Updated: May 29, 2020 at 2:30 p.m. EST
Hello, everyone – we hope you and your families are all healthy and doing well.
As always, details regarding the policy response to the Covid19 crisis continue to unfold rapidly, with further guidance on already implemented programs, as well as additional legislation and potential new assistance programs, still expected. Continue to regularly check CAE’s twitter feed for the latest developments.
Two Million More Unemployed Amid Faster Economic Contraction
On Thursday, the Labor Department announced that in the week ending May 23rd, an additional 2.1 million Americans filed first-time claims for unemployment benefits – a decrease of 323,000 from the previous week, but the tenth straight week of initial claims of more than 1 million. Again, to put that alarming trend in perspective, prior to the onset of the Covid19 crisis, the most claims ever filed in a single week was 695,000 in 1982. Over the past ten weeks, 41 million working-age Americans – one of every four – have filed for unemployment benefits.
Also on Thursday, the Bureau of Economic Analysis reported that the U.S. economy contracted by 5.0 percent in the first quarter, faster than the 4.8 percent contraction originally reported and the economy’s worst quarter since the final quarter of 2008 during the financial crisis. Much of the decline was driven by a sharp drop-off in consumer spending, BEA said.
Federal Reserve’s “Beige Book” Confirm Damage to U.S. Businesses
A regular survey conducted by the Federal Reserve Board of businesses conditions in its twelve regional districts, known as the “Beige Book,” released Wednesday, confirmed the sharp plunge in economic activity. The survey was conducted in April, when non-essential businesses were shut down in much of the country, through May 18th.
“Economic activity declined in all districts – falling sharply in most,” the Fed said in its report. “Although many contacts expressed hope that overall activity would pick up as businesses re-opened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery.”
Dallas Fed President Robert Kaplan Says Mass Testing Key to Recovery
The U.S. economy has likely bottomed, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday in an interview with Reuters, but a healthy rebound depends on a massive increase in testing so that people feel comfortable resuming traveling, dining out, and other pre-crisis activities. “We need to dramatically increase testing and contact tracing…so that we can grow the economy faster and work down this unemployment rate.”
CAE Conducts Second Virtual Entrepreneur Roundtable
In order to stay in close touch with the issues, challenges, and priorities most relevant to the nation’s entrepreneurs, CAE staff conducts regular entrepreneur roundtables in cities across the United States. In the 33 months that CAE has been underway, staff have conduct 24 entrepreneur roundtables – or roughly one every six weeks.
CAE staff has continued this essential exercise in the Covid19 era, switching from in-person roundtables to virtual roundtables via Zoom.
CAE conducted its first virtual roundtable with Tucson entrepreneurs on March 26th and its second with Detroit entrepreneurs last Thursday, May 21st. CAE is currently planning its next roundtable with Portland, OR entrepreneurs in mid-June.
House Passes Changes to PPP
In a nearly unanimous vote of 417 to 1, the House of Representatives passed legislation Thursday, sponsored by Reps. Dean Phillips (D-MN) and Chip Roy (R-TX), that would give borrowers receiving loans under the $670 billion Paycheck Protection Program more flexibility in how they can use the funds and still have the loans forgiven.
The legislation would give businesses seeking full loan forgiveness more time to spend the money – 24 weeks rather than eight – and lower the minimum amount that must be spent on payroll to 60 percent instead of 75 percent. “This will give America’s small businesses the flexibility to ensure they at least have a chance to survive,” said Rep. Steve Chabot (R-OH), the Ranking Member of the House Small Business Committee.
The vote puts pressure on the Senate to act in the coming days. Last week, a bipartisan group of Senators agreed to a narrower set of changes intended to enhance PPP flexibility, but was unable to secure unanimous consent to pass the bill before leaving for Memorial Day recess.
The Senate will return to Washington on Monday. Senate Minority Leader Chuck Schumer (D-NY) supports the House-passed bill and will move to put it on the Senate floor next week, Schumer spokesperson Justin Goodman said.
But it appeared that the Senate will not simply pass the House bill. Senator Marco Rubio (R-FL), chairman of the Senate Small Business and Entrepreneurship Committee, said “inadvertent technical errors” in the House bill could actually make it harder for employers to obtain loan forgiveness.
Endless Frontier Act Introduced in House and Senate
On Wednesday, Senators Charles Schumer (D-NY) and Todd Young (R-IN), along with Reps. Ro Khanna (D-CA) and Mike Gallagher (R-WI) introduced the Endless Frontier Act “to bolster U.S. leadership in science and tech innovation, and dramatically increase investment in emerging technology.”
The Act would: 1) establish a new Directorate for Technology in a re-designated National Science and Technology Foundation; 2) establish a regional technology hub program; and, 3) require a strategy and report on economic security, science, research, and innovation.
The legislation is very ambitious and would amount to a major step toward a more robust and coherent national science, technology, and innovation strategy, including significant structural changes to the National Science Foundation, the establishment of a new Technology Directorate within the NSF, and the appropriation of more than $100 billion in new funding.
CAE board member Orin Herskowitz received an early briefing on the bill from Senator Schumer’s staff and subsequently shared his enthusiasm for the bill with me.
Senator Schumer’s staff reached out to CAE earlier this week to seek our endorsement of the legislation, and on Wednesday CAE’s Executive Committee unanimously agreed to formally endorse. I’ll be issuing a statement of support on Monday.
Other Potential Avenues of Assistance for New and Small Businesses
CAE continues to work with our colleagues at NVCA, and with a number of Congressional offices in both the House and Senate, on legislation that would monetize startups’ tax assets, including more favorable treatment of net operating losses (NOLs) and research and development tax credits. This approach could generate significant amounts of capital for many startups that could be delivered easily and quickly.
Staff in Rep. Dean Phillips’ (D-MN) office now has legislative language that CAE is sharing with other Congressional offices to assess interest and identify potential co-sponsors. If all goes well, the bill could potentially be included in the next Covid19 relief legislation, expected later this summer.
We’ll keep you posted.