Meanwhile, small businesses and banks complain the government is unprepared to start administering first round of loans
White House and Congress have yet to disburse the $2.2 trillion pandemic stimulus package to businesses and average Americans but they are already planning to spend billions of dollars more in a second plan to soften the economic blow being dealt by the coronavirus, FOX Business has learned.
Wall Street executives briefed on the government’s efforts say while the exact details of the next round of the stimulus remain unclear, the various political factions involved in the process have reached an unofficial consensus on several key elements including additional relief for small businesses and an extension of payroll tax credits.
The move comes amid complaints by small businesses and banks that the federal government is unprepared to begin administering the $350 billion in small business loans found in the first stimulus’s round by its Friday deadline.
Meanwhile, administration officials have told Wall Street executives that they fear the small business component isn’t enough to meet loan demand. Small businesses are considered companies with 500 or fewer employees but they are the backbone of the US economy, employing nearly half the US workforce. They have been hit hardest by social distancing orders that President Trump has now extended to at least April 30 amid the coronavirus spread.
Discussions of the new round of stimulus programs are an indication of the growing consensus on Wall Street and in Washington that there will be no easy or quick economic fix for an economy that has been virtually shut down and is teetering on the edge of a possible depression amid the virus outbreak.
0n Thursday, 6.6 million people filed initial unemployment claims—the most people to ever file claims in the span of a week. Last week, 3.3 million people filed claims—a record number until this week.
A study released by the Federal Reserve of St. Louis estimates unemployment could reach 47 million people, or 32 percent of workers. For context, the highest unemployment rate during the Great Depression was 24.9 percent.
A Goldman Sachs report this week said economic activity defined by Gross Domestic Product plummeted 34 percent in the second quarter of this year.
A White House spokesman declined comment. Spokespeople for Senate Majority Leader Mitch McConnell and Speaker of the House Nancy Pelosi declined comment.
Under the current virus stimulus legislation known as the CARES act, the federal government will start providing small businesses the lesser of up to $10 million beginning Friday or a percentage of payroll. But given what they foresee as exorbitant demand, government officials have indicated to Wall Street executives that they will need possibly tens of billions of dollars more to meet the funding needs from the small business community. These businesses have been forced to lay off millions of Americans and the loans are forgivable if they maintain their workers.
In addition to more loans being provided, people with knowledge of conversations between White House and congressional leaders say the payroll tax credit may be extended from June 30 to the end of the year.
Both the federal government and the Federal Reserve have injected trillions into the economy through printing money, using various means including loans and buybacks. But it’s unclear if such measures are working; stock prices have remained volatile even as the Dow Jones Industrial Average finished Thursday up more than 450 points. All major stock averages are down more than 20 percent year to date.