreme case where businesses are going under as a direct result of actions taken by the government (reasonable as they may be). not sure where I stand on this one.
If the terms are zero or near-zero interest for say 5 years then the effects to the business's bottom line would be mute.
If the loan is like some loanshark credit card company charging 27% compound with a three month payback, then yeah, bankruptcy is your friend.
Remember, countries take out huge loans to pay for wars that are paid back over generations, the UK just finished paying back it's loan for WW2 just recently.
These are the kind of loans people/businesses need.
> Now, the Trump administration is asking Congress for roughly $1 trillion in new economic relief as lawmakers begin work on the next phase. And there's growing consensus among Republicans and Democrats that direct payments to Americans will be needed, but how much and when that could happen remains to be seen.
> On Tuesday, Treasury Secretary Steven Mnuchin met with Republican senators and said he was working with Trump on the economic package. They are discussing payments to small businesses, loan guarantees for industries like airlines and hotels, and a stimulus package for workers.
> Lawmakers and the White House are already drafting another economic stabilization package that would send direct payments to taxpayers and provide loans to businesses.
I hope they do something a lot better than loans for small businesses.
Even direct payments won't be enough, unless they give small independent shops money to pay their leases every month until this is over, so they can keep their locations while there is no foot traffic.
There is no such think as risk-free investments. It can be risk-favored, for sure. And it is definitely a benefit to the receiver. But its not a "guaranteed killing".
In actuality, trying to invest that much independently would probably damage the economy, and it's difficult to have any clue what would happen.
The programs funded by the bill address issues such as
- developing, manufacturing, and procuring vaccines and other medical supplies;
- grants for state, local, and tribal public health agencies and organizations;
- loans for affected small businesses;
- evacuations and emergency preparedness activities at U.S. embassies and other State Department facilities; and
- humanitarian assistance and support for health systems in the affected countries.
The bill also allows HHS to temporarily waive certain Medicare restrictions and requirements regarding telehealth services during the coronavirus public health emergency.
https://www.congress.gov/bill/116th-congress/house-bill/6074
Another one that is now in senate:
https://www.congress.gov/bill/116th-congress/house-bill/6201
- $61M to the FDA for various uses relevant to COVID-19 response.
- $20M to the Small Business Administration for admin expenses incidental to carrying out the disaster loan program.
- $2.2B to Department of Health and Human Services for preparations/preventions/responses to COVID-19; Not less than $950M to be used for grants or co-op agreements with states, tribes, etc. Minimum of $475M to be allocated within 30 days.
- $836M to National Institutes of Health for COVID-19 prep/prevention/response. Including not less than $10M to go toward training to reduce hospital employee and first-responder exposure to COVID-19.
- $3.1B to Public Health and Social Services Emergency Fund for developing innovations and enhancements to manufacturing platforms toward COVID-19 response. Emphasises creating affordable medication, among other things.
- $300M to same, for purchase of vaccines, therapeutics, diagnostics.
- $264M to Department of State for COVID-19 response.
- $1M to USAID for Office of Inspector General oversight activities relevant to the funding
- $435M to Global Health Program funding / Bilateral Economic Assistance, administered by USAID.
- $300M to International Disaster Assistance
- $250M to Economic Support Fund (Economic, security, and stabilization purposes)
- Telehealth Services During Certain Emergency Periods Act of 2020
And, yes, $250M is a rounding error. But the foreign aid budget is famous for being estimated as 20% of the federal budget if you survey the general population, when in reality it's <0.5%. So this isn't unusual or anything.
Speaking of US homeland economic support, one could argue that the combined effort shown by the bill, and all of the allocated budget money, is going toward support of the US economy in some way.
Requiring licensing at the state level that is not reciprocal with other states.
Limiting the number of students admitted to MD programs.
Additionally, for a doctor to practice in a particular state, the medical board of that state grants and revoked licenses, restricting the practice of medicine to only doctors licensed in the state or states.
The bill also temporarily waives that, to allow for telemedicine to be conducted across states, but only temporarily.
Also, what does a business with < 50 employees have to do to get exempt? Is there a deadline to apply? Or will we have to wait to get sick only to find out that we're given the middle finger and can't take it because our company is going to exempt itself?
You may think that the landlords would be making more money by not accepting the comp, since the rent will have some premium on top of property tax, but the ones with some foresight may realize that they will lose more money if their tenants go out of business and they have vacancy periods, possibly only to find new renters at a lower price in the event of recession.
Ok, I'm going to hold you to this. I am screenshoting it.
Does the GPD going down necessarily mean that there is less demand and not less supply?
I wonder if the hotel industry is also going to get only loans or instead unfettered cash with no need to repay, let's see how that one works with double standards.
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/test...
The US was quarantining americans returning from covid countries with CDC quarantine orders (federally enforceable) since Jan 31?
i suggest you do more than just take any announcement from the WH at face value, especially when there are numerous sources saying otherwise.
But, yes america has an obligation to repatriate american citizens, and subjecting them to quarantine is the right thing to do.
I have no doubt people were falling through cracks though. America has an incredibly open border with lax enforcement, mainly due to partisan bickering. Hopefully, this will get everyone on board with border security
We've had to warn you many times not to post nationalistic or ideological flamebait to HN, including just the other day. Really, would you please stop?
Like, if you trip on a sidewalk, the city reimburses you because it is their responsibility to allow you to walk on the sidewalk. It is the federal government's responsibility to ensure interstate trade can take place. If they order it to stop, they need to reimburse you because their sidewalk had a giant gaping pothole in it.
What you're referring to is called a welfare state. They're welfare state policies, not Socialist policies. The US has been a welfare state nation for many decades now, and increasingly so.
For example, there are no Socialist nations in Europe at present, including Norway, Sweden, Finland, Denmark, or France. Those are overwhelmingly market based economies that have large welfare states.
Heathcare for all is not "welfare". It's the government taking tax dollars and then paying for things for all citizens. It's how the USA currently pays for Police and Prisons and the Military and corn subsidies and elementary school teachers among a million other things that are not welfare.
What I'm saying is the US is adopting more socialist ideas, and it's spreading the tax dollars around to more and more citizens in more types of ways, like the rest of the developed world has been doing for decades very successfully.
As I said, I'll be fascinated to see the reaction if and when it's taken back after COVID-19.
Rubbish. The Defense production act invoked today is from WWII and extremely limited in scope. After the crisis is over the government will be forced to give up these powers. And thank goodness. This is no way to run a free country in normal times.
I take it you're aware of Denmark, Sweden, Norway, Australia, Canada, New Zealand and virtually ALL the other developed countries on the planet who function this way every day of the year and do very well.