WASHINGTON — In the coronavirus crisis, even doctors can face a cash crunch.
Dr. Benjamin Ticho, an ophthalmologist in Chicago Ridge, Illinois, has seen his revenue plunge 80% as patients stay home and he cancels non-emergency surgeries. He's cut his staff's hours sharply and is negotiating with his creditors.
"We've reached out to many of our bigger vendors and said, 'Hey, we may be facing a cash crunch — can you give us a break, or at least defer payments?' Many have been sympathetic," said Ticho, who owes loans on medical equipment. He's giving his patients a break, too, by holding off for now on collecting their unpaid balances.
The record $2.2 trillion emergency relief package that Congress gave final approval to Friday is aimed at businesses like Ticho's and people like his patients: Caught in a public health lockdown that has closed companies and brought economic life to a standstill, they are at risk of running out of money and being unable to pay bills or meet daily expenses.
The idea behind the measure is to give companies and families a cash cushion to better weather the health crisis and looming recession. When it's safe to go back to work, dine out and book airline tickets again, the thinking goes, they'll be more financially ready to return to something closer to normal life.
"It will inject trillions of dollars of cash into the economy as fast as possible to help American workers, families, small businesses and industries make it through this disruption and emerge on the other side ready to soar,'' said Senate Majority Leader Mitch McConnell, R-Ky., who helped negotiate the package.
So Congress is sending a one-time payment directly to most American adults and U.S. residents with Social Security numbers. That amounts to $1,200 for single adults earning up to $75,000 a year and $2,400 for married couples earning up to $150,000, plus $500 per child. Someone filing as head of household would get the full payment if they earn $112,500 or less.
The payment is reduced by $5 for each $100 that a taxpayer's income exceeds those thresholds, and is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.
The package will also help replace the earnings of unemployed workers for four months, providing them with their state's unemployment benefits plus an extra $600 a week. For the first time, gig economy workers such as Uber drivers can claim unemployment benefits, too.
The support for individuals and households is especially important because the social safety net in America isn't as strong as it is in the wealthy developed countries of Europe.
The package includes $50 billion in tax credits for businesses that keep employees on payroll and will cover 50% of those workers' paychecks. Companies can also defer payment of the 6.2% Social Security tax, giving them an incentive to put off layoffs at a time when ordinary business has come to a halt.
Also included is $454 billion in seed money that will allow the Federal Reserve to make roughly $4.5 trillion in loans to larger industries.
At $2.2 trillion, the money that Congress and the Trump administration are throwing at the economic crisis amounts to more than 10% of America's gross domestic product — the broadest measurement of economic output. By comparison, President Barack Obama's $787 billion stimulus plan in the depths of the Great Recession amounted to about 5.5% of GDP.
And that doesn't count what else the Fed is doing. It has slashed its benchmark interest rate to zero. It's flooding financial markets with cash by buying up securities, including government and, for the first time, corporate bonds. It's also buying so-called commercial paper, short-term IOUs that companies issue to cover operating costs such as payrolls. And it's readying a loan program for small businesses.
Fed Chair Jerome Powell has made clear that the central bank will do what it takes to support the economy. In an interview Thursday on NBC's "Today" show, Powell said the Fed would lend an essentially unlimited amount, if necessary, to support banks, businesses and city and state governments until the viral outbreak is brought under control.
The chairman acknowledged that the economy will suffer and that unemployment will rise.
"There can also be a good rebound on the other side of that," he said. "By assuring the flow of credit in the economy and keeping rates low, we want to assure that that rebound, when it does come, is as vigorous as possible."
"Except for wartime expenditures during World War II there is nothing comparable to this in U.S. history," said Adam Posen, president of the Peterson Institute for International Economics in Washington, D.C.
This rescue isn't just bigger. It's also different in significant ways.
In most economic downturns, even severe ones, policymakers aim at coaxing jittery consumers and businesses to start spending again by slashing interest rates, cutting taxes, or putting people to work on public works projects and giving them paychecks.
It's not going to work that way this time. Nobody is going to go out shopping or schedule a cruise when they're quarantined indefinitely inside their living rooms. And businesses aren't going to hire, open new offices or invest in equipment when they aren't collecting revenue because they have no customers.
Policymakers now just want to keep businesses and individuals from going under while the virus still rages, hoping they'll be in shape to drive a recovery when the crisis is over.
"They're truly focusing on stopping the system from freezing up,'' said Louis Hyman, an economic historian at Cornell University who has studied the labor market and gig workers.
For now, it seems, there's no way to turn back the forces pulling the economy into recession for the first time in 11 years. Economists are expecting the April-June quarter to be the worst on record. The economy may plunge at an annual rate of 20% or more over those three months. Millions of Americans are expected to lose their jobs in the next few weeks. On Thursday, the Labor Department reported that roughly 3.3 million Americans had filed for unemployment benefits last week — obliterating the 1982 record of 695,000.
The rescue, cobbled together by the Fed, Congress and the White House, is designed to reach business owners such as New York tour operator Georgette Blau, who has laid off her tour guides and tapped her personal savings to keep her On Location Tours operating.
Blau is uneasy about seeking a loan from the Small Business Administration, saying the monthly payments would be too high. She would consider looking into the Fed's plans to provide credit to small firms. But it won't be easy to calm her financial worries.
"Even something like $75,000 is not going to last us very long,'' she said.
The scale of the damage is staggering. More than 180,000 stores are temporarily shuttered, accounting for more than 40% of U.S. retail space, according to GlobalData Retail, a research firm.
"Retailers were caught up in a nightmare," said David French, senior vice president of government relations at the National Retail Federation, the nation's largest retail trade group. "They have people to pay. Rents to pay. They have inventories."
No money is coming in at Olio, a wedding and event venue in Peabody, Massachusetts. Owners Sarah Narcus and Ellen Basch have canceled or postponed all events through the spring. They've asked, and gotten, leniency from their lenders, including the bank that holds the million-dollar mortgage on their building.
"They were very receptive. They have deferred payments except for interest and escrow for 90 days," Narcus says. The business still has to pay other expenses including taxes and utilities.
To keep what could be a steep but short recession from turning into something worse, economists say the government needs to move fast.
But it won't be easy.
"No set of existing financial pipes was designed for a crisis requiring payments to more than 100 million individuals or households within days or weeks,'' write Peterson Institute researchers Donald Hammond and David Wilcox.
They are worried that the government will rely on income tax rolls to identify recipients; but many Americans, especially the poorest ones, don't pay income taxes and can't be found that way. They suggest using Social Security records and federal assistance rolls, too.
"We urge policymakers to emphasize the need for speed,'' Hammond and Wilcox write, even if it means some Americans accidentally get more than one relief check. "In most cases, the people who receive multiple payments will be at the lower end of the economic ladder and thus likely to be in great need of help.''
Cornell's Hyman expects that the government will make mistakes as it tries to roll out so much money, so quickly. But he's impressed with the rescue package anyway.
"It's the biggest intervention in human history, and it's all done in a week,'' he said. "It's crazy.''
Rosenberg reported from New York. AP Economics writers Christopher Rugaber in Washington and Anne D'Innocenzio in New York contributed to this report.