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What's in the Latest COVID Relief Act?

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The Committee for a Responsible Federal Budget gave an overview of the latest COVID relief deal and how much it will boost incomes and economic growth, and discussed the proposal for $2,000 checks.

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What's in the Latest COVID Relief Act?

  1. 1. CRFB.org
  2. 2. CRFB.org The Consolidated Appropriations Act of 2021 Ten-Year Cost Discretionary Appropriations $1.41 trillion Defense Discretionary Spending $672 billion Non-Defense Discretionary Spending $627 billion Overseas Contingency Operations $77 billion Emergency and Disaster Related Spending $27 billion Other Spending $4 billion Response and Relief Act $935 billion Aid to Small Businesses $325 billion Education $82 billion Extend and Augment Unemployment Benefits (+$300/week) for 11 weeks $120 billion Stimulus checks of $600/person $166 billion Health Care $69 billion Transportation $45 billion Other Spending $87 billion Other Tax Cuts $40 billion Tax Extenders ~$135 billion Other Provisions (health extenders, surprise billing, etc) ? Source: CBO, CRFB Calculations Note: Totals may not sum due to rounding
  3. 3. CRFB.org Provision Ten-Year Cost Aid to Small Businesses $325 billion Paycheck Protection Program (PPP) Second Draw $284 billion Economic Injury Disaster Loan Advances $20 billion Emergency Grants to Venues $15 billion Other Small Business Relief and Program Expenses $6 billion Deductibility of expenses paid for by PPP loans ^† Education $82 billion K-12 Education Grants $54 billion Higher Education Grants $20 billion Governor's Emergency Education Relief Fund $4 billion Grants for HBCUs, Minority-Serving Institutions, and Tribal Colleges $2 billion Grants to For-Profit Colleges to Provide Financial Aid $1 billion Education Grants for Tribes and Territories $1 billion Source: Legislative summaries, bill text, JCT, CRFB calculations. What's in the Response and Relief Act? † Although the proposal rescinds funds from the PPP program and the Federal Reserve’s lending facilities, those funds would not have been spent anyway under current law so the actual deficit impact will be closer to $350 billion. The precise deficit impact is unknown — for example, unemployment benefits could cost more or less depending on unemployment levels and PPP loans may not be fully utilized. ^ This change may reduce tax revenues by up to $200 billion relative to current law (or less if there are limits imposed on deductibility, as reported by some sources), but much of the cost was inadvertently scored in the original bills so it would not be counted as an additional cost by CBO.
  4. 4. CRFB.org Provision Ten-Year Cost Health Care $69 billion Funding to States for Testing, Tracing, and COVID Mitigation $22 billion Vaccine Procurement $20 billion Vaccine Distribution Through the States & CDC $9 billion Additional Health Care Provider Grants $3 billion Repeal the Medicare Sequester through March 2021 $3 billion* Increase Physician Pay Schedule $3 billion Mental Health Funding $5 billion Other Health Funding $3 billion Distribute Majority of Existing Provider Relief Fund to Struggling Health Providers ** Extend and Augment Unemployment Benefits (+$300/week) for 11 weeks $120 billion Stimulus checks of $600/person $166 billion What's in the Response and Relief Act? Source: Legislative summaries, bill text, JCT, CRFB calculations. ** The bill requires that at least 85 percent of the unobligated PRF balance be used for more distributions to health providers that incurred losses in Q3 and Q4 of 2020 and Q1 of 2021. This represents around $20 billion in potential distributions. * Rough CRFB estimates where official scores unavailable. Subject to change as more details emerge. The distributions from the Provider Relief Fund, in particular, represents our best guess of the bill from ambiguously worded legislative summaries, but will be updated as necessary.
  5. 5. CRFB.org Provision Ten-Year Cost Transportation $45 billion Second Round Payroll Support Program for Airline Workers $16 billion Transit Infrastructure Grants $14 billion State Highway Funding $10 billion Grants to Transportation Service Providers Like Buses and Ferries $2 billion Airport Grants $2 billion Amtrak Funding $1 billion Other Spending $87 billion Nutrition and Agriculture Programs $26 billion Rental Assistance $25 billion Community Lender Support $12 billion Child Care Grants $10 billion Broadband Grants and Investment $7 billion Provide Additional Emergency Funding to Agencies $3 billion Disaster Relief Funding for COVID Funeral Expenses $2 billion Community Development Block Grants $2 billion Write-Off $10 Billion U.S. Postal Service Loan $0 Source: Legislative summaries, bill text, JCT, CRFB calculations. What's in the Response and Relief Act?
  6. 6. CRFB.org Provision Ten-Year Cost Other Tax Cuts $40 billion Extend and Expand Employee Retention Tax Credit $20 billion Reinstate 100% Business Meals Deduction for 2021 and 2022 $6 billion Increase Earned Income and Child Tax Credit by Allowing Taxpayers to Use 2019 Income $4 billion Extend CARES Act Charitable Provisions $4 billion Extend CARES Act Employer-Paid Student Loan Exclusion Through 2025 $3 billion Extend Families First Paid Leave Credits Through March 2021 $2 billion Total $935 billion* "Offsets" (reductions in previous budget authority) -$560 billion Net Total (budget authority) ~$360 billion *† What's in the Response and Relief Act? Source: Legislative summaries, bill text, JCT, CRFB calculations. * Rough CRFB estimates where official scores unavailable. Subject to change as more details emerge. The distributions from the Provider Relief Fund, in particular, represents our best guess of the bill from ambiguously worded legislative summaries, but will be updated as necessary. † Although the proposal rescinds funds from the PPP program and the Federal Reserve’s lending facilities, those funds would not have been spent anyway under current law so the actual deficit impact will be closer to $350 billion. The precise deficit impact is unknown — for example, unemployment benefits could cost more or less depending on unemployment levels and PPP loans may not be fully utilized.
  7. 7. CRFB.org $325 $166 $135 $120 $82 $51 $0 $50 $100 $150 $200 $250 $300 $350 Small Business Aid Stimulus Checks Tax Extenders Unemployment Aid Education Vaccines, Testing, and Tracing The Legislation Also Included Costly Tax Extenders Sources: Joint Committee on Taxation, legislative summaries, CRFB calculations. billions
  8. 8. CRFB.org Policy Ten-Year Cost Tax Provisions Made Permanent $51 billion 7.5% of income floor instead of 10% for medical expense deduction $33 billion Reduced excise taxes on beer, wine, & distilled spirits $9 billion Larger Lifetime Learning Credit in place of the deduction for qualified tuition & related expenses $6 billion Other provisions $3 billion Tax Provisions Extended Through 2025 $46 billion Work Opportunity Tax Credit $16 billion New Markets Tax Credit $6 billion Business meals deduction $6 billion Rule allowing American companies to transfer money tax-free between foreign subsidiaries $4 billion Tax credit for employers to offer paid family and medical leave $4 billion Exclusion for certain employer payments of student loans $4 billion Allow mortgages to be forgiven tax-free $3 billion Other provisions $3 billion Source: Committee for a Responsible Federal Budget, based on CBO and BEA data. The Legislation Also Included Costly Tax Extenders
  9. 9. CRFB.org Policy Ten-Year Cost Tax Provisions Extended Through 2021 $18 billion Energy Investment Tax Credit $7 billion Extend and expand charitable deduction for non-itemizers & increase the maximum deduction $4 billion Extend and expand credit for buying residential energy-efficient property $4 billion Other provisions $3 billion Other Temporary Tax Provisions $22 billion Eliminate 10% floor on claiming disaster property losses $8 billion Increase low-income housing tax credit rate $6 billion Depreciation of residential rental property over 30 years $3 billion Reduce interest rates used for life insurance contracts $3 billion Other provisions $2 billion Grand Total ~$135 billion Source: Committee for a Responsible Federal Budget, based on CBO and BEA data. The Legislation Also Included Costly Tax Extenders
  10. 10. CRFB.org Families First CARES PPPHCE Response & Relief Total Small Business Support - $375 $225 $325 $960 Unemployment Benefits $5 $460 - $120 $585 Recovery Rebates - $290 - $165 $460 Health Care Spending $90 $160 $100 $70 $420 State and Local Aid* $85 $175 - $80 $340 Tax Relief $25 $265 - $40 $330 Other Spending $20 $170 - $135 $325 Total COVID Relief (Net Cost) $225 $1,900 $355 $935 $3,415 Estimated Deficit Impact From COVID Relief Proposals (billions) Source: Committee for a Responsible Federal Budget based on CBO, JCT, and other sources. *Includes Coronavirus Relief Fund money and funding for public schools, transit, and existing Medicaid costs. Note: Estimates are rounded to the nearest $5 billion Net COVID Relief Will Total $3.4 Trillion
  11. 11. CRFB.org That’s More Than the Great Recession Stimulus Note: Figures reflect 5-year cost estimates Source: CBO, CRFB Calculations American Recovery and Reinvestment Act 1.0% 2011/2012 Payroll Tax Holiday: 0.3% Fannie/Freddie/TARP: 0.2% Economic Stimulus Act of 2008, 0.2% Other 0.7% CARES Act 1.8% Response & Relief Act 0.8% PPP & Health Extension Act: 0.3% Other: 0.1%[CELLRANGE] [CELLRANGE] 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Great Recession COVID-19 Recession Percent of GDP
  12. 12. CRFB.org -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% And Is Much More Frontloaded Source: CBO, CRFB Calculations Percent of GDP
  13. 13. CRFB.org COVID Relief Will Boost Income to Record Levels Source: Committee for a Responsible Federal Budget, based on BEA data. Note: All numbers show percent growth in income relative to pre-pandemic levels (Q1 of 2020) $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 +10% +13% +2% Market Income (minus taxes) Prior Law Transfers (excluding UI and rebates) Recovery Rebates billions
  14. 14. CRFB.org Economic Impact Estimates Category Fiscal Impact Low Central High Unemployment Benefits $120 $80 $120 $155 Economic Impact Payments $165 $100 $135 $165 Paycheck Protection Program and Other Small Business Support $345 $125 $150 $170 State and Local Aid (including Education and Transit Funding) $85 $75 $80 $85 Other Spending and Revenue $220 $140 $145 $155 Total $935 $515 $625 $730 Overall Multipliers 0.55x 0.67x 0.78x The Response & Relief Act Will Boost Output Source: CBO, CRFB Calculations Note: Totals may not sum due to rounding
  15. 15. CRFB.org 2021 Output Gap Year-End COVID Relief Bill 2022 Output Gap 2023 Output Gap $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Output Gap (Central Estimate) Economic Impact 2021 2022 2023 $515 $730 And Close Much of the Output Gap Source: Committee for a Responsible Federal Budget, based on CBO, Brookings, and bill text. billions
  16. 16. CRFB.org And Close Much of the Output Gap Source: Committee for a Responsible Federal Budget, based on CBO and BEA data. $19,000 $20,000 $21,000 $22,000 $23,000 $24,000 $25,000 2020Q1 2020Q3 2021Q1 2021Q3 2022Q1 2022Q3 2023Q1 2023Q3 billions
  17. 17. CRFB.org Source: Committee for a Responsible Federal Budget, based on CBO and BEA data. Note: Our optimistic scenario model does not account for the difficulty/unlikeliness of raising GDP above potential during a pandemic. $19,000 $20,000 $21,000 $22,000 $23,000 $24,000 $25,000 2020Q1 2020Q3 2021Q1 2021Q3 2022Q1 2022Q3 2023Q1 2023Q3 Optimistically, It Could Solidify the Recovery billions
  18. 18. CRFB.org Source: Committee for a Responsible Federal Budget, based on CBO and BEA data. $19,000 $20,000 $21,000 $22,000 $23,000 $24,000 $25,000 2020Q1 2020Q3 2021Q1 2021Q3 2022Q1 2022Q3 2023Q1 2023Q3 And Will At Least Prevent Another Economic Slump billions
  19. 19. CRFB.org What About The $2,000 Checks? The CASH Act would increase the $600/person checks provided in the Response and Relief Act to $2,000/person and expand eligibility to adult dependents. We estimate this proposal would: • Cost $464 billion, equivalent to over 2 percent of GDP • Bring the total cost of new rebates to $630 billion – twice the amount provided to small businesses in the Response and Relief Act and five-times the amount spent on unemployment benefits • Increase personal income to 25 percent above pre-COVID levels this quarter • Boost economic output by about $300 billion, equivalent to 1.5 percent of GDP this year or 0.5 percent over three years
  20. 20. CRFB.org The Bigger the Rebate, the Bigger the Cost CASH Act (proposed): +$1,400 per Taxpayer +$1,400 per Child +$2,000 per Adult Dependent Family of 4 Receives: $8,000 Total Cost: $630 billion* Response and Relief Act: $600 per Taxpayer $600 per Child Family of 4 Receives: $2,400 Total Cost: $166 billion CARES Act: $1,200 per Taxpayer $500 per Child Family of 4 Receives: $3,400 Total Cost: $292 billion Source: JCT, CBO, CRFB analysis of the House-passed CASH Act * Total reflects JCT estimate of $464 billion for the revenue effects of the CASH Act, as well as CBO’s estimate of $166 for the recovery rebates portion of the Response and Relief Act
  21. 21. CRFB.org $0 $2,000 $4,000 $6,000 $8,000 $10,000 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 Single Adult Single Parent, One Child And the Higher Up the Income Ladder They Will Go Married Couple, No Children Married Couple, One Child Married Couple, Three Children Married Couple, Two Children Adjusted Gross Income Source: CRFB analysis of the House-passed CASH Act Amount of Economic Impact Payment
  22. 22. CRFB.org Single Adult Married Couple No Children Married Couple 1 Child Married Couple 2 Children Married Couple 3 Children Married Couple 5 Children Single Parent 2 Children Income Where Checks Are Fully Phased Out CASH Act ($2,000/person) $115,000 $230,000 $270,000 $310,000 $350,000 $430,000 $232,500 Response Act ($600/person) $87,000 $174,000 $186,000 $198,000 $210,000 $234,000 $148,500 CARES ($1,200/adult, $500/child) $99,000 $198,000 $208,000 $218,000 $228,000 $248,000 $156,500 Size of Rebate under CASH Act $50,000 income $2,000 $4,000 $6,000 $8,000 $10,000 $14,000 $6,000 $100,000 income $750 $4,000 $6,000 $8,000 $10,000 $14,000 $6,000 $150,000 income $0 $4,000 $6,000 $8,000 $10,000 $14,000 $4,125 $200,000 income $0 $1,500 $3,500 $5,500 $7,500 $11,500 $1,625 $250,000 income $0 $0 $1,000 $3,000 $5,000 $9,000 $0 $300,000 income $0 $0 $0 $500 $2,500 $6,500 $0 $350,000 income $0 $0 $0 $0 $0 $4,000 $0 Source: CRFB analysis of the House-passed CASH Act And the Higher Up the Income Ladder They Will Go
  23. 23. CRFB.org [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 0-20% 20-40% 40%-60% 60%-80% 80-90% 90-95% 95-99% Top 1% +$1400/person $600/person But They Still Don’t Go to the Very Rich Source: Tax Policy Center. Modeled on 2019 income levels and population. Income Percentile Average Rebate
  24. 24. CRFB.org 24 In Dollars Share of Economy September Deficit Projection (CBO) $1.8 trillion 8.6% of GDP Effect of COVID Relief, Tax Extender, and Omnibus Spending Package +$750 billion +3.6% of GDP Economic and Technical Changes since July Forecast -$250 billion -1.2% of GDP Higher Projected GDP Since July Forecast N/A -0.6% of GDP Updated Deficit Projection (CRFB) $2.3 trillion 10.4% of GDP We’re Headed for a $2.3 Trillion Deficit
  25. 25. CRFB.org 121% 109% 98% 60% 70% 80% 90% 100% 110% 120% 130% 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 September 2020 Alternative Scenario September 2020 Current Law March 2020 Current Law And Record Debt Levels Source: CRFB Calculations based on Congressional Budget Office data. Percent of GDP
  26. 26. CRFB.org Learn More at CovidMoneyTracker.org

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