Billions in Unused Federal Aid Available to Help Economy
Will all the clamor for an additional federal stimulus package to protect the economy as Covid-19 continues to wreak havoc, and the delay in such a package coming forth as a result of Washington's partisan divide, Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin revealed what to many may be surprising information regarding unused federal aid.
In testimony before the Senate Banking Committee last Thursday, Powell and Mnuchin said as much as $380 billion from the last aid package remains unused. Further, they suggested that Congress could easily tweak the programs and approve putting this money to valuable use helping businesses and individuals, and do so without spending any more money than they have already previously approved. "It would not cost an extra penny," Mnuchin told members of the committee. Congress would just need to give its permission to reallocate the money to areas where it is needed most.
So just where is this "unused" money sitting now? Several places, according to Mnuchin and Powell.
The largest source is a roughly $200 billion in unused aid that was earmarked to back up emergency programs that were put in place by the US central bank after the pandemic hit according to Mnuchin. The Fed assumed it would need to lend out this money to stabilize the banking system. However, it seems that just their availability as a backstop helped to calm the financial markets enough that not nearly as much was needed as originally thought, leaving this large amount still available.
The next largest source comes surprisingly from the Paycheck Protection Program (PPP). You may recall that a second round of PPP funding was made available after the first round of PPP funds were quickly snapped up. Perhaps due to a lack of publicity (or misinformation that was floated about PPP), around $130 billion of that second round of PPP money apparently remains unused. The PPP is now expired, so without further action, those funds will go unused.
Finally, according to Chairman Powell, probably about $50 billion of the Treasury's backstop to the Fed's Main Street Lending Program could be put to better use to help the economy. In response to questioning by the committee, Powell mentioned using the money to help small businesses through extending PPP and "after that I would say, something more for those who remain unemployed."
Powell added, "The risk is they will go through that money, ultimately, and have to cut back on spending and maybe lose their home or their lease." Without more aid, he said, "we will see, sooner or later, probably sooner, we will see that the economy has a harder time sustaining the growth that we've seen, that's the risk."
People on all sides of the political spectrum seem to agree that additional stimulus is sorely needed to keep the economy running as smoothly as possible until things return to normal. Not to mention helping people whose futures are quite uncertain.
While there is much disagreement about how much extra we should spend and where to target it, given that this money has been appropriated for use in already enacted legislation, perhaps at least these funds can be put to good use aiding individuals and small businesses who just need a helping hand to get through.
