The $2 trillion CARES Act, a response to COVID-19, is equivalent to 45% of all 2019 federal spending

Congress passed several major pieces of legislation responding to the COVID-19 pandemic in the past few weeks. What’s the difference between these bills, currently being discussed in phases, and what’s the best way to measure the size of the CARES Act in the context of previous government spending?

Phases I & II: First stages of the coronavirus response

Phase One – Health agencies and initial small business loans

This first significant piece of legislation passed on March 6, 2020. H.R. 6074, or the Coronavirus Preparedness and Response Supplemental Appropriations Act, provides $8.3 billion in funding for vaccine development, loans for affected small businesses, evacuations and emergency activities at State Department facilities, and other humanitarian assistance.

Phase Two – Paid sick leave, unemployment benefits, and food assistance

Phase Two refers to H.R. 6201, the Families First Coronavirus Response Act, which passed on March 17, 2020. The law provides roughly $100 billion in tax credits supporting emergency paid leave benefits. It also expands unemployment benefits and requires employers to give approximately two weeks of paid sick leave. The bill also increases access to food and nutrition support for both children and adults by waiving specific program requirements.

Phase III: The CARES Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law, amounting to over $2 trillion in aid. That’s roughly $6,000 per American or 45% of all federal government expenditures in 2019.

The federal government spent $4.45 trillion in 2019

For reference, the American Recovery and Reinvestment Act, or the largest stimulus bill in response to the 2008-2009 recession, is estimated to have cost roughly $831 billion over the 2009-2019 period, according to the Congressional Budget Office.

Major features of the CARES Act

What exactly is in the CARES Act? In short, many things—the full bill is over 800 pages long, filled with appropriations as large as $500 billion as well as many small appropriations such as $100 million to support the Transportation Security Administration and $9.1 million to support cybersecurity and infrastructure security. The following chart breaks out the bill’s largest spending areas, each of which is explained and put in context below.

The largest budget components of the CARES Act

Distressed Businesses ($500B):

The largest portion of the spending is the roughly $500 billion providing relief to distressed businesses. This segment of spending includes over $425 billion for the Federal Reserve to rapidly expand lending and purchases of government-backed securities, $50 billion in loans to passenger airline companies, $8 billion in loans to cargo airline companies, and $17 billion for other businesses critical to maintaining national security. Lending to companies comes with strings attached, though—employees with total compensation exceeding $425,000 cannot receive increased compensation, stock buybacks are prohibited during the duration of the loan, and companies must maintain employee rolls to the best of their ability. For context, during the 2008-2009 recession, General Motors and Chrysler received about $80 billion in funds from the Troubled Asset Relief Program ($63 billion of which auto companies repaid), according to the Congressional Budget Office.

Small Businesses ($350B):

The next largest portion of the spending is the roughly $350 billion providing relief to small businesses (defined as businesses with under 500 employees). Most of this money will be deployed through the Paycheck Protection Program, which allows small businesses to borrow up to 250% of their average monthly payroll expenses, up to a maximum loan amount of $10 million. The loans are intended to cover eight weeks of payroll expenses and additional payments toward debt. Money from that loan paid toward payroll and existing interest payments on mortgages, rent payments, leases, and utility service agreements will be forgiven—i.e., will not need to be paid back (more information on the Paycheck Protection Program here). Small businesses can apply through most banks to receive a loan.

The government approved $30.2 billion in small business loans in 2019

As of 2018, there were 30.2 million small businesses in the country. These small businesses employed 58.9 million employees or 47.5% of all employees. In 2019, the Small Business Administration (SBA) approved 100,000 loans for a total amount of $30.2 billion. The majority of the SBA’s lending is typically through 7(a) Loan Guarantees, a general set of loans that include the Standard 7(a) loan with a maximum of $5 million with a turnaround time of 5-10 business days and an express loan with a maximum amount of $350,000 made within 36 hours. In 2019, 7(a) Loan Guarantees amounted to $23.6 of the $30.2 billion in SBA lending.

Checks to Individuals ($300B):

As USAFacts described in detail in a recent piece, a significant part of the legislation is a program to provide $1,200 tax rebates to qualifying individuals, with additional $500 payments per qualifying child. The rebate begins to diminish at income levels above $75,000 (or $150,000 for joint filers). According to the Joint Committee on Taxation, this part of the legislation will cost nearly $300 billion over the next two years.

What exactly will the $1,200 cover for Americans? For reference, the monthly median household income in 2018 was $5,161, and the median gross rent as of 2018 is $1,023, according to the Census Bureau. According to the Bureau of Labor Statistics, the average middle class (middle 20% of income earners) household spent roughly $1,000 per week in 2018, with about $133 per week going towards food and $343 per week going towards housing. Households in the lowest 20% of income earners spent roughly $500 per week.

Unemployment Insurance ($250B):

Next is $250 billion directed to creating a temporary Pandemic Unemployment Assistance (PUA) program. The program expands coverage to more workers, including self-employed and gig workers. It also provides up to 39 weeks of federal financed unemployment insurance (UI) benefits to unemployed workers who are ineligible for other UI benefits and are not receiving paid leave. State laws determine an individual’s benefit amount based on recent earnings.

All eligible unemployment insurance benefits—including both the temporary PUA as well as regular state Unemployment Compensation—will be augmented by an additional $600 weekly benefit for weeks of unemployment ending on or before July 31, 2020.

In the past two weeks, nearly 10 million Americans have already filed initial jobless claims. At this rate, if all those who file are successful in receiving unemployment insurance, just the additional $600 in weekly benefits on top of existing benefits will amount to $6 billion per week.

Inflation-adjusted unemployment benefits have been relatively flat

For context, the average weekly regular unemployment insurance benefit in 2018 was $356 per week. In 2018, 79.2 million weeks of regular unemployment insurance were claimed, amounting to $25.6 billion in spending. According to data from the Bureau of Labor Statistics, median weekly earnings for part-time workers in 2019 amounted to $279. For full-time workers, this amount was $933 per week.

State and Local Governments ($150B):

The CARES Act also establishes a Coronavirus Relief Fund of $150 billion for state, local, and tribal governments. States receive an amount proportional to their population with a minimum amount of $1.25 billion per state. The funds can be used for any necessary expenditures related to COVID-19. For some background, state and local governments across the country spent a total of $3.6 trillion in 2017, with large states like California spending as much as $567 billion and smaller states like Idaho spending $13 billion.

Health ($140B):

The CARES Act also distributes over $140B in funding to various health-related efforts, which is in addition to the $8.3 billion in Phase One primarily allocated for public health. The law puts $100 billion into a Public Health and Social Services Emergency Fund, designed to distribute money to hospitals and other healthcare entities responding to the pandemic. The act also allocates $16 billion in funding for the Strategic National Stockpile and $27 billion to develop diagnostics, vaccines, therapeutic treatments, and personal protective equipment. A variety of other health-related funds are distributed through the act, such as $4.3 billion to support the Centers for Disease Control and Prevention (CDC) and $200 million to support the Centers for Medicare and Medicaid Services.

For context, the federal government spent roughly $55 billion on public health in 2019, amounting to 0.1% of overall federal expenditures that year.

The inflation-adjusted public health budget has increased over time

Most of the public health budget goes to three programs. In 2017, $31 billion went to the National Institutes of Health, which conducts biomedical and public health research; $11 billion went to the Health Resources and Services Administration, tasked with improving access to healthcare for those who are uninsured, isolated, or medically vulnerable; and $8 billion went to the CDC, tasked with the prevention of disease, injury, and disability.

What’s next?

The president, as well as leading House Democrats, are already calling for a fourth phase bill delivering an enormous infrastructure and job creation program to upgrade the nation’s critical broadband, road, and water systems. Whether this proposed legislation, which could be as large budget-wise as the $2 trillion CARES Act, will be able to pass Congress so soon after the nation’s largest stimulus bill in history is unclear. The need for such job creation will need to continue to be assessed by examining the CARES Act’s impact on the economy and by watching key metrics such as unemployment claims, which have totaled nearly 10 million in the past two weeks.