Lawmakers in Washington, D.C., may be undecided about the best next steps to prop up a U.S. economy in free fall due to the coronavirus, but the footwear industry has its own wish list to aid struggling brands and retailers.
The federal government’s $2.2 trillion CARES Act, passed in late March, included numerous components meant to protect American jobs and inject money into the economy. Among those efforts was a loan program administered by the Small Business Administration called the Paycheck Protection Plan, stimulus checks for citizens, expanded unemployment benefits and mortgage deferrals for individuals and landlords.
But economic experts — and lawmakers — agree that the CARES Act is only a drop in the bucket compared to what’s needed to prevent another Great Depression.
Over the last three weeks, the Labor Department reported in excess of 16 million new jobless claims. In recent days, numerous retail companies have announced employee furloughs at mega retailers such as Saks Fifth Avenue, JCPenney, Nordstrom and Kohl’s, and at major footwear brands from Steve Madden to New Balance.
But while Congress might agree on the need for action, legislators are at odds on how to proceed.
“We had competing bills last week in the Senate that both went down,” said Matt Priest, president and CEO of the Footwear Distributors and Retailers of America, which lobbies Washington on behalf of the industry. “One [bill from Republicans] was to backstop the SBA loans for paycheck protections with $250 billion. The Democrats countered with wanting to funnel more money to the front lines, to hospitals, health workers and first responders. Both failed.”
Priest pointed to another plan circulating in the U.S. House of Representatives — likely a version of a proposal presented by Democrats in January — that focuses on infrastructure. It could benefit the shoe industry if it includes spending on roads, rails and warehousing — things that help the flow of goods and e-commerce.
Both House Democrats and President Donald Trump have voiced their support for an infrastructure package to jump-start the economy. However, Priest noted, infrastructure plans tend to have a longer time frame and a slower payoff, as seen with the Obama Administration’s 2008 stimulus bill, which funded tens of thousands of infrastructure projects.
What is needed now, said Priest, are more-immediate steps to stop the bleeding among companies. “What we would like to see in the near term is something that doesn’t even need legislation — it’s a holiday on duty payments on imports from China,” he said. Those are sizable. According to the FDRA, footwear companies paid $3.3 billion in footwear duties in 2019.
Another boon to shoe companies would be more protections for retail tenants, giving them some flexibility on rent payments.
Lastly, Priest pointed to a rule at the SBA that disqualifies companies with affiliates from being considered small businesses and receiving PPP loans through the CARES Act. “They waived that for the restaurant industry, for instance, for franchise owners like a McDonald’s,” he said. “We’d love if they would waive that for other industries, because we have some members that would otherwise be a small business if they weren’t co-owned by a foreign entity that makes them considered bigger.”
While Priest believes D.C. leaders would favor changing the SBA rules, it’s unclear if or when they might get around to it. “There’s just so much going on, it’s like … the Titanic is going down — what levers are you pulling to help save as many people as you can?”
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