Next Round of Stimulus Likely in Early August

Another stimulus package is “back on track,” with a $1 trillion-plus deal likely to be enacted by early August, Greg Valliere, chief U.S. policy strategist at AGF Investments, predicted in mid-June.

Two reasons are stoking momentum for the next package, according to Valliere.

First, the pandemic “obviously isn’t over yet,” he said. “New cases are spiking (in part because of more testing), and may stay at high levels because social distancing was [sometimes] ignored in recent protests. People are still tentative about going to restaurants, malls or on trips (the battered airline stocks are a barometer).”

A V-shaped recovery “never seemed very likely, and now a fresh wave of virus anxiety has Fed Chairman Jerome Powell worried about the considerable downside risks to the economy and the markets,” he said.

The Fed will lend extensively, Valliere said, “but Powell insists that Congress also has to act. And Treasury Secretary Steven Mnuchin has been increasingly adamant this week that another stimulus package is virtually mandatory as state and local layoffs loom this summer.”

The second reason a stimulus bill will get done is that the “three key factions in the stimulus debate all have skin in the game, and will push for their agendas,” Valliere said.

House Speaker Nancy Pelosi and the Democrats will press for “massive aid to state and local governments,” Valliere said, and “they’ll win at least $500 billion, but that may not be enough.”

Senate Majority Leader Mitch McConnell and the Republicans see “some type of liability protection for companies [as] a ‘must pass.’ The details aren’t clear — will there be a federal fund to aid companies that are sued? — but there will be some type of lawsuit protection in the final measure.”

President Donald Trump’s focus will be on tax cuts. “A lower payroll tax rate isn’t out of the question, as well as a tax bonus for people who return to work, and a possible tax credit for entertainment and dining out,” Valliere said.

All of the players, Valliere noted, “are willing to consider another cash payment to individuals, perhaps not as generous as the initial $1,200 checks.” However, a sticking point will be unemployment benefits, which expire at the end of July. “Something far less than the initial $600 per week is possible, but the focus will be on incentives to get people back to work,” Valliere opined.

PPP Update

Meanwhile, the Paycheck Protection Program, created under the CARES Act, had approved a total of $510.2 billion loans as of May 30, S&P Global reported. The average loan size for total PPP approvals was $114,000, with 4.475 million loans approved.

The average loan size for the first round of PPP stimulus was almost twice that size, at $206,000, with 1.66 million loans approved, S&P Global reported. “With approximately 30 million small businesses in the U.S., this was apparently not enough to meet significant small business demand,” S&P Global stated.

Funds distributed over $342 billion in less than two weeks, starting April 3, according to the SBA April 16 report.

Citing a Chamber of Commerce/Met Life May survey, conducted April 21-27, of the small businesses who applied for a PPP loan, approximately one-third said that they received a loan.

“For those who applied and did not receive a loan, the biggest reported issue was that the loan funds were gone before they could apply. For those who reported that they tried to apply but were unsuccessful, 39% reported that the loans were gone before they could apply,” S&P Global said.

The second round of PPP funds, announced on April 24 and injecting an additional $310 billion, started to address these problems, according to S&P Global.

“Roughly 85.5% of the total PPP loans were for $150,000 and under, and 26.4% of overall loan dollars were for loans in this range. Almost 80% of the total loan count was for loans $100,000 and under (64.6% was for loans $50,000 and under). About 0.7% (29,697 loans) were for amounts larger than $2 million (receiving 21.2% of the total loan money in PPP),” the report states.

In comparison, less than 1.57% of the total number of the first installment of PPP loans were for amounts larger than $2 million.

“However, those businesses getting more than $2 million received 27.8% of the loan money in the PPP.1, which had likely limited the program’s ability to reach the many small businesses in need,” S&P Global said. “The more bite size loan approvals seem to be more fitting given 98% of small business have fewer than 20 workers or no workers on its payrolls, according to the SBA ‘2019 Small Business Profile.’”

AICPA Survey

A survey released by the American Institute of CPAs in mid-June found that some 56% of business executives said their companies had sought relief funds through PPP.

Treasury Secretary Steven Mnuchin told the Senate Small Business and Entrepreneurship Committee in mid-June that the PPP has issued 4.5 million loans amounting to more than $510 billion, what he called an “incredible effort.”

Mnuchin noted that Treasury would be issuing guidance regarding the Paycheck Protection Program Flexibility Act, which was signed into law on June 5 and is designed to provide businesses with more time and flexibility to keep their employees on the payroll.

AICPA’s Economic Outlook Survey polled chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Two-thirds of the companies the executives represent are privately owned entities, with the rest a mix of public companies and nonprofits, according to AICPA.

The survey found that 8% of those surveyed took the Small Business Administration’s Economic Injury Disaster Loan (EIDL), while 35% of survey respondents said they hadn’t applied for government relief.

Some 56% of business executives said their companies had sought relief funds through the Paycheck Protection Program, according to a just-released survey by the American Institute of CPAs.

During a Wednesday hearing held by the Senate Small Business and Entrepreneurship Committee, Treasury Secretary Steven Mnuchin said that the PPP has issued 4.5 million loans amounting to more than $510 billion, what he called an “incredible effort.”

Mnuchin said more guidance will be issued soon regarding the Paycheck Protection Program Flexibility Act, which was signed into law on June 5 and is designed to provide businesses with more time and flexibility to keep their employees on the payroll.

“In less than two months, the PPP is supporting the employment of approximately 50 million workers and more than 75% of the small-business payroll in all 50 states,” Mnuchin told the senators.

AICPA’s Economic Outlook Survey polled CEOs, CFOs, controllers and other CPAs in U.S. companies who hold executive and senior management accounting roles.

Two-thirds of the companies the executives represent are privately owned entities, with the rest a mix of public companies and nonprofits, according to AICPA.

The survey found that 8% of those surveyed took the Small Business Administration’s Economic Injury Disaster Loan (EIDL), while 35% of survey respondents said they hadn’t applied for government relief.

“The overwhelming majority — 92% — of executives in our survey said their companies had been impacted negatively by the pandemic,” said Ash Noah, a managing director for the Association of International Certified Professional Accountants, in a statement. “The survey results give a snapshot of how they’ve coped so far, with many relying on a mix of relief programs, cost containment and business continuity strategies.”

Sixty-one percent of survey respondents said their companies had kept their employment levels and pay structure intact, presumably in part due to the widespread use of PPP and related programs, the survey said. Others had furloughed or laid off employees or instituted pay cuts, among other tactics.

Washington Bureau Chief Melanie Waddell can be reached at mwaddell@alm.com.