As the United States faces one of the worst economic crises in its history, millions of Americans are struggling across many aspects of their finances. But as lawmakers plan to adjourn Capitol Hill until September, no new relief appears to be in sight.
Back in March, coronavirus pandemic led the government to impose lockdown restrictions that forced retailers and offices to shutter for weeks. Scores of workers were furloughed or laid off, and shoppers held onto their purse strings in fears of a recession. In response, the White House passed the massive $2.2 trillion CARES Act in late March that not only sent direct payments to many Americans and granted added unemployment benefits, but also provided loans to states and businesses.
However, many of those funds have either dried up or expired: The Internal Revenue Service and the Treasury Department have already sent out the $1,200 checks for individuals, while the $600 in enhanced jobless aid and the eviction moratorium for renters had expired at the end of July.
Over the weekend, President Donald Trump signed four executive orders to allow $400 in weekly unemployment benefits, an extension of eviction order protections, a payroll tax holiday and the deferment of student loan payments through the end of the year. A second stimulus check, however, was not included in the action. As Congress leaves Capitol Hill for summer recess, many are questioning whether they would have to wait a full month or even longer to receive much-needed financial aid.
If a bill isn’t passed by September, here’s what could happen:
Consumer spending could plummet
At the end of July, the Bureau of Economic Analysis reported that American consumers had increased their spending in June by 5.6%. Those gains, however, are now threatened as COVID-19 cases surge in the South, West and parts of the Midwest and the critical unemployment benefit reached its end that very midnight.
What’s more, consumer spending — a key linchpin of the U.S. economy — has a significant effect on the U.S. gross domestic product, which already dropped at a 32.9% annualized rate in the second quarter. That’s a 9.5% fall from the prior year’s quarter and the steepest in records dating back to 1947. (Before the pandemic took hold, the average U.S. GDP hovered at around 2%.)
If financial assistance from the government isn’t extended, millions of Americans could slash their shopping budget, even for essential goods, which could have serious consequences for retail and more sectors — not to mention a rippling effect on jobs and wages for those who are employed in those highly-affected sectors.
More retailers could go bankrupt
The fashion and footwear industry has been at the center of 2020’s bankruptcy wave, and overall U.S. filings are on track to hit a 10-year high as the COVID-19 outbreak persists. According to recent research from S&P Global Market Intelligence, 442 American companies have filed for bankruptcy as of Aug. 9. (That exceeds the amount of filings during any comparable period since 2010, and the number is 27% higher than the same period in 2019.)
This week alone, Stein Mart became the latest retailer to file for Chapter 11 protection — but it’s not just nationwide chains that are at risk. Over the weekend, the federally funded Paycheck Protection Program created as part of the CARES Act stopped accepting applications, and although Congress aims to include provisions to extend the program, many cash-strapped businesses might not be able to hold out solvency for another month.
Millions could face eviction
A housing crisis is looming. According to nonprofit The Aspen Institute, up to 40 million Americans — or 12% of the total U.S. population — could lose their homes as a result of the government’s lapsed eviction protections. Although Trump has said that he aims to forestall evictions, his order delegated this response to Health and Human Services Secretary Alex Azar and Centers for Disease Control and Prevention Director Robert Redfield — but stopped short of immediately halting evictions amid the pandemic.
With millions already unable to pay their credit cards and utilities bills, let alone monthly rent, individuals and families could be left without roofs over their heads, and property owners might be unable to pay their mortgages and property taxes — or be forced to foreclose.