CARES Act

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is a $2.2 trillion economic stimulus bill passed by the 116th U.S. 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 $300 billion 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), $260 billion in increased unemployment benefits, the creation of the Paycheck Protection Program that provides forgivable loans to small businesses with an initial $350 billion in funding (later increased to $669 billion by subsequent legislation), $500 billion in loans for corporations, and $339.8 billion to state and local governments.
The original CARES Act proposal included $500 billion in direct payments to Americans, $208 billion in loans to major industry, and $300 billion in Small Business Administration loans. As a result of bipartisan negotiations, the bill grew to $2 trillion in the version unanimously passed by the Senate on March 25, 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 H.R. 748 (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, amounting to 10% of total U.S. gross domestic product. The bill is much larger than the $831 billion stimulus act passed in 2009 as part of the response to the Great Recession. The Congressional Budget Office estimates that it will add $1.7 trillion 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.
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 $50 billion 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 $225 billion during the next three months, which will prompt the loss of between five and seven million jobs," accompanied by a request of $145 billion 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 $1 trillion, 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 3.3 million 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.
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 $1 trillion. It was suggested that $200–500 billion 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 $750 billion package as a counter-offer, which focused on expanding unemployment benefits instead of tax rebates. A compromise plan was made to set aside $250 billion for tax rebates and the same amount for unemployment.
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.
The Act includes the following provisions.
The Act:
The Act:
Businesses owned by the president, senior government officials, and their immediate families are ineligible for funds distributed through the $500 billion Economic Stabilization Fund. A business falls into this category if it is at least 20% owned or controlled by a person in the restricted group. Such businesses may nonetheless still be eligible for funds distributed through the $669 billion Paycheck Protection Program or through the $15 billion change to the tax code.
Jared Kushner's businesses may generally be eligible for relief under the Economic Stabilization Fund because, according to The New York Times, he usually owns less than 20% of his family's real estate projects.
On April 21, the Trump Organization said it would not seek a Small Business Administration federal loan. (It was, however, seeking relief from the General Services Administration to which it normally pays rent of about $268,000 per month to operate the Trump International Hotel in a federal building in Washington, D.C. Eric Trump said he hoped the General Services Administration would treat the Trump Organization "the same" as its other tenants.)
Political donors are eligible for loans under the Paycheck Protection Program. As of May 3, the largest beneficiary of relief loans under this program is the hotel group Ashford Hospitality Trust. The company is run by Monty Bennett, who donated over half a million dollars to Republicans in the current election cycle; Bennett received the loans after hiring lobbyist Jeffrey Miller, who fundraised over $1 million for Trump's reelection. The company had applied for $126 million in loans and had already received $76 million when, following criticism, it announced it would return these funds. Other recipients with ties to the Trump administration include Hallador Energy (employed EPA administrator Scott Pruitt as a lobbyist; received $10 million); Flotek Industries (employed ambassador to Germany Richard Grenell as a consultant; received $4.6 million); and MiMedx (their former chief executive Parker H. Petit was Trump's 2016 finance chairman in Georgia; received $10 million).
Clay Lacy Aviation, a California-based private jet charter company that serves business executives and celebrities, received a government grant of nearly $27 million that it does not have to repay. In 2016, the company's founder, Clay Lacy, donated $47,000 to the Republican Party after it officially nominated Trump and also donated the maximum allowable $2,700 directly to the Trump campaign.
Some individuals received checks in the mail, while others received direct deposits in their bank accounts. On May 18, the Treasury Department said that future payments may be issued in the form of prepaid Visa debit cards rather than checks.
The Act:
Other pieces of legislation established an Emergency Rental Assistance (ERA) program. The Consolidated Appropriations Act, 2021 (Division N of P.L. 116-260) set aside $25 billion, while Section 3201 of the American Rescue Plan Act (P.L. 117-2) set aside an additional $21.5 billion. These were to be funded by the Coronavirus Relief Fund (CRF) established by the CARES Act.
The House initially passed a tax cut bill in mid-2019 and sent it to the Senate, which then used it as a shell bill and added an amendment in the nature of a substitute, fulfilling the constitutional requirement that all bills for raising revenue must originate in the House. After the new bill was released by the Senate, Speaker of the House Nancy Pelosi (D-CA) issued a statement that read in part: "We are beginning to review Senator McConnell's proposal and on first reading, it is not at all pro-worker and instead puts corporations way ahead of workers." Senate Minority Leader Chuck Schumer (D-NY) criticized the fact that Democrats were not involved by Republicans in drafting the bill.
Among Senate Republicans there was "significant debate and disagreement" regarding "Donald Trump's proposal to provide most Americans with $1,000-plus checks to boost spending and stimulate the economy". Senator Richard Shelby (R-AL), the Republican chair of the Senate Appropriations Committee, stated "I personally think that if we're going to help people we should direct the cash payments maybe as a supplement to unemployment, not to the people who are working every day, just a blank check to everybody in America making up to $75,000."
On the evening of Sunday, March 22, 2020, Senate Democrats blocked the bill in a key procedural vote; the vote was 47–47, while 60 votes were needed to proceed. Immediately thereafter, "Dow futures hit their 5% 'limit down' overnight, and were off 600 points at one stage Monday morning."
In response, Mitch McConnell announced the second key procedural vote on the CARES Act, a cloture vote to end debate, on Monday, March 23; 60 votes were needed, but it failed 49–46. Both procedural votes were on a "shell" bill framed to repeal an Obamacare tax which passed the House on July 17, 2019. For procedural reasons, the text was replaced by the new language passed by the Senate.
Procedural votes for the bill were made more difficult by the fact that five Republican Senators were in self-quarantine: Senator Rand Paul, who had tested positive for COVID-19, as well as Senators Mike Lee, Mitt Romney, Cory Gardner, and Rick Scott.
Nancy Pelosi indicated that the House would prepare its own bill, expected to exceed $2.5 trillion, as a counter-offer, which was criticized by Republicans as "a progressive wishlist seemingly unrelated to the crisis".
Early in the morning of Wednesday March 25, Senate leaders announced they had come to an agreement on a modified version of the CARES Act, the full text of which exceeds 300 pages. Mitch McConnell "announced news of a breakthrough on the Senate floor shortly after 1:30 a.m. Wednesday".
Senator McConnell said on the floor, "[we have] reached a bipartisan agreement on a historic relief package for this pandemic ... this is a wartime level of investment for our nation." McConnell continued the analogy to war by saying the CARES Act would provide "ammunition" to health care workers who are the "frontline heroes who put themselves at risk to care for patients" by providing them "the ammunition they need". Chuck Schumer stated on the Senate floor, "Like all compromises, this bill is far from perfect, but we believe the legislation has been improved significantly to warrant its quick consideration and passage, and because many Democrats and Republicans were willing to do the serious and hard work, the bill is much better off than where it started."
The result of the agreement between Senate leaders and the White House was a $2 trillion bill that "is the largest economic relief bill in U.S. history". The bill was criticized by Representative Alexandria Ocasio-Cortez and New York Governor Andrew Cuomo. Republican Senators Lindsey Graham, Tim Scott, Ben Sasse, and Rick Scott expressed concern the bill's strong unemployment provisions "encourage employees to be laid off instead of working". Senator Bernie Sanders then threatened to block the legislation and impose more stringent conditions for the $500 billion earmarked for corporate bailouts if the unemployment provision was removed by the proposed amendment of the four Republican Senators. To address these concerns, Senate leaders "agreed to allow an amendment vote on the floor". The Republican-led amendment to cap unemployment benefits failed in a 48–48 vote.
Late in the night of March 25, 2020, the Senate passed the $2 trillion bill in a unanimous 96–0 vote. Four Republicans did not vote, namely John Thune, who was "feeling ill", Rand Paul (who had tested positive for COVID-19), and Mitt Romney and Mike Lee, who were both in isolation after having had contact with Senator Paul.
On March 25, Pelosi said that "many of the provisions in there have been greatly improved because of negotiation," and hoped to pass the bill by unanimous consent.
Representative Thomas Massie, a Republican from Kentucky, attempted to maneuver for a roll-call vote, but the quorum present did not support the idea. Massie's threat to demand a recorded vote nonetheless "compelled dozens, if not hundreds, of lawmakers to return to Capitol Hill from their home districts, navigating across interstates and through airports at a time when public health officials have urged Americans to avoid nonessential travel and gathering in large groups". Massie's actions received bipartisan criticism. Former Secretary of State John Kerry, a Democrat, tweeted "Congressman Massie has tested positive for being an asshole. He must be quarantined to prevent the spread of his massive stupidity," a message which was shared by Donald Trump on Twitter. Republican Representative Peter T. King called Massie's actions "disgraceful" and "irresponsible". Despite the criticism Massie continued to defend his actions, claiming that the act was full of pork barrel spending and that very little of the total money would actually go to citizens. The House passed the bill on March 27 by a near-unanimous, unrecorded voice vote.
A few hours after the House passed the bill, it was signed into law by President Trump.
In a signing statement, Trump suggested he could gag the Special Inspector General for Pandemic Recovery (SIGPR) insofar as his constitutional powers as president enabled him to block the SIGPR's reports to Congress. According to The New York Times, the statement was consistent with Trump's "history of trying to keep damaging information acquired by an inspector general from reaching Congress".
Part of the CARES act set aside $8 billion to federally-recognized "tribal governments". The Treasury Department earmarked about $500 million of those funds to go towards Alaska Native corporations (ANCs), which provided similar governance as typical tribal leadership in the lower 48 states. Three native Indian tribes sued on the basis that under the Indian Self-Determination and Education Assistance Act of 1975 (ISDA), ANCs were not federally-recognized tribal governments and should not be eligible for CARES funds. The case was eventually heard by the United States Supreme Court, which ruled in June 2021 that ANCs did qualify as tribal governments under the ISDA, and thus eligible to receive the set-aside funds.
The legislation required the creation of a Pandemic Response Accountability Committee. On March 30, the inspectors general selected Glenn Fine, who had been an inspector general in four presidential administrations and who was serving as acting Pentagon inspector general, to chair the committee. One week later, Trump removed Fine from his position as acting Pentagon inspector general, making him ineligible to chair the committee. Michael E. Horowitz instead became the acting chair.
By late April, there were at least four investigations into the government's response to the pandemic; on April 28, some inspectors general from the Pandemic Response Accountability Committee updated the House Oversight Committee about these investigations.
The legislation also requires oversight by a separate Special Inspector General for Pandemic Recovery (SIGPR) who will monitor loans and investments from a $500 billion corporate bailout fund established by the legislation. A provision in the legislation empowers the special inspector general to audit the use of the fund; requires the Treasury Department and other executive-branch entities to provide information to the special inspector general; and directs the special inspector general to report to Congress "without delay" if an agency unreasonably withholds requested information. The Pandemic Response Accountability Committee will coordinate the work of the SIGPR.
Amidst reports that Trump would nominate White House lawyer Brian Miller for this job, Montana Senator Jon Tester and Utah Senator Mitt Romney drafted a letter to the president requesting a different, independent Special Inspector General. Miller was confirmed by the Senate on June 2.
The Congressional Budget Office provided a preliminary score for the CARES Act on April 16, 2020, estimating that it would increase federal deficits by about $1.7 trillion over the 2020–2030 period. The estimate includes:
CBO reported that not all parts of the bill will increase deficits. "Although the act provides financial assistance totaling more than $2 trillion, the projected cost is less than that because some of that assistance is in the form of loan guarantees, which are not estimated to have a net effect on the budget. In particular, the act authorizes the Secretary of the Treasury to provide up to $454 billion to fund emergency lending facilities established by the Board of Governors of the Federal Reserve System. Because the income and costs stemming from that lending are expected to roughly offset each other, CBO estimates no deficit effect from that provision." On November 19, 2020, Treasury Secretary Mnuchin sent a letter to the Federal Reserve requesting that the Federal Reserve return unused funds to the Treasury.
After the enactment of the CARES Act, the Treasury Department and Internal Revenue Service (IRS) disbursed about 160.4 million payments totaling $269 billion by the end of April 2020, of which nearly 1.1 million payments, totaling almost $1.4 billion (0.5% of the total value of all payments), were sent to dead people. A Government Accountability Office report in June 2020 noted that, in the hurry to distribute payments, the agencies had not followed post-2013 financial control safeguards to prevent payments to the dead or other ineligible persons. The report added that "agencies have made only limited progress so far in achieving transparency and accountability goals."
The IRS put a notice on their website that incarcerated individuals did not qualify and withheld or retrieved payments from many prisoners. On September 24, 2020, a U.S. District Court issued an order certifying a nationwide class of incarcerated individuals. The court also granted a preliminary injunction requiring the IRS and Treasury Department to stop withholding checks solely on the basis of their incarceration status, resulting in payment of $100M (0.04% of the total value of all payments).
Some citizens of other countries were accidentally given checks on the basis of having previously worked or lived in the U.S.
Congress passed the CARES Act relatively quickly and with unanimity from both parties despite its $2.2 trillion price tag, indicating the severity of the global pandemic and the need for emergency spending, as viewed by lawmakers. Writing in The New Republic, journalist Alex Shephard nevertheless questioned how the Republican Party "... had come to embrace big spending" when, during the Great Recession, no Republicans in the House and only three in the Senate supported President Barack Obama's $800 billion stimulus, known as the American Recovery and Reinvestment Act of 2009 (ARRA), often citing the deficit and national debt. Shephard opined that, unlike CARES, much of the media attention to ARRA focused on its impact on the deficit, and he questioned whether Republicans would again support a major spending request under a hypothetical future Democratic president.
Donald Trump remarked upon passage of CARES in the Senate that "The Democrats have treated us fairly ... I really believe we've had a very good back-and-forth. And I say that with respect to [Senate Minority Leader] Chuck Schumer".
In mid-April, a survey released by the James Beard Foundation and the Independent Restaurant Coalition indicated that 80 percent of restaurant owners (representing roughly half a million businesses which employ eleven million people) did not believe that their businesses were likely to survive, despite the CARES Act and the PPP. Advisors nominated by the White House to their Great American Economic Revival Industry Group for the food industry included 23 celebrities and executives of large chains, but no small business owners.
In a release dated April 16, 2020, the Congressional Budget Office estimated that the CARES Act "will increase federal deficits by about $1.7 trillion over the 2020–2030 period." Part of the reason this is less than the $2.2 trillion included in the CARES Act is that income and costs as part of the Treasury's emergency lending program are expected to offset each other.
Following the passage of the CARES act, real disposable personal income jumped to over 17,200 billion of chained 2012 dollars from a previous 15,200 billion of chained 2012 dollars in January.
The passage of the CARES act occurred during the 2020 election cycle. Steven Mnuchin, the Treasury Secretary, insisted to the IRS that the checks to individuals include Trump's name, the first time a president's name appeared on an IRS expenditure. IRS officials believed the White House was politicizing the agency to boost Trump's reelection bid. The officials also worried that it would be in violation of the 1939 Hatch Act, among other federal laws, seeking a legal opinion from the Treasury Department and guidance from the Justice Department. The request was approved by agency attorneys. The request to add Trump's name and a letter from the White House stood to delay the mailing (due to reprinting), but the checks were sent on time.
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