Giving Credit When Its Due
Andy Meyer, Vantage Financial Partner & Senior Advisor
My opinion of a reasonable deal is one where both sides shake hands and agree, but each walk away with similar feelings of dissatisfaction.
Sometimes it isn’t easy to put our pride aside and tell another person or group of people that they did a good job. Or thank them for handling a tough situation in the way that they did, even if it was part of their job description. It’s hard not to think about how something could have been better. The Monday morning quarterbacking and backseat driving is part of human nature. It’s simply too easy to do and becomes a default for many of us. Wouldn’t it be nice if every now and then we had more solutions for a problem than that of complaints? How often do you read a positive social media post thanking the local meteorologist for getting the forecast right? We are all guilty of it. I have a buddy that I like to give a hard time about his opinion of Amazon Prime’s delivery commitment. He enjoys pointing out any time his package takes 50 hours to get to his doorstep versus the 48 they advertise. We humans are an interesting group.
With the recent events forcing businesses to close and a population of social butterflies to stay home on our couches, many Americans needed a financial pick-me-up. Sales, walk-in traffic and even the need for us to fill up our gas tanks have disappeared in the span of weeks. More than 20 million people have now filed for unemployment benefits without any definitive timeframe as to when this all might end.
Although it was and is their job, the Federal Government got something done that will directly and positively affect most Americans in need. The CARES Act is by no means perfect and will rightfully be critiqued and amended as the shutdown drags on. But please let me repeat myself…. I do NOT believe the package is perfect or anyone should be replacing their Bibles with this recent bill based on its overwhelming lack of perfection. But I do believe, and I am pleasantly surprised, that it is indeed a good START in helping those in need. And get this, both parties and the President all agreed and signed it into law! COME ON, let’s step back and enjoy that simple fact for a moment before we all toss on our Monday morning quarterback helmets and bash this thing to no end. Yes, it did take lawmakers a few extra days, but compared to the glacier-like pace that we are used to coming from DC, this was a dramatically different story.
I would encourage everyone to do some research and read for yourself what is in this bill. I’m sorry, but your favorite mainstream media outlet might not be the best place to go in order to get the facts and a true unbiased analysis from which to build your own opinion (full disclosure, I do not watch mainstream media news).
So, let’s look at the paper trail and see where the dollars are headed.
• Large corporations are promised $500 billion
I don’t believe it mattered what the above number ended up being, we were going to have a portion of population rightfully upset that big business are receiving any money at all. I get it, historically large corporations have been taken care of and it’s understandable to question if they deserve this kind of money. But ask yourself one thing, who do these huge companies employ? If we were to let them fail, you better believe the CEOs and their executive boards won’t be the ones unable to pay their car payments and foreclosing on their homes. Please research the strings attached to this money while keeping in mind it is NOT perfect.
• Qualifying individuals will receive $604 billion
Tax free checks given to individuals making less than $75k, households less than $150k and families with children and dependents to care for.
A dramatic expansion of unemployment benefits. “A single parent with two children that earns the federal minimum wage but loses their job as a result of the COVID-19 outbreak stands to see their income over the next four months more than double thanks to expanded unemployment benefits and cash stimulus checks.” – George Pearkes of Bespoke Investment Group
• $340 billion for state and local governments
Entities that the majority of us depend on for daily safety, health resources and education.
• Small businesses will receive $377 billion
Although this is coming from a small business owner, I truly believe that small business is the foundation of our economy and way of life. There are 30 million small businesses that employ millions of Americans who use their paychecks to support their families. The overwhelming majority of these small businesses are being negatively affected by the forced shutdown. I believe this dollar amount will need to grow in the coming weeks and months. JP Morgan put out an article estimating that small businesses currently have about 15 days of cash on hand.
• The remaining $183 billion is set aside for safety net programs
This includes child nutrition, food banks, and the like getting $29 billion along with public health spending related to Covid-19 receiving $154 billion.
For those doing their back-of-the-napkin math at home, that is a total package of $2.04 Trillion. The breakdown of households getting roughly 28% of the total bill when counting stimulus checks plus unemployment benefits. If you add safety nets and student loan relief, the 28% goes up to about 32%, versus 25% for large businesses and 19% for small businesses.
The details of this bill matter. While individuals and small businesses are more vulnerable, they are receiving checks they will not need to pay back and loans that will turn into grants. For corporations the $500 billion will be a combination of loans and grants and the companies will be restricted from buybacks and dividends for the term of the loan plus 12 months. We expect to hear more details in the weeks ahead.
It is 100% understandable to be skeptical of this entire bill and each figure described above. The perfect package does not exist and there was no easy button to slam. We don’t know how this will play out. Will there be issues of individuals getting their checks in a timely fashion? Will some be forced to sit on hold with their unemployment office for hours as 20 million people scramble to apply for benefits? Will individuals with millions in the bank but show little income receive a $1,200 check? Will small businesses and corporations that remain well capitalized and generally unaffected receive a significant grant? Yes, all these things will happen in some capacity. But I don’t think there was any other way to quickly distribute these funds to people that really needed them two weeks ago. This is the definition of crunch-time and there are no re-dos. Can you imagine where the spirit and optimism of our country would be, not to mention the markets, if Capitol Hill hadn’t passed a significant bill or was still arguing about all the details?
Before you type a post on social media about the future risk of runaway inflation due to this amount of government spending, think about the average person and business that has zero control over what has happened to their livelihood. We could not wait six months for lawmakers to figure out how to construct the perfectly fair plan. Before you comment how potentially some unemployed workers may stand to receive a “raise” relative to what they were making prior to the pandemic, ask yourself if it would really be that awful if someone in need got a little extra? Should we be saving the airlines? Think about what airlines do and who they support and employ. If the airlines fold, so will the hotels, restaurants, bars and entire areas of our country that DEPEND on tourism and entertainment.
Couple recent updates: “Over 80 million Americans saw the Coronavirus stimulus checks deposited into their bank accounts Wednesday. The SBA reported Thursday morning that more than 1,637,000 loan applications valued at over 339 billion” has been approved.” – The Wall Street Journal
This bill is not perfect. And you do not need to love each of our politicians or President in order to give them some credit. This type of economic freeze due to a pandemic has never happened before, and the end is still unknown. Let’s not be too proud or let our politics get in the way of giving some credit where it is due.
Don’t lose faith.