As global markets and healthcare systems grapple with the COVID-19 outbreak, the US government continues to manage its response to the situation. As infections in the US multiplied over the week of March 9, lawmakers began to realize the severity of the situation. A sense of urgency now prevails in Washington, with a focus on how to contain COVID-19 and work to counteract the economic fallout. Following the World Health Organization’s declaration of a COVID-19 pandemic and President Trump’s television address on March 11, many of the details related to the federal fiscal and monetary response to the situation remained under negotiation. By March 13, lawmakers began to achieve consensus.

Initial action from the White House
In his address to the nation on March 11, President Trump announced a 30-day European travel restriction. Of note is that the restriction applies only to people, not goods. The restriction does not apply to American citizens, but foreign nationals who have been in the 26-country Schengen Area in recent weeks. Trump also authorized the Small Business Administration to provide loans to businesses affected by the COVID-19 outbreak. Trump has also asked the Department of the Treasury and the Internal Revenue Service to defer tax payments for affected individuals and businesses and extend the 2019 tax-filing deadline beyond April 15.

Overview: The Families First Coronavirus Response Act of 2020
Following intense and fast-paced negotiations, Republican and Democratic lawmakers reached consensus on a federal spending bill designed to strengthen public health systems and the American economy in light of the COVID-19 outbreak. President Trump reportedly pushed hard for the legislation to include a payroll tax cut, on the belief that it would help prevent layoffs and bankruptcies amid small and medium-sized business. However, Democratic lawmakers – and some Republican lawmakers – appeared to prefer more direct federal stimulus.

Final legislation includes:

  • Free nationwide COVID-19 testing
  • Paid sick leave for small and medium-sized businesses – including contractors and gig economy workers
  • Tax credits for small and medium-sized businesses
  • $1 billion in food assistance – including increased funding for emergency food assistance for families and the elderly
  • Funding to bolster state unemployment funds
Additional legislation
Families First is the second of at least three aid bills to be produced by Congress in response to COVID-19. A third bill is expected to further address the economic fallout from the outbreak. In this bill, we could see tax stimulus for companies and individuals, in addition to federal aid for the airline, hotel, cruise and other industries that have been hit hard as a result of the pandemic. When we see this bill is uncertain. Initial reports have indicated it will be sometime after the Easter recess – but it remains unclear if the markets will wait that long.

Emergency accounting
Members of Congress are cognizant of the multibillion-dollar price tag associated with the COVID-19 aid package. This is an emergency aid package – the legislation does not include provisions about how to pay for the bill and its cost will go directly on the deficit. If the economic crisis associated with COVID-19 continues to worsen, extraordinary relief similar to that implemented during the 2008 Global Financial Crisis may be necessary.

Potential political ramifications
Former Vice President Joe Biden and Vermont Senator Bernie Sanders – the remaining contenders for the 2020 Democratic Party presidential nomination – have both been critical of the White House response to COVID-19. Each campaign considers the situation an opportunity to demonstrate how their candidate would lead during a time of national crisis. Meanwhile, President Trump and the White House have worked to project a sense of resolve as events have unfolded, praising the response of federal organizations and calling for political unity. As the November general election approaches, the federal government’s response to COVID-19 is likely to remain front and center, as both parties seek to define their leadership capabilities through the lens of outbreak.
This material is provided for informational purposes only and should not be construed as investment advice.

The views and opinions expressed may change based on market and other conditions. Unless otherwise noted, the opinions of the speakers provided are not necessarily those of Natixis Investment Managers or any of its affiliates. All investing involves risk, including the risk of loss. Investment risk exits with equity, fixed income, and alternative investments.

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