The COVID-19 pandemic brought devastation to public health and left economic destruction in its wake. And the truth is, it is still causing costly damage. Shuttering businesses and hitting the pause button on gatherings and events have punctured a hole in the country, businesses of all sizes, and most U.S. households. While the government did pass a $2.2 trillion stimulus package at the end of March to keep the economy moving, those funds were insufficient to keep the U.S. afloat.
That brings us to the present with the November 2020 election just a couple of short weeks away with no additional stimulus to help the American people. If the U.S. government doesn’t come to an agreement and pass stimulus before the election, there won’t likely be any help for families and businesses until after January 20, 2021. Unfortunately for most, that help may come too late.
America’s Overall Debt
The U.S. Treasury keeps a running total of the national debt, which now exceeds $27 trillion, with its gross domestic product (GDP) hitting just over $19.7 trillion. In other words, the amount of money the U.S. government owes is greater than the market value of its assets. That hasn’t happened since 1947.
That means if you were to spread the nation’s debt among its citizens, each person would carry about $82,000 in personal debt. As you know, carrying debt is a drain on your personal finances, just like it is for the nation. And while the U.S. carries debt yearly, a growing deficit without a growing economy can lead to default, which will surely devalue the U.S. dollar.
In other words, the nation must pay its debts.
The problem is that raising taxes and cutting spending isn’t going to be enough to stop the bleeding in the budget. Not only that, but the American people can’t afford a tax hike, so that leaves few options to maintain the dollar’s integrity.
One thing helping to slow the increasing debt are the Fed's low-interest rates because that keeps the country's interest payment amounts down. Still, just like any personal budget, the government will have to cover the deficit at some point.
However, the concentration is not on the debt and how the government will pay its debts in the future, but how to support the economy now and encourage growth during a pandemic. Certainly, another stimulus package should encourage spending, spark the economy, and keep businesses from closing for good. But will it pass in time?
Stimulus and the Election
The window to pass a stimulus package before November is closing quickly, leaving Americans wondering what will happen if no stimulus passes by November 3rd, 2020. There are a few scenarios for those in the U.S. to consider.
If no stimulus package passes and Trump wins the election, Democrats in Congress may hold off stimulus talks. On the other hand, if Biden wins the election, there will probably be a stalemate in the lame-duck season, and Biden will have to wait until he’s sworn in to provide stimulus to the U.S.
Either way, unless a stimulus package passes before the election, it looks like the American people and small businesses lose. The good news is, talks are still ongoing to provide help before election day.
PPP Loans Helping Small Businesses
During the first round of stimulus, The CARES Act earmarked $349 billion to help small businesses with less than 500 employees keep their doors open and pay their employees’ salaries for up to 24 weeks.
This paycheck protection program (PPP) provided loans through the Small Business Administration, which gave borrowers low-interest rates and allowed them to defer their payments for six months. Not only that, but these loans were 100% forgivable as long as businesses followed the guidelines and only used the money for its intended purposes, as outlined in the loan agreement.
So, if forgiven, these companies would never have to pay back the money they borrowed, and their doors would remain open.
Since the pandemic raged on past the 24-week mark, the second stimulus package in the works includes possibilities for more PPP loans targeting businesses who continue to struggle. The eligible companies would likely be those with less than 200 employees and a 25% reduction in revenue due to the coronavirus, although the final bill may have additional restrictions. That said, until a new stimulus package passes, businesses will continue to flail, and millions may close for good.
Household Debt in the COVID Age
But businesses aren’t the only ones with economic struggles during these times; American families are having trouble keeping food on the table. With the pandemic continuing and over 25 million people on unemployment, families have a hard time keeping up with their expenses. And when you can’t cover your expenses with the money you bring in, that’s when credit cards become essential for survival.
The $1,200 stimulus check in March didn’t last long for the average American, so they had to rely on savings, working, or unemployment to carry them through to the end of the pandemic. But the pandemic hasn’t ended, savings and unemployment have run out, and a lot of the jobs there prior to March 2020 aren’t there anymore.
While health is at the forefront of every person’s mind, economics runs a close second. In fact, over 75% of estimated voters put the economy high on their priority list as a deciding factor in their voting choice. Not only do they want to know how the next administration will help their families, but they want to be sure that the pandemic doesn’t further devastate them through higher taxes.
With families carrying high debt and running the risk of possible bankruptcy, higher taxes and lower paychecks would keep them in a debt cycle. That debt cycle would discourage families from spending money and slow economic recovery overall because their concentration will be on paying for the essentials and survival.
Debt and the November 2020 Elections
No matter who wins the election in November, one thing is true: People across the U.S. are in worse financial shape than they were before COVID-19 hit the shores. Not only that, but the nation itself has a debt that’s growing by the second without the assets to cover it. Since the pandemic is still active, it’s hard to tell the full economic impact it will have. But the moves this administration and the next make while we’re in this predicament will determine how well we weather the storm.