Congress has committed nearly $6 trillion since early 2020 to fight Covid-19 and cushion the economic blow from a once-in-century pandemic.
The vast majority of those emergency funds have already been spent on everything from lifelines to small businesses and stimulus checks to bailouts for airlines. There is no money left to rescue restaurants and most of the efforts to save small businesses have either expired or will soon.
The rapid spread of Omicron will test the durability of the economic recovery and is already raising questions about whether Washington will need to come to the rescue yet again.
“Another round of Covid fiscal relief is premature,” Moody’s Analytics chief economist Mark Zandi told CNN, “but lawmakers should be prepared to act quickly of the Omicron wave begins to undermine the economic recovery.”
For now, it’s too soon to determine how much, if any, aid the economy will need.
But it’s clear the risks to the recovery have increased in recent days due to the spike in Covid-19 cases around the nation. And the growth outlook has been dimmed further by the apparent demise of the Build Back Better bill, at least in its current iteration.
86% of federal Covid funds have been disbursed
Over the course of the Biden and Trump administrations, Congress authorized a staggering $5.7 trillion in emergency Covid aid, according to a tally by the Committee for a Responsible Federal Budget.
Roughly $4.9 trillion, or 86%, of those funds have either been disbursed or committed.
For example, the federal government sent out $815 billion in stimulus checks to families through three rounds. No further stimulus checks have been authorized.
Before shutting down in June, the Paycheck Protection Program provided more than $800 billion in loans to over 8.5 million small businesses and nonprofits, keeping them afloat during the pandemic.
Washington also delivered about $80 billion in aid to prevent the collapse of the airline industry and minimize the job losses there.
Neither the US Chamber of Commerce nor the Business Roundtable would comment on whether more aid will be needed from Congress.
‘The last straw for many restaurants and bars’
But restaurants, among the hardest hit sectors during the pandemic, are demanding Congress provide support to help them ride out the Omicron storm.
“Congress went home, and their neighborhood restaurants and bars are going out of business,” Erika Polmar, executive director of the Independent Restaurant Coalition, said in a statement. “The latest Covid-19 surge will be the last straw for many restaurants and bars struggling with back rent, debt and reduced consumer demand.”
Congress did provide $28.6 billion in grants, through the Restaurant Revitalization Fund, to help restaurants survive Covid. However, funding dried up and restaurant groups say nearly 200,000 restaurants have applied for, but not yet received, funding.
For months, restaurant advocates have been urging lawmakers to replenish the emergency funding.
“The spread of the Omicron variant couldn’t come at a worse time for restaurants,” Sean Kennedy, executive vice president of public affairs at the National Restaurant Association, told CNN in a statement. “Going into the holiday season, operators were already strained by increasing supply costs and staffing challenges, now consumer confidence is falling just as we’re entering the final weeks of the year.”
The National Restaurant Association estimates that 90,000 restaurants have closed permanently or long-term because of the pandemic and the industry has lost close to $300 billion in sales.
“Until Congress moves to replenish the Restaurant Revitalization Fund, every new variant that could impact how consumers use restaurants threatens to push thousands closer to closing permanently,” Kennedy said.
White House isn’t ruling out more help
The Biden administration isn’t shutting the door to the idea that further emergency aid from Congress could be needed.
“We will continue to closely monitor the economic recovery and follow closely whether future developments would require some targeted resources,” the White House official told CNN on Tuesday.
Asked about the pleas for aid from the restaurant industry, the official pledged to work with Congress on how best to support small business owners, including restaurants, going forward.
The $1.9 trillion American Rescue Plan, which President Joe Biden signed into law in March, has helped to support the US economy this year as millions of people got vaccinated.
Approximately 91% of the American Rescue Plan funds that are legally available for distribution have either been obligated or allocated to specific grantees or groups, the White House official said.
But more American Rescue Plan funds are set to be released next year.
In addition to the $245 billion in funds that have been distributed to state and local governments so far this year, a second tranche of about $105 billion is set to be released. That money can be used to keep school districts and childcare centers open, distribute vaccines and help fill holes in the budgets of local governments.
“The American Rescue Plan continues to provide critical support to our recovery and responding to Covid. That was how it was designed,” the White House official said.
Deadline looms for small business disaster loans
Although the centerpiece of the small business rescue, PPP, has been shut down, some funds are still available to small businesses, but not for long.
The Covid Economic Industry Disaster Loan (EIDL) program is only accepting applications from small businesses until December 31. The Small Business Administration urged firms to apply by December 10. The SBA said it has overseen the distribution of about $314 billion through this program.
While Congress recently withdrew about $30 billion from EIDL to help fund the bipartisan infrastructure law, the SBA said it “has enough in available funding to continue supporting” all applicants up to their full entitled amount. However, the SBA did not say precisely how much funding remains.
The SBA said it has distributed more than $13.6 billion to nearly 13,000 recipients in the Shuttered Venue Operators Grant program, a federal program for theaters, live music venues and other businesses hit by Covid. While the SBA is still processing applications and appeals, it is no longer accepting new applications for this program.
Emergency Fed programs shuttered
Meanwhile, Omicron is hitting just as the Federal Reserve starts to unwind its own emergency stance.
In March 2020, the Fed undertook a historic rescue of the economy and markets by dropping interest rates to zero and launching emergency lending programs.
Those lending facilities, aimed at staving off a financial crisis, have since been shut down.
The Fed is also planning to lift interest rates off rock-bottom levels next year to fight inflation, although for now they remain near-zero.
Similarly, the Fed is still buying tens of billions of dollars of bonds a month to support the economy, but it has begun to slow these purchases and plans to end them by the spring.
‘Real test’ for the economy
All of this is subject to change though, depending upon what happens with Covid.
“There may be a reassessment of the withdrawal of stimulus, including at the Fed. The Fed may be forced to wait a little longer on its first interest rate hike,” said Greg Valliere, chief US policy strategist at AGF Investments.
The good news is the US economy is entering this wave from a position of relative strength.
Firings are historically low. Consumer spending has been strong. GDP is expected to accelerate this quarter. And the stock market, despite some recent wobbles, remains near record highs.
Nela Richardson, chief economist at ADP, expressed confidence the economy is strong enough to get through the Omicron wave.
“So much Covid relief money was spent early on that we can endure this rough patch, if it’s short,” Richardson said. “This is a real test for the durability of the economic recovery. I don’t think it’s fragile.”
‘Full-throated vaccine attack’
Much will depend on what happens next on the Covid front. If hospitals are at risk of becoming overwhelmed, the return of health restrictions and risk aversion by Americans could slow the economy in the coming months.
“If the pandemic goes in a darker direction, and at the moment that feels like a real possibility,” Zandi said, “the economy may require some additional fiscal support to recover.”
Valliere said the picture should become clearer after the holidays.
“I don’t think we’re quite there yet,” he said.
Richardson urged policymakers to focus on vaccines, testing and boosters on the health front as well as big picture investments in the economy, including training workforces and boosting the availability of affordable childcare.
“A full-throated vaccine attack is warranted,” Richardson told CNN. “But short-term thinking on the economy has run its course in terms of benefits. We need to shift to long-term thinking on the economy.”