A lot can happen in two months. Way back in January, the American economy was buoyed by record low unemployment and the longest bull run in stock market history. We were starting to see sprinkled reports in the media about a new strain of respiratory illness emerging out of China, but it didn’t really register as much of a threat.
As marketers and advertisers, we’re typically thrilled when our content goes viral. It turns out the literal meaning of that is far less appealing—and far scarier. In just two months we’ve gone from record low unemployment to state unemployment insurance websites crashing from too many people trying to file claims.
As marketers and advertisers, the economic health of our clients is indistinguishable from our own. As every industry tries to make sense of the economic chaos swirling around us, it’s a good time to take a look at how the federal government is trying to contain the fallout. This is changing by the day, if not by the hour, so there is no clear picture yet as to what the federal response will be.
States and cities will be playing a crucial role in the months ahead, particularly states’ deployment of unemployment insurance payments and assistance programs for small businesses. While breaking down a state-by-state and city-by-city response is beyond the scope of this update, a good starting place to keep abreast of these developments would be on your state governor’s website.
While it’s probably fair to say the federal government’s initial response to the coronavirus threat was muted, it has recently reacted at lightning speed. The seriousness of the health risk, coupled with rapid economic deterioration, has lit a fire under Congress and the Administration, resulting in a show of bipartisanship only seen in times of extreme duress.
To date, the federal government is working to address not just the virus itself, but also the economic impact, on two separate parallel tracks.
One track is the Administration and its actions to address the crisis. While all spending proposals must go through Congress, the Administration has a lot of discretion to offer relief via directives to federal regulatory agencies and amending trade agreements.
To date, the Administration has:
- Directed the Department of Housing And Urban Development (HUD) to suspend evictions and foreclosures through April. (This applies only to mortgages backed by the HUD’s Federal Housing Administration.)
- Directed the Internal Revenue Service (IRS) to delay the April 15 deadline for individuals’ and small businesses’ tax payments. This is expected to free up a kind of “bridge loan” of almost $200 billion.
- Directed the Department of Education (ED) to waive interest on federal student loans until further notice. It’s unclear how this plan will be administered.
- Directed the Department of Defense (DOD) of the intent to allow DOD to invoke the Defense Production Act, which allows the DOD essentially to force American manufacturers to stop producing their own goods and instead produce needed supplies. Many manufacturers appear to be doing this voluntarily and proactively.
- Started a process to ease tariffs with China to open up supply lines of needed goods. This might not help with medical supplies, as China will need to keep sufficient reserves for its own needs.
The other track is Congress, where the bulk of the action is taking place right now.
When the media report on the “White House stimulus package,” keep in mind that any stimulus package implemented will be the result of a Republican Administration, a Republican Senate, and a Democratic House. And while all three spheres of influence clearly understand the urgency of the situation, it’s still an election year.
The upcoming election manifests itself in spoken and unspoken political realities. Both the White House and Congress are very aware of the voter backlash that followed the 2008–09 fiscal bailout of the banking and automotive industries, and both are very nervous about being seen as bailing out certain industries instead of providing direct financial relief to Americans.
To date, Congress has:
- Approved a relief package to provide sick leave, unemployment benefits, free coronavirus testing, and food and medical aid to those affected by coronavirus.
- Debated a $1 trillion stimulus package that would provide direct payments to taxpayers and provide loans to businesses.
- This package would include $50 billion for secured loans for the airline industry and $150 billion for secured loans or loan guarantees for other parts of the economy hit hard by the crisis.
- The package calls for loans to small businesses that would allow any employer with 500 or fewer employees to receive loans equaling six weeks of payroll, up to $1,540 per employee, under the condition that companies pay their employees for eight weeks after receiving the loan.
- This is where relief for many agencies will likely occur—in the form of small business loans.
- As seen in the early language, it appears the definition of “small business” will expand beyond its traditional definition to encompass a broader spectrum of businesses eligible for relief.
- The details of the trillion-dollar stimulus package are likely to be fiercely debated in Congress in the next few days.
- A lot will change between introduction and passage, in ways predictable and unpredictable.
- But with every industry imaginable—airlines, hotels, retail, finance, manufacturing, finance—asking Congress for relief, it’s very likely the final stimulus package will have something for everyone.
The speed at which the past two months have unfolded has been breathtaking to behold, even for those who experienced 9/11 and its aftermath and the 2008 financial crisis. And while there is no doubt the American (and global) economy is in for a rocky ride over the next few months, there are a few silver linings.
Despite the political dysfunctionality and hyper-partisanship of the past few years, America has time and time put aside petty differences to rise to a challenge. (In the quip usually attributed to Winston Churchill: “You can always count on the Americans to do the right thing after they have tried everything else.”) There is no doubt a rough road ahead of us, and it’s one all Americans will have to trod.
Here in Washington, the 4A’s Government Relations office will continue to work to advocate for not only the health of the agency community but also for the health of the broader business community. We’re all in this together.
Alison Pepper
SVP–Government Relations, 4A’s
