The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is a $2.2trillion economic stimulus bill passed by the 116th United States Congress and signed into law by President Donald Trump on March 27, 2020, in response to the economic fallout of the COVID-19 pandemic in the United States. The spending primarily includes $300billion in one-time cash payments to individual people who submit a tax return in America (with most single adults receiving $1,200 and families with children receiving more), $260billion in increased unemployment benefits, the creation of the Paycheck Protection Program that provides forgivable loans to small businesses with an initial $350billion in funding (later increased to $669billion by subsequent legislation), $500billion in loans for corporations, and $339.8 billion to state and local governments.
The original CARES Act proposal included $500billion in direct payments to Americans, $208billion in loans to major industry, and $300billion in Small Business Administration loans.Carney, Jordain (March 19, 2020). "McConnell introduces third coronavirus relief proposal ". The Hill.300 Billion SBA Loan Program Expansion Considered By Congress , JD Supra (March 23, 2020). As a result of bipartisan negotiations, the bill grew to $2trillion in the version unanimously passed by the Senate on March 25, 2020.Emily Cochrane & Sheryl Gay Stolberg, $2 Trillion Coronavirus Stimulus Bill Is Signed Into Law , New York Times (March 27, 2020). It was passed by the House via voice vote the next day, and was signed into law by President Donald Trump on March 27. It was originally introduced in the U.S. Congress on January 24, 2019, as (Middle Class Health Benefits Tax Repeal Act of 2019). To comply with the Origination Clause of the Constitution, the Senate then used H.R. 748 as a shell bill for the CARES Act, changing the content of the bill and renaming it before passing it.
Unprecedented in size and scope, the legislation was the largest economic stimulus package in U.S. history,Wire, Sarah D. (March 25, 2020) "Senate passes $2-trillion economic stimulus package ". The Los Angeles Times. amounting to 10% of total U.S. gross domestic product.Kambhampati, Sandhya (March 26, 2020). "The coronavirus stimulus package versus the Recovery Act ". The Los Angeles Times. The bill is much larger than the $831billion stimulus act passed in 2009 as part of the response to the Great Recession. The Congressional Budget Office estimates that it will add $1.7trillion to the deficits over the 2020–2030 period, with nearly all the impact in 2020 and 2021.
Lawmakers refer to the bill as "Phase 3" of Congress's coronavirus response. The first phase was the Coronavirus Preparedness and Response Supplemental Appropriations Act that provided for vaccine research and development. The Families First Coronavirus Response Act, which focused on unemployment and sick leave compensation, was phase 2. All three phases were enacted the same month.
An additional $900 billion in relief was attached to the Consolidated Appropriations Act, 2021, which was passed by Congress on December 21, 2020, and signed by President Trump on December 27, after some CARES Act programs being renewed had already expired.
Unemployment benefits under the CARES Act expired in 2020; the eviction moratorium was generally phased out by mid-2021; the deadline to apply for PPP loans expired in May of 2021; and bankruptcy protections expired May 27, 2022.Expiration of the Coronavirus Aid, Relief, and Economic Security Act (CARES), United States Bankruptcy Court, April 1, 2022
Background Reduction of economic activity
In response to the COVID-19 pandemic, dramatic global reduction in economic activity occurred as a result of the social distancing measures meant to curb the virus. These measures included working from home, widespread cancellation of events, cancellation of classes (or moving in-person to online classes), reduction of travel, and the closure of businesses.
In March, it was predicted that, without government intervention, most airlines around the world would go bankrupt. On March 16, the trade group representing the U.S. airline industry requested a $50billion federal bailout.
On March 18, the National Restaurant Association wrote the President and Congress with an estimate that "the industry's sales will decline by $225billion during the next three months, which will prompt the loss of between five and seven million jobs," accompanied by a request of $145billion of aid to restaurants.
In an effort to gain Republican support for a large stimulus package that, at the time, was envisioned to be about $1trillion, United States Secretary of the Treasury Steven Mnuchin told Republican Senators the United States unemployment rate could reach 20% if no government action was taken. Almost 3.3million Americans filed for unemployment in the week ending March 21, "nearly five times more than the previous record of 695,000 set in 1982".
On March 20, Goldman Sachs predicted the U.S. gross domestic product would "decline by 24% in the second quarter of 2020 because of the coronavirus pandemic". Deutsche Bank predicted the U.S. economy would shrink by 12.9% in the second quarter of 2020.
Initial proposals
Two relief bills were signed by President Trump early in 2020: $8 billion on March 6, and $192 billion on March 18. It was apparent to Congress that these would not be sufficient. A much larger third package, which was to become the CARES Act, was negotiated.
In mid-March 2020, Democratic politicians Andrew Yang, Alexandria Ocasio-Cortez, and Tulsi Gabbard advocated for universal basic income in response to the COVID-19 pandemic in the United States; Gabbard suggested that it be a temporary measure until the crisis subsides. On March 13, Democratic representatives Ro Khanna and Tim Ryan introduced legislation to provide payments to low-income citizens during the crisis via an earned income tax credit. On March 16, Republican senators Mitt Romney and Tom Cotton stated their support for a $1,000 basic income, Romney saying it should be a one-time payment to help with short-term costs. On March 17, the Trump administration indicated that some payment would be given to non-millionaires as part of a stimulus package.
With guidance from the White House, Senate Majority Leader Mitch McConnell proposed a third stimulus package, amounting to more than $1trillion. It was suggested that $200–500billion would fund tax rebate checks to Americans who made between $2,500 and $75,000 in 2018 to help cover short-term costs via one or two payments of $600–1,200 per adult and $500 per child. Democrats prepared a $750billion package as a , which focused on expanding unemployment benefits instead of tax rebates. A compromise plan was made to set aside $250billion for tax rebates and the same amount for unemployment.
Subsequent initiatives On April 21, 2020, the Senate approved the Paycheck Protection Program and Healthcare Enhancement Act, providing $484 billion in additional funding to the existing Paycheck Protection Program, and President Trump signed it into law three days later. On May 15, 2020, the Democratic-controlled House passed a $3 trillion relief bill called the HEROES Act, but the Republican-controlled Senate never brought it to a vote. There was no other significant economic relief bill until late December 2020 when Congress reached an agreement on a $900 billion stimulus.
Relief to healthcare corporations: hospitals, manufacturers, and distributors
Provisions The Act includes the following provisions: Allocates $130 billion to the medical and hospital industries. Also including medical equipment manufacturers.Goodrich, Kate (March 30, 2020). "How the CARES Act Supports America's Healthcare System in the Fight Against COVID-19 ". Jackson Walker Reauthorizes and allocates funding to public health programs. Authorizes the Food and Drug Administration to approve rule changes for over-the-counter drugs without full advanced public notice and public comments. Requires an examination, report, and recommendations regarding the security of the United States' supply chain of medical products. Adds personal protective equipment, medical devices, diagnostic tests, and medical supplies that administer drugs, vaccines, and other biological products to the Strategic National Stockpile. Gives legal immunity to manufacturers, distributors, and administrators of respiratory protective devices under federal and state law with respect to all claims for loss caused by the devices. Requires the Department of Health and Human Services to prioritize the review of drug applications when there is an emergency drug shortage. Requires group health plans, health insurance carriers, and Medicare to cover COVID-19 testing and vaccination. Authorizes and appropriates $1.32billion of grants to community health care centers for the prevention, diagnosis, and treatment of COVID-19. Provides $145 million in grants over a five-year period for promoting telehealth. Establishes a Ready Reserve Corps of medical professionals in event of a public health emergency or national emergency. Limits federal and state liability for unpaid health care volunteers for harm caused to patients relating to the diagnosis, prevention, or treatment of COVID-19. Allows the disclosure of de-identified patient medical records related to substance use disorder. Allows funding for elder nutrition support to be used for an individual who is unable to obtain food due to social distancing. Waives the usual dietary guidelines requirements during the COVID-19 health emergency. Requires the Department of Health and Human Services to carry out a national public awareness campaign about the importance, safety, and need for blood donation. Expedites the development and approval process of new veterinary drugs for diseases that have the potential for serious health consequences for humans. Increases Medicare payments to medical providers between May 1, 2020, and December 31, 2020.
Outcomes The $175 billion Provider Relief Fund began disbursing funds to healthcare providers in April 2020. Funds do not have to be repaid if the healthcare provider meets specified criteria. An August 2020 Washington Post analysis found that for-profit nursing homes accused of "Medicare fraud and kickbacks, labor violations and widespread failures in patient care" had received hundreds of millions of dollars from this fund. The CARES Act allocated $1 billion to the Defense Department to manufacture personal protective equipment (PPE) and other health products under the Defense Production Act (DPA). Defense Department lawyers determined that the money did not have to be used for pandemic-related purposes, and, within weeks, hundreds of millions of dollars had been spent for other military uses.
Relief to businesses and organizations
Loans The Act: Allocates up to $500billion to the Exchange Stabilization Fund (ESF) for assistance to eligible businesses, states, and municipalities. A business is eligible if it has significant operations in the United States, a majority of its employees based in the United States, and it either has fewer than 10,000 employees or has less than $2.5billion of revenue. Each loan is a minimum of $1million, has a four-year maturity, and restrictions on compensation of highly paid employees. The program is limited to $25billion for passenger air carriers, $4billion for air cargo carriers, and $17billion for businesses critical to maintaining national security.Coronavirus Aid, Relief, and Economic Security Act, Section 4003(b)