Officials at the Internal Revenue Service have warned that $1,200 relief checks may not reach many Americans until August or September if they haven’t already given their direct-deposit information to the government. Taxpayers in need of answers from the IRS amid a rapidly changing job market are encountering dysfunctional government websites and unresponsive call centers that have become understaffed as federal workers stay home.
Adding to the confusion were several last-minute changes enacted by federal officials to cornerstones of the relief effort, including a revision to the rules of the small-business loan program hours before it went live and the late cancellation of a requirement that Social Security recipients file a tax form before receiving their relief checks.
The administration is under immense pressure to get the money out into the economy fast. In the past two weeks alone, nearly 10 million applied for weekly jobless claims, by far a record. And fears about the government response are mounting.
Ross Zhang, 32, a lighting designer and technician in New York, unsuccessfully tried calling the state’s unemployment line for help 50 times on Friday after already attempting to do so dozens of times since being laid off about three weeks ago.
“It is a feeling of powerlessness and anxiety, and anger at people in power failing to provide answers,” Zhang said. “The stress is as much from the punishing bureaucracies as from the virus.”
The ranks of the unemployed will probably swell quickly: About half of small businesses face closure over the next two months without emergency help, according to a National Federation of Independent Business survey.
Joe Scaldara, 47, for weeks had decided against reducing the hours of his seven-person staff at Auto Tune Total Car Care because he thought the federal loan program would allow him to cover his payroll. But on Friday, Scaldara’s bank told him it would not process his small-business application because it is prioritizing clients with existing loans. Scaldara’s calls to three other lenders have not been returned, and he said he expects to lay off his staff at the end of this week.
“It’s extremely frustrating,” Scaldara said. “I feel like I had the wool pulled over my eyes.”
Defenders of the administration’s early efforts say the government is facing an unprecedented economic shock and a daunting set of tasks. The novel coronavirus pandemic has forced much of the federal workforce to work remotely and form its policy response while working from home. The officials reporting to the Treasury Department are getting their temperatures taken as they pass through the entrance, a procedure similar to the adjoining White House and executive branch complex.
Parts of the federal relief effort have showed signs of success. Treasury Secretary Steven Mnuchin on Friday announced the Small Business Administration had already processed more than $1.8 billion in emergency loans for small firms, largely by community banks, even though the program is in its infancy. Economist on both the left and right have praised the bipartisan measures to send checks and shore up unemployment insurance.
“Secretary Mnuchin takes very seriously his responsibility of executing the largest economic relief package in history to help American workers, families and businesses,” Treasury spokeswoman Monica Crowley said in a statement, citing the rapid launch of the small-business program and the $1,200 check payments, as well as the hiring of outside firms for the airline loan program. “The Secretary and the entire [Treasury] team are fully committed to the fast and successful implementation of the Cares Act to provide much-needed assistance to the American people.”
Mnuchin has wielded enormous personal control over the allocation of hundreds of billions in emergency funding, closely reviewing not only policy decisions but also department informational pages and news releases. Some officials at Treasury have griped that Mnuchin’s close personal involvement across numerous efforts risks creating a “bottleneck” that slows the urgent process of disbursing the aid, according to three people who have spoken with government officials in recent days.
Former Treasury officials also have faulted Mnuchin for not doing more to fill key positions in Treasury’s ranks with experts. More than a dozen senior positions in Treasury were unfilled heading into the crisis, creating a wide vacuum between the career staff and the highest levels of management.
“It’s one thing to turn the water on full blast, which is what Congress did with the $2 trillion stimulus. But the water still has to get through the pipes — and right now, the pipes are clogged,” said Sarah Bloom Raskin, a former deputy secretary at Treasury under the Obama administration.
That shortage risks delaying a massive effort in which speed is of the essence, at all levels of the economy. Some large corporations walloped by the outbreak are searching for answers about how they can access more than $400 billion in emergency federal funding. Mnuchin, for instance, has said the government will probably seek equity stakes in the airline companies in exchange for the emergency aid, a demand the airlines are angrily rejecting. Airline lobbyists are already planning to press the White House National Economic Council and President Trump directly if Mnuchin does not back down, according to a person with knowledge of the strategy, who spoke on the condition of anonymity to freely discuss private deliberations.
Attention last week centered largely on the law’s SBA program, the centerpiece of the administration’s effort to prevent firms with fewer than 500 employees from going out of business. The loan program is designed to get aid quickly to millions of ailing businesses so they can keep their employees. Some top bank executives are balking at the terms of the program, which they warned in its rush to disburse funds could lead them to be held liable under “know your customer” provisions of the Bank Secrecy Act. The delays and uncertainty have left some small businesses in the lurch.
Chris Landry, who runs a one-person consulting firm in Northampton, Mass., said with his two children in college he needs to know whether he can receive the loan, but has not been able to get answers from either his credit union or his bank. “It’s extremely frustrating,” Landry said. “The guidelines are very confusing for people who aren’t professional accountants.”
Other parts of the government response are already being exposed as inadequate to the challenge at hand. Congress has given the states an additional $1.5 billion to update their systems to process unemployment claims, when in reality the states probably need closer to an additional $30 billion to $60 billion, although it is unclear how much the Department of Labor will provide, according to Indivar Dutta Gupta, co-executive director of the Georgetown Center on Poverty and Inequality. More than 25 states use processing servers that date back to the 1980s and have not been updated in decades. Multiple state unemployment websites have already crashed amid widespread reports that the newly laid off cannot get questions answered.
Tears in the federal safety net are also surfacing as a concern. Millions more people will probably apply for federal welfare benefits but be denied because the program’s costs are capped, said Michael Linden, a fellow at the Roosevelt Institute, a left-leaning think tank. Up to 30 million Americans are at risk of losing their insurance because of the virus, with the number of people without health insurance at all potentially rising to 40 million, according to a recent report by Health Management Associates, a health-care consultancy firm. State revenue is expected to plummet as economic activity grinds to a halt, depriving Medicaid — which provides insurance to the poor — of a key funding source.
“It’s a perfect storm, where the system is set up to collapse at a moment of need,” said Rebecca Vallas, a poverty expert at the Center for American Progress, a left-leaning think tank.
Despite the early struggles in getting the stimulus program launched, the Trump administration has begun deliberations on an additional giant aid package. White House officials have in recent days discussed pitching a payroll-tax cut, a capital-gains tax cut, creating 50-year Treasury bonds to lock in low interest rates, and a waiver that would clear businesses of liability from employees who contract the coronavirus on the job, according to two people with knowledge of internal White House deliberations who spoke on the condition of anonymity because they were not authorized to talk publicly.
In public remarks, Trump also has seized on the idea of a $2 trillion infrastructure package after conversations with long-standing business associates in New York, an idea also popular among congressional Democrats. But Trump faces internal skepticism over an infrastructure bill from leading White House players, with chief of staff Mark Meadows and senior economic adviser Larry Kudlow seen as opposing the effort, according to one of the people familiar with internal dynamics.
It is not clear whether officials are moving fast enough to implement the first package or to approve a second one for the crisis bearing down on the economy, some economists say.
“The administrative side of the government is completely overwhelmed right now,” said Jason Furman, who served as a senior economist under the Obama administration. “We had a creaky infrastructure to begin with, and it’s now at risk of breaking.”
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