The Washington PostDemocracy Dies in Darkness

Key federal aid programs are running out of time — and cash — as new coronavirus variant spreads

While the economic effects of the delta variant are unclear, a worsening pandemic again threatens to crimp travel and tourism, reduce traffic to storefronts and restaurants, and displace workers from their jobs

The delta variant has become the dominant strain of coronavirus in the United States, resulting in a rise in infections and hospitalizations. (Video: John Farrell/The Washington Post)
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Some of the federal stimulus programs that kept families and businesses afloat financially throughout the worst of the coronavirus pandemic are soon expiring or already depleted, raising fresh economic fears at a time when another wave of infections is starting to sweep the country.

The new concerns stem from the highly transmissible delta variant, which has ravaged largely unvaccinated pockets of states including Arkansas, Missouri and Florida. The growing caseloads threaten once again to crimp travel and tourism, reduce traffic to storefronts and restaurants, and displace workers from their jobs — a prospect that has led to wild gyrations on Wall Street as investors try to determine what will happen next.

The exact economic implications of the delta variant remain unclear, but top political leaders sounded a note of alarm this week. On successive days, President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) implored Americans to get vaccinated, warning that the country could slide backward if people didn’t act swiftly.

The U.S. economy has added millions of jobs so far this year, and the Biden administration still projects a robust economic recovery. But the delta variant’s rise has given pause to a number of experts, who worry what might happen if a resurgent pandemic grips the nation at a time when some federal aid programs are inactive.

“It’s quite concerning and does make clear we’re not out of this, which means we may not be out of the economic impact and fallout the pandemic has had,” said Sharon Parrott, president of the Center on Budget and Policy Priorities. “So I think time will tell.”

What happens to the economy when $5.2 trillion in stimulus wears off?

Since the pandemic began, Congress has authorized about $6 trillion in assistance, which helped stave off an economic downturn that in some ways rivaled even the Great Depression. That includes critical federal initiatives that once lent billions of dollars to small businesses and restaurants, which in recent months have run out of cash or reached their expected ends.

For workers, meanwhile, programs to help renters afford housing, assist students struggling with their loans or boost out-of-work Americans’ pay are nearing their expiration — unless Congress extends them or the White House intervenes.

No state has announced the sort of major restrictions on travel or commerce that Americans nationwide experienced last spring, the result of which helped slow the spread of the pandemic at considerable cost to the economy. The federal government has also set aside other assistance in recent months, including a $350 billion pot for cities and states that they theoretically can use to offset any additional financial blow from a worsening pandemic.

Still, experts say the uncertainty about the delta variant might be enough to spook Americans, slow hiring and curtail spending and growth once more, unleashing a hard-to-calculate toll on an economy that has been on the upswing.

In Missouri, for example, Democratic Rep. Cori Bush on Monday expressed alarm at the fact that “hospitals are running out of beds and ventilators, while more and more people who are unvaccinated are dying.” The congresswoman said the stimulus aid she supported along with her fellow Democrats this spring had made a significant difference, but she added in a statement Monday that there is more work to be done.

“As elected officials, we must do everything within our power to protect the health, safety, and well-being of every community until this pandemic is over,” Bush said.

Mask mandates make a return — along with controversy

For now, the variant only adds to the myriad economic challenges facing Democrats and Republicans on Capitol Hill. Lawmakers in recent days have turned their attention to more long-term investments, including nearly $1 trillion in infrastructure improvements, which the Senate could begin debating as soon as this week.

Entering that debate, Biden this week sought to tout his broader economic agenda — and the successes he chalks up to his $1.9 trillion coronavirus aid package known as the American Rescue Plan. Millions of Americans have been vaccinated, businesses have reopened, and travel has resumed, prompting the president on Monday to highlight data that shows the country is on pace to see its largest burst in economic growth in 40 years.

“For all those predictions of doom and gloom, six months in, here’s where we stand: record growth, record job creation, workers getting hard-earned breaks,” Biden said during a speech, adding that the White House’s efforts had “brought this economy back from the brink.”

The relief package included another round of one-time checks to most Americans as well as new aid to feed the hungry, help the unemployed, protect renters from eviction, shore up sagging transit systems and bolster schools, hospitals and local governments in financial need. In doing so, it included billions of dollars in tax credits to assist families with children as well as those struggling to afford health insurance, which will continue through this year.

Some of those programs spread out their spending into 2024 to give families and workers a financial boost perhaps beyond the pandemic, according to a White House official, who spoke on the condition of anonymity to describe the administration’s thinking. That could serve as a critical hedge against a worsening public health outlook.

But some of the country’s short-term gains still could be at risk depending on the trajectory of the delta variant and the toll it unleashes on individual industries or their communities, particularly those that are lagging behind in administering vaccines.

“We have concerns from a health perspective, and that obviously impacts the economy. It can certainly both pause re-openings or lead to more social distancing restrictions,” said Neil Bradley, the executive vice president of the U.S. Chamber of Commerce. “But just the prevalence of an outbreak or a surge in a particular area by itself reduces economic activity.”

Economy grew by 1.6 percent in first quarter, showing signs of boom to come

Hoping to cushion the blow in the early days of the pandemic, Congress approved the first tranche in what ultimately would become the nearly $800 billion Paycheck Protection Program, which offered forgivable loans to businesses that retained their workers. The Biden administration said in June that the effort over more than a year helped keep 8.5 million businesses afloat during a “once-in-a-generation economic crisis.”

Even though the PPP, as it’s known, had been extended and augmented multiple times since its March 2020 inception, the program closed its doors to new applications in May. Some of the aid remained available for a time after that, yet only for businesses in underserved communities.

Another tranche of about $29 billion set aside for restaurants more recently as part of the American Rescue Plan disappeared in a matter of weeks this spring, forcing the Small Business Administration to announce an end to the application window only three months after Congress authorized the program. Restaurants still face a shortfall of about $43 billion, according to Erika Polmar, executive director of the Independent Restaurant Coalition, which represents tens of thousands of owners and operators. She said the number could grow if states begin to reimpose capacity restrictions and other measures to fight coronavirus variants.

“Many people have moved beyond this,” added Polmar, whose group on Monday called on Congress to set aside another tranche of funds. “We’re barely out of the woods as it is.”

Families, meanwhile, face potential trouble at a time when their costs are rising. The financial blow could fall hardest on those who are out of a job: Unemployed workers stand to see the loss of their enhanced federal benefits in about six weeks, troubling labor experts who had tried to warn Congress against setting a rigid cutoff date in the first place. In some of the hardest-hit states, including Florida, GOP governors have canceled these benefits early — leaving some advocates fearful that the decisions could backfire if the pandemic worsens.

“There has been significant concern in states where these benefits have already turned off that people will not be able to immediately find work or suitable work,” said Parrott, the leader of the Center on Budget and Policy Priorities, noting that local economic downturns caused by the variant could be consequential. “The number of people that could be faced with that difficultly of being out of work or unable to work, and without assistance, could certainly rise.”

As GOP-run states slash jobless aid, the Biden administration finds it has few options

Along with unemployment aid, Congress approved about $46 billion since the start of the pandemic to help renters who are falling behind on their monthly payments. While the aid remains plentiful, it has been slow to arrive — a problem at a time when federal eviction protections are set to lapse at the end of this month.

Still another key deadline arrives at the end of September, when a federal pause on student loan payments is set to lift. The fast-approaching date prompted roughly 60 House and Senate Democrats to urge the Biden administration last month to extend its deferral program into 2022, citing the potential financial hardships that resumed payments — and the loss of other federal aid — might create.

“While the economic recovery is in progress, additional financial support is needed by students and families throughout the summer, when eviction and foreclosure moratoriums may lapse, and beyond September, when the extended unemployment benefits from the American Rescue Plan are set to expire,” wrote the lawmakers, including Senate Majority Leader Charles E. Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.).

Some of the potential economic disruptions could be addressed through other stimulus programs, including the $350 billion fund that Congress set aside as part of Biden’s rescue package for state and local governments. Federal lawmakers gave these states, cities and counties great latitude for how to spend their allocations, according to the White House official, who said about half of it would reach local governments in 2022.

Any aid beyond that, however, could be a tough sell on Capitol Hill, where Republicans voted overwhelmingly against the American Rescue Plan, saying its additional spending was unnecessary. Some Republicans still hope to claw back the dollars for other uses, including infrastructure projects.

“As we face down the consequences of excessive pandemic restrictions like skyrocketing drug overdoses and a mental health crisis among our kids, Congress needs to roll back the emergency spending and federal power grabs, not revert to an outdated playbook,” said GOP Sen. Marco Rubio, whose home state of Florida has become a new epicenter for the variant. He said the state is “thriving,” with vaccines readily available.

Bush, the Democratic lawmaker whose district covers St. Louis, took a different view. While Missouri stands to gain billions of dollars in aid under the rescue package, she still pledged in a statement to keep pushing for additional help in areas including unemployment benefits, especially as Democrats turn their attention to advancing other elements of Biden’s economic agenda in the coming weeks.

“This is not the end of our work,” Bush said.