WASHINGTON -- The emergency lending program for small businesses maxed out Thursday and stopped accepting claims, but a divided Congress looked unlikely to address that growing problem as the nation plunged into unemployment levels not seen since the Great Depression.
The Small Business Administration said on its website that the agency "is unable to accept new applications ... based on available appropriations funding."
Also Thursday, the Congressional Budget Office said the federal government's stimulus is already forecast to swell the U.S. federal budget deficit by $1.6 trillion this fiscal year.
Based on pre-virus projections for a $1 trillion deficit, the new gap is likely to be equivalent to more than 10% of gross domestic product. That would make it the biggest by that measure since World War II as well as a record in dollar terms.
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The $350 billion Paycheck Protection Program was a central piece of the $2 trillion economic rescue law passed three weeks ago. Republicans and Democrats say more action is needed to build on the law, but they cannot agree on what to do. The economy continues to crumble, but lawmakers are scattered all over the country, advancing conflicting proposals and bickering.
The impasse has become so heated that President Donald Trump lashed out at House Speaker Nancy Pelosi, D-Calif., on Thursday, a day after he threatened to adjourn Congress because he complained nothing was getting done. Pelosi, for her part, dismissed Trump as "a weak person."
The Paycheck Protection Program was overwhelmed by demand from the moment it opened April 3, and the program has essentially run dry as small businesses request relief. The program is aimed at helping businesses with fewer than 500 workers and keeping people employed by extending loans that are forgivable if businesses keep workers on payrolls.
The Small Business Administration reported Thursday that more than 1,637,000 loan applications valued at "over $339 billion" had been approved. It is not expected to disclose who the recipients of the taxpayer funds will be; the bailout law did not compel the agency to make this information public.
The government has not released data showing how much of that cash has been disbursed and given to the small businesses. Anecdotal reports from lenders and small-business owners suggest a small portion of it has been released, with many banks overwhelmed with applications. It is also unclear how many companies have secured new loans, though it appears to be a small portion of the 30 million small businesses in the United States.
Money also has lapsed for the Economic Injury Disaster Loan program, which offers government loans and emergency grants of as much as $10,000.
"These two loan programs are essential, and neither one is operational now," said Holly Wade, director of research and policy analysis for the National Federation of Independent Business, the largest group representing small businesses in the country. "It's absolutely terrible for the small-business sector."
CONGRESSIONAL INACTION
Last week, Treasury Secretary Steven Mnuchin asked Congress to agree to $250 billion more for the program, but a GOP attempt to approve that increase failed in the Senate as Democrats demanded more money for hospitals, cities and states and food-stamp recipients.
There has been scant progress since. Talks started Wednesday with aides to Mnuchin, Pelosi and Senate Minority Leader Charles Schumer, D-N.Y., but they did not yield results in time for action at a brief Senate "pro forma" session Thursday.
Instead, Senate Majority Leader Mitch McConnell, R-Ky., spoke briefly on the floor, saying there had been "absolutely no progress" since last week's attempt and excoriating Democrats' position as "absolutely surreal."
The need is deepening on all sides. New figures out Thursday showed unemployment claims once again surged over the past week. More than 22 million Americans have filed for unemployment aid since Trump declared a national emergency four weeks ago.
Later Thursday -- today in Beijing -- data showed that China suffered its worst economic contraction since at least the 1970s in the first quarter as it fought the coronavirus, and weak consumer spending and factory activity suggest it faces a longer, harder recovery than initially expected.
The world's second-largest economy shrank 6.8% from a year ago in the three months that ended in March after factories, shops and travel were closed to contain the infection, official data showed. That was stronger than some forecasts that called for a contraction of up to 16% but it was China's worst performance since before market-style economic reforms started in 1979.
In Washington, Democrats have blamed Republicans for the impasse, accusing them of refusing to negotiate over their demands for targeted assistance, such as more relief for hospitals, and for city and state budgets that have been hammered by a drop in revenue. Governors of both parties have been begging Congress to approve $500 billion more in stabilization funds to help them weather the economic catastrophe.
Pelosi told reporters on a conference call Thursday that instead of asking Democrats why they are blocking more small-business money, Republicans should explain why they are standing in the way of increases for health care facilities and state and local budgets.
"I turn the question on them," Pelosi said. "When we all know we want to help small businesses, why would you turn your back on the hospitals who are delivering the services?"
Republicans have argued that the need for small businesses is more immediate, but Pelosi disputed that. "It's very, in our view, self-evident that that need for state and local and hospitals is urgent now," she said. Pelosi said negotiations were ongoing, and also said Democrats wanted to see more data on how the small-business program has functioned so far.
DEFICIT PREDICTION
Even without additional spending, the Congressional Budget Office said that in the decade through 2030, the Coronavirus Aid, Relief and Economic Security Act will boost the deficit by $1.8 trillion.
For this year, the act will result in more than $1 trillion of estimated outlays, while reducing government revenue by $571 billion, according to the agency.
Even though the law provides more than $2 trillion in aid, the budget office estimated no deficit impact from the $454 billion authorized to backstop Federal Reserve lending programs "because the income and costs stemming from that lending are expected to roughly offset each other."
Deficits were already ballooning under Trump, who once said he could eliminate the entire national debt within eight years. The trend of rising gaps was driven by increased spending and lower revenue, stemming in part from Republican-backed tax cuts that took effect in 2018.
ONE-MAN WATCHDOG
With Congress having unleashed $2 trillion to this point, so far only one person is working to oversee how it is spent.
Bharat Ramamurti is starting out as a watchdog of one, the sole appointee to a five-member Congressional Oversight Commission. Sheltering at home with preschoolers, Ramamurti has been writing letters and taking to Twitter to try to jump-start his work, asking the Trump administration for "detailed and timely information" about coronavirus payments. But he's eager for reinforcements.
"I'd love to have other members of the committee appointed so we -- can all do this together," said Ramamurti, a former aide to Sen. Elizabeth Warren, D-Mass., who was appointed by Schumer. Three additional members will be appointed by congressional leaders, along with a chairperson.
It's a halting start for the oversight structure built into the coronavirus relief law, which Democrats demanded as a condition for empowering a White House and administration they see as untrustworthy. The law establishes three watchdogs, with a fourth being created by House Democrats as part of a multipronged effort to prevent fraud and abuse as the Trump administration and Congress pump unprecedented sums into the economy.
A slow rollout is typical for Washington, said Noah Bookbinder, executive director of Citizens for Responsibility and Ethics in Washington. However, "If oversight is not happening, that's a problem, because the actual assistance is happening," Bookbinder said.
The oversight structure will be put to the test in the coming weeks, as deadlines arrive for the Trump administration to deliver data and other information to Congress.
Information for this article was contributed by Erica Werner, Aaron Gregg and Renae Merle of The Washington Post; by Katia Dmitrieva, Jennifer Jacobs and Mark Niquetteof Bloomberg News; and by Mary Clare Jalonick and Matthew Daly of The Associated Press.
A Section on 04/17/2020