On Friday, August 7th, the COVID-19 Congressional Oversight Commission, which monitors the use of the Coronavirus Aid, Relief, and Economic Security (CARES) Act bailout funds, held its first public hearing. The meeting was intended to help answer a pressing question that has emerged during the months since the act was passed: amid the worst economic crisis since the Great Depression, why is so much of the money that Congress has allocated to rescue the economy going unused?
The two-trillion-dollar CARES Act, which was passed by Congress in March, contained a number of programs intended to help companies survive the shutdowns that were implemented in response to the coronavirus pandemic. The programs were broken down by company size: the Paycheck Protection Program makes loans available to the smallest businesses, and a set of corporate lending programs is aimed at the biggest companies. In addition, an initiative called the Main Street Lending Program targets companies in between: ones that have between five hundred and ten thousand employees, and thus aren’t so large that they can issue bonds or otherwise access capital to carry them through the pandemic. These programs also come with different conditions attached. Companies taking P.P.P. money are strongly incentivized to use the funds to pay their employees, while midsize companies must agree not to engage in stock buybacks or use government funds to increase executive compensation. In the case of large corporations, though, Congress and the Trump Administration did not obligate the companies to use the money to retain workers and placed almost no restrictions on what they do with it. One of the most vocal members of the Oversight Commission, a former economic adviser to Senator Elizabeth Warren named Bharat Ramamurti, believes that this is granting big companies far more trust than they deserve.
The Main Street Lending Program remains one of the least-discussed programs in the bailout, yet it is aimed at an important sector of the economy that represents millions of jobs. Congress and the Treasury Department pledged seventy-five billion dollars to the Federal Reserve to administer it; the Fed, by borrowing or creating more money, could potentially use that sum to give out six hundred billion dollars’ worth of loans. Midsize companies are a significant source of jobs, employing an estimated forty-five million people around the U.S. Yet, four months after it was created, the fund of the Main Street Lending Program has barely been touched, even as tens of thousands of businesses have closed and millions of workers have been let go. “Even if things pick up a little bit, it seems very unlikely that we are going to get close to the capacity of this funding facility,” Ramamurti told me. “And if that money isn’t going to be used, it seems to me that Congress could repurpose it for some other better use.”
The Main Street program was the focus of the hearing on August 7th. It included Ramamurti and the three other members of the Oversight Commission who have been appointed: two Republicans, the Pennsylvania senator Pat Toomey and the Arkansas representative French Hill; and another Democrat, the Florida congresswoman Donna Shalala. (The House Speaker, House Minority Leader, Senate Majority Leader, and Senate Minority Leader each selected one member, but the commission still lacks a chairperson, who must be jointly chosen by Nancy Pelosi and Mitch McConnell.) Some of the members came to the Capitol Building, in Washington, while others beamed in from their homes. Ramamurti’s goal for the hearing seemed to be to convey a sense that the Main Street Lending Program is failing, and that those billions of dollars should be deployed in some other way that directly benefits the people who are suffering the most. During his opening statement, Ramamurti put it directly. “My goal today is to figure out why the program has failed and how to fix it quickly,” he said. “Before more Americans lose their jobs and more good businesses have to shut their doors.”
Ramamurti believes that part of the reason midsize companies are going out of business while there are vast reserves of untapped government money available is because the Treasury Department and the Federal Reserve have made it unappealing for many companies in financial distress to take the aid. “In my view, they should be more generous in terms of who is eligible to get money, and on what terms, but more restrictive on what the companies can do with the money afterward,” he told me.
One of the witnesses at the hearing was Gwen Mills, the secretary-treasurer of Unite Here, a union representing more than three hundred thousand workers, including bellhops, casino workers, waiters, and cooks. She said that the majority of the union’s members are Black and Latino, that a majority are women, and that eighty-five per cent are now out of work. She felt that, even if low-interest loans were offered to casino and hotel companies, her members wouldn’t benefit; instead, they need access to health insurance and “direct support,” or money to pay their bills until their jobs return. When Ramamurti asked her if she was aware of a single job that the Main Street program had saved, she said no.
Meanwhile, talks between Republicans and Democrats in Congress over a follow-up to the CARES Act have completely fallen apart. In the midst of an unprecedented crisis, Democrats are advocating sending money directly to people who need it, trusting that they know how best to spend it; Republicans, in contrast, are trying to minimize the government’s role and are hoping to encourage markets to take on the work instead. Under the extreme circumstances created by the pandemic, though, the challenges that the economy faces seem well beyond what even a well-functioning market could rectify. Approximately 1.8 million jobs were added to the economy in July, but the longer-term picture of American unemployment is dire: the number of people who have been out of work for an extended period has risen to 6.5 million, the highest number recorded. One of the major sticking points between the two parties over a new rescue bill centers on how much, if any, extra unemployment insurance should be offered to out-of-work Americans. Democrats argue that the government should continue sending weekly federal payments of six hundred dollars to those without jobs. Republicans argue that the payments are discouraging people from going back to work, because in many cases the total unemployment benefits people are receiving are more than what they were previously earning. (President Trump announced an executive order to extend unemployment benefits, though Democrats and others have called it inadequate.) “If you asked different members of Congress what the goal of these economic-relief efforts was, you’d hear twenty different answers,” Ramamurti told me. “Was it to keep people employed? Was it to make sure good businesses didn’t go under? Was it to sustain people if they did get fired? And what we have is sort of a mishmash of all of those. And I think it has led in part to an awkward, and in many cases ineffective, response.”
As the picture has worsened, the stock market has continued to rise, which seems to have given some in Congress a false sense of comfort. It’s another reminder that, even as President Trump and others in Washington like to cite the stock market as a sign of economic strength, it does not reflect the economic reality for most people. Ramamurti noted that when the initial CARES Act was passed, in March, the stock market was crashing, which created a sense of urgency. “I think that sharpens the minds of Republicans in a way that even thirty million unemployed people seeing their incomes go down six hundred dollars a week doesn’t,” he said.
“The only reason the economy hasn’t totally fallen off a cliff is because of the fiscal support in the CARES Act for unemployed people and for lower-income folks, and if that is not extended in this next package, it’s going to be a total nightmare,” Ramamurti said. “Millions of people are going to be evicted or lose their homes, there’ll be millions of job losses, and that’s the sort of economic downturn that will take a very long time to recover from. And I think, at a certain point, the stock market is going to catch on to that and that’s going to go down, too.“