U.S. COVID-19 Stimulus and Relief

The COVID-19 pandemic, now in its third year, has tremendously impacted the U.S. and global economies. The U.S. government responded to the crisis when it enacted a number of policies to provide fiscal stimulus to the economy and relief to those affected by this global disaster. The Federal Reserve (Fed) also took a series of substantial monetary stimulus measures to complement the fiscal stimulus.

In this article, we divided federal stimulus and relief efforts into monetary policy implemented by the Fed, and fiscal policy implemented by Congress and the Trump and Biden administrations. Although the pandemic persists, many of these programs have been discontinued.

Impact on the U.S. Economy

The early days of the pandemic sent the U.S. economy into a recession in February 2020. The COVID-19 crisis pushed the U.S. stock market into bear market territory in March 2020, with the S&P 500 not recovering to pre-pandemic highs until June 2020. The U.S. unemployment rate rose as high as 14.7% in April 2020—the highest since the Great Depression. The unemployment rate was 3.7% as of August 2022.

The U.S. economy, as measured by real (inflation-adjusted) gross domestic product (GDP), fell by about 32% in the second quarter of 2020. GDP rebounded in the third quarter and ended the year with an increase of 4.0% year over year (YOY).

U.S. Monetary Policy

The Fed’s stimulus measures fell into three basic categories: interest rate cuts, loans and asset purchases, and regulation changes.

The loans and asset purchases come in general purchases made as part of quantitative easing (QE) and repurchase operations where the Fed buys assets directly. The Fed also created specific lines of credit and programs where it financed loans from the Primary Market Corporate Credit Facility (PMCCF) through special purpose vehicles (SPVs).

It then lends money to to companies through the SPV, which use the money to fund operations. All of these efforts were combined to try to ensure that the U.S. would not suffer a liquidity crisis similar to that of the Great Recession.

Interest Rates

The Fed cut its target range for the federal funds rate twice during March 2020—first by 0.50% to a range of 1% to 1.25%, then by 1.00% to a range of 0% to .25%

This is notable because the Fed did not move interest rates in increments greater than 0.25% since cutting them during the Great Recession. On March 15, 2020, the Fed also cut its discount rate, another key interest rate, by 1.5%, down to 0.25%.

Fed officials made the move to increase the target rate range, which remained at rock bottom levels to combat the pandemic. The Fed has made three increases to the target rate range since then to combat rising inflation:

• March 2022: 25 basis points to a range of 0.25% to 0.5%
• May 2022: 50 basis points to a range of 0.75% to 1%
• June 2022: 75 basis points to a range of 1.5% to 1.75%
• July 2022: 75 basis points to a range of 2.25% to 2.5%

Quantitative Easing (QE) and Repo Operations

On March 12, 2020, the Fed also expanded its repurchase agreements—where the Fed buys assets and sells them back at a later date—by $1.5 trillion, then added another $500 billion four days later to ensure enough liquidity in the money markets. Repo operations effectively allowed the Fed to loan money to banks.

One of the simplest asset-purchasing programs has been the QE program. The Fed directly buys assets like U.S. Treasuries and mortgage-backed securities (MBS) to slowly increase the supply of money and influence inflation. The Fed, which originally created the program during the Great Recession, restarted it on March 15, 2020. The scale of the program was open-ended, with the Fed saying it would buy “in the amounts needed to support the smooth functioning of markets.”

In late 2021, the Fed started to reduce asset purchases in a process called tapering. Federal Reserve Board (FRB) Chair Jerome Powell announced on Dec. 15, 2021, that the Federal Open Market Committee (FOMC) decided to accelerate its tapering of net new purchases of bonds, in response to a strengthening economy and rising inflation. These purchases had totaled $120 billion per month.

On Dec. 16, 2020, the Fed announced that its QE policy would continue “until substantial further progress has been made” toward inflation and employment goals. The Fed expects this progress to take years, based on projections it also released that day.

Discontinued Federal Reserve Programs

Besides direct asset purchases, the Fed set up several new lending programs, both as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (see U.S. Fiscal Policy section below for details) using funds from the U.S. Treasury Department’s Exchange Stabilization Fund (ESF) as seed capital, and entirely on its own.

Several were set up as SPVs—separate legal entities that allow the Fed to lend in ways that it normally doesn’t. All of these programs, detailed below, have been discontinued.

Paycheck Protection Program Liquidity Facility (PPPLF)

To help small businesses, the Fed launched the Paycheck Protection Program Liquidity Facility (PPPLF) on April 9, 2020, in concert with the CARES Act. This program lent money to banks so they could, in turn, lend money to small businesses through the Paycheck Protection Program (PPP). On April 30, 2020, the program expanded the types of lenders that could participate in the program. The program ended on July 30, 2021.

Primary Market Corporate Credit Facility (PMCCF) and Secondary Market Corporate Credit Facility (SMCCF)

On March 23, 2020, the Fed created the Primary Market Corporate Credit Facility (PMCCF) to buy corporate bonds to ensure that corporations could get credit. At the same time, it created the related Secondary Market Corporate Credit Facility (SMCCF), which bought up corporate bonds and bond exchange-traded funds (ETFs) on the secondary market.

The SMCCF started purchasing bond ETFs on May 12, 2020, and said it would begin purchasing individual bonds to create a “broad, diversified market index” of individual U.S. corporate bonds starting on June 16, 2020.

The combined purchase limit for the programs was $750 billion. The Treasury Department contributed a total of $75 billion in initial capital to these two programs from the ESF: $50 billion for the PMCCF and $25 billion for the SMCCF. The premise was that these programs made banks more willing to lend to corporations because they knew that they could sell the loans to the Fed. Both programs stopped purchasing bonds on Dec. 31, 2020.

Term Asset-Backed Securities Loan Facility (TALF)

On July 28, 2020, the Fed resurrected another Great Recession program: the Term Asset-Backed Securities Loan Facility (TALF), back-dated to March 23, 2020. It made up to an initial $100 billion in loans to companies and took asset-backed securities (ABS) as collateral. This included a variety of securities, such as those based on auto loans, commercial mortgages, or student loans.

On April 9, 2020, the Fed expanded the ABS types that could be purchased. The Treasury Department’s ESF made a $10 billion initial equity investment in the SPVs. The program stopped making new loans as of Dec. 31, 2020.

Main Street Lending Program

On March 23, 2020, the Fed announced the Main Street Lending Program, which set up an SPV to purchase up to $600 billion in small- and medium-sized business loans. Under the plan, the Fed purchased a 95% stake of each loan, with the bank keeping 5%. To qualify, businesses needed to have either 10,000 or fewer employees or up to $2.5 billion in 2019 revenue.

On July 17, 2020, the Fed extended the program to nonprofit organizations that didn’t have endowments larger than $3 billion, had either fewer than 15,000 employees or less than $5 billion in 2019 revenue, and met a number of other additional requirements. The program purchased stakes in both new loans and loan extensions.

Under the CARES Act, the Treasury Department planned to make a $75 billion equity investment in the SPV. The terms of the loans were five years, with interest deferred for one year and principal payments deferred for two years.

On Oct. 30, 2020, the Fed reduced the minimum size of the loans that the program would purchase. The program ended on Jan. 8, 2021.

Municipal Liquidity Facility (MLF)

On April 9, 2020, the Fed launched the Municipal Liquidity Facility (MLF), which purchased up to $500 billion of short-term notes issued by:

• The 50 states and the District of Columbia
• Counties with at least 500,000 people
• Cities with at least 250,000 people
• Multistate entities (defined by the Fed as an entity created by a compact between two or more states)
• Up to two revenue bond issuers per state, such as airports or utilities

In addition, smaller states could designate their largest city or county (depending on the size of the state) to qualify for the facility even if it didn’t meet the population requirement.

On Aug. 11, 2020, interest rates for tax-exempt notes were lowered by 0.5 percentage points. The difference in rates between taxable and tax-exempt notes was also lowered. Under the CARES Act, the Treasury Department made an initial equity investment of $35 billion in the SPVs. It stopped purchasing notes on Dec. 31, 2020.

Primary Dealer Credit Facility (PDCF) and Money Market Mutual Fund Liquidity Facility (MMLF)

On March 17, 2020, the Fed relaunched a Great Recession-era program: the Primary Dealer Credit Facility (PDCF), which has given loans to primary dealers backed by a wide variety of securities as collateral. There was no set limit to the amount of credit issued.

To add more liquidity to money markets, the Fed opened the Money Market Mutual Fund Liquidity Facility (MMLF) on March 23, 2020. This program lent money to financial institutions so that they could buy money market mutual funds. Like the PDCF, it did not have a specific lending limit.

The Treasury Department gave the MMLF $10 billion of debt credit protection for the program. On May 5, 2020, the central bank said that participation in the MMLF wouldn’t affect the liquidity coverage ratio of participating banks.

This program was similar to the Asset-Backed Commercial Paper Money Market Fund (AMLF) program launched in 2008 after the collapse of Lehman Brothers caused a major money market fund to fail. The AMLF ended on Feb. 1, 2010.

Both the PDCF and the MMLF expired on March 31, 2021.

Commercial Paper Funding Facility (CPFF)

On March 17, 2020, the Fed established the Commercial Paper Funding Facility (CPFF), which purchased short-term debt known as commercial paper to ensure that those markets stayed liquid.

On March 23, 2020, the Fed broadened the variety of commercial paper that it would buy to lower the pricing of the debt. This was actually a relaunch of a program that ran during the Great Recession, when many businesses were hurt as liquidity in the commercial paper markets dried up.

While it had no set limit on the amount it purchased, the CPFF stopped purchasing debt on March 31, 2021, and the SPV continued to be funded until its assets matured. The Treasury Department made a $10 billion equity investment in the CPFF from its exchange stabilization fund (ESF).

Fed’s Regulation Changes and Policy Updates

The Fed made regulation changes to further add liquidity to the markets. For instance, it made a number of technical changes to hold on to less capital so that banks could lend more. It also temporarily removed the asset restrictions placed on Wells Fargo after its fake-accounts scandal, so that Wells Fargo could lend more.

On March 19, 2021, the Fed announced that it was letting its policy of relaxing bank reserve requirements expire on March 31, 2021, as scheduled. The policy, originally announced on May 15, 2020, temporarily allowed banks to exclude Treasuries and deposits with Fed banks from their balance sheets for the purpose of calculating reserve requirements, allowing them to lend more.

On March 25, 2021, the Fed announced that the temporary restrictions on dividends and buybacks that it placed on banks in 2020 would end after June 30, 2021, for banks that met capital requirements during the 2021 stress tests. Restrictions were extended for banks that failed to meet capital requirements.

U.S. Fiscal Policy

Throughout March and April of 2020, the U.S. government passed three main relief packages and one supplemental package. After the passage of the supplementary package in April, nicknamed “phase 3.5,” there was no substantial action on COVID-19 stimulus or relief from Congress for several months.

The Democrat-controlled House of Representatives passed the $3.4 trillion HEROES Act in May 2020, and the Republican Senate majority proposed—but did not pass—the $1 trillion HEALS Act in July 2020. Despite offers from House Democrats to meet in the middle at $2 trillion, the Senate Republican majority refused to budge from their position, insisting on less stimulus.

In December 2020, Congress passed the Consolidated Appropriations Act (CAA), which included a $900 billion stimulus bill, providing additional support during the pandemic.

During this period, Presidents Donald Trump and Joseph Biden issued a plethora of executive actions in attempts to provide aid during the pandemic, as have various executive branch agencies. A fifth major stimulus package, the $1.9 trillion American Rescue Plan Act, was signed into law by President Biden on March 11, 2021.

Stimulus and Relief Package 1

The first relief package, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, nicknamed Phase One, was signed into law on March 6, 2020, by President Trump. It allocated $8.3 billion to do the following:

• Fund research for a vaccine
• Give money to state and local governments to fight the spread of the virus
• Allocate money to help with efforts to stop the spread of the virus overseas

Stimulus and Relief Package 2

The second relief package, the Families First Coronavirus Response Act (FFCRA), or Phase Two, was signed into law on March 18, 2020. The law allocated a budget for relief that included the following:

• Providing money for families who rely on free school lunches in light of widespread school closures
• Mandating that companies with fewer than 500 employees provide paid sick leave for those suffering from COVID-19, as well as providing a tax credit to help employers cover those costs
• Providing nearly $1 billion in additional unemployment insurance money for states, as well as loans to states to fund unemployment insurance
• Funding and cost waivers to make COVID-19 testing free for everyone

Separately, on March 18, 2020, the Federal Housing Administration (FHA) and the Federal Housing Finance Agency (FHFA) implemented foreclosure and eviction moratoriums for single-family homeowners whose mortgages were FHA-insured or backed by Fannie Mae or Freddie Mac. The eviction moratorium on FHA and other government-backed loans was extended to Sept. 30, 2021. Additionally, the FHFA announced on Sept. 24, 2021, that Fannie Mae and Freddie Mac would continue to offer COVID-19 forbearance to multifamily property owners who were experiencing a financial hardship due to the COVID-19 emergency.

Stimulus and Relief Package 3: CARES Act

The third—and largest—relief package was signed into law on March 27, 2020. By nominal dollar amount, it is the largest single relief package in U.S. history. This law, called the Coronavirus Aid, Relief, and Economic Security Act and nicknamed the CARES Act or Phase Three, appropriated $2.3 trillion for many different efforts:

• One-time, direct cash payment of $1,200 per person, plus $500 per child
• Expansion of unemployment benefits to include furloughed people, gig workers, and freelancers until Dec. 31, 2020
• Additional $600 of unemployment per week until July 31, 2020
• Waiver of early withdrawal penalties for 401(k)s for amounts of up to $100,000 until Dec. 31, 2020
• Mortgage forbearance and a moratorium on foreclosures on federally backed mortgages for 180 days
• $500 billion in government lending to companies affected by the pandemic
• $349 billion in loans and grants to small businesses through the PPP and the expanded Economic Injury Disaster Loan (EIDL) program
• More than $175 billion for hospitals and healthcare providers
• $150 billion in grants to state and local governments
• $30.75 billion for schools and universities

Stimulus and Relief Package 3.5

A supplementary stimulus package, nicknamed Phase 3.5, was signed into law on April 24, 2020. It appropriated $484 billion, mostly to replenish the PPP and the EIDL, and contained additional funding for hospitals and COVID-19 testing.

Another supplementary measure, the Paycheck Protection Program Flexibility Act of 2020, which modified the PPP, was signed into law on June 5, 2020. It made the following changes to the program:

• It allowed businesses 24 weeks to spend the money, up from the initial eight-week period
• It lowered the requirements for loan forgiveness. Businesses now had to spend only 60% of their PPP funds on payroll, instead of the 75% previously required.
• The payment deferment period was extended from six months to when the borrower finds out the amount of their loan forgiveness
• It allowed businesses that received PPP loans to delay paying payroll taxes
• It allowed businesses loan forgiveness if they didn’t rehire workers who refused good-faith offers of reemployment or were unable to restore operations to levels before the COVID-19 pandemic
• It gave businesses until the end of 2020 to restore their payrolls to precrisis levels
• It increased the loan maturity of PPP loans taken out after June 5, 2020, to five years
• It extended the time that borrowers have to pay back unforgiven parts of the loan

Supplementary Measures

On March 17, 2020, Treasury Secretary Steven Mnuchin extended the deadline for paying both individual and business taxes for tax year 2019 to July 15, 2020.

On March 20, 2020, then-Education Secretary Betsy DeVos suspended student loan payments and interest accrual for federally held student debt. This suspension of payments and interest continues until Dec. 31, 2022.

On April 19, 2020, the Trump administration said businesses could delay payment of tariffs for 90 days if they suspended operations during March and April of 2020 and if they “demonstrate[d] a significant financial hardship.”

Additional Non-Federal Stimulus

Federal stimulus money has dried up, leaving some U.S. residents struggling to make ends meet under severe inflationary conditions. Several states have implemented stimulus programs to assist their residents in the form of checks, rebates, refunds, or credits to those that are eligible:

• California
• Colorado
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Maine
• Massachusetts
• New Jersey
• New Mexico
• Oregon
• South Carolina
• Virginia

Trump Executive Orders

On Aug. 10, 2020, Trump signed four executive actions to provide additional COVID-19 relief.

Lost Wages

The first action created the Lost Wages Assistance (LWA) program, which would roll out a $400-per-week payment to those receiving more than $100 a week in unemployment benefits. The plan called for $300 to be paid by the federal government and $100 by state governments. The program was retroactive to Aug. 1, 2020 and ended Dec. 27, 2020.

The program was to be funded by up to $44 billion in money taken from the Federal Emergency Management Agency (FEMA) disaster relief fund. The president said the states should use the remaining aid given to them under the federal CARES Act to fund these payments, even though many states already had allocated those funds and state budgets were under intense strain.

Because the president cannot expand unemployment insurance without congressional approval, states had to scramble to build new systems to handle these program benefits. This caused delays and meant that actual payment of the benefits was not rolled out for weeks or months in many states.

Student Loan Interest

A second executive action extended the moratorium on payments and interest accrual on student loans held by the government until the end of 2020. The moratorium was previously set to expire on Sept. 30, 2020, but has been continuously renewed.

Housing

A third executive action instructed the Department of the Treasury and the Department of Housing and Urban Development (HUD) to help provide temporary assistance to homeowners and renters. The action directed HUD to “promote the ability of renters and homeowners to avoid eviction or foreclosure.” The executive action also instructed the FHFA, which oversees Fannie Mae and Freddie Mac, to “review all existing authorities and resources that may be used to prevent evictions and foreclosures for renters and homeowners.”

Notably, the order did not extend the CARES Act’s federal eviction moratorium, which expired on July 24, 2020.

Payroll Tax Deferment

A fourth executive action deferred payroll taxes for Americans earning less than $100,000 per year for the period from Sept. 1, 2020, to Dec. 31, 2020. The taxes were required to be paid back in 2021.

Biden Extends Protections

As part of a series of executive actions announced on his first day of office, Jan. 20, 2021, President Biden’s Department of Education announced it would extend federally held student loan forbearance, which was set to expire on Jan. 31, 2021. Forbearance was extended through Dec. 31, 2022.

Shortly after the passage of the American Rescue Plan, on March 30, 2021, the Department of Education announced the expansion of its student loan relief to include defaulted privately held loans as well, through Sept. 30, 2021. A 0% interest rate and a pause of collections would affect 1.14 million borrowers who defaulted on a privately held loan under the Federal Family Education Loan (FFEL) program since March 13, 2020.

Eviction Moratorium

The CARES Act created a moratorium on evictions that was initially set to expire on July 24, 2020. The moratorium was extended several times since then, and, on June 24, 2021, the government announced that it was extended a final time to July 31, 2021.

On Aug. 3, 2021, however, the Centers for Disease Control and Prevention (CDC) announced a temporary halt on evictions in counties experiencing substantial or high levels of community transmission of COVID-19. This mandate was set to expire on Oct. 3, 2021. However, on Aug. 26, 2021, the U.S. Supreme Court vacated the CDC order, effectively ending the eviction moratorium. The conditions for the moratorium included:

• You couldn’t expect to make more than $99,000 as an individual, or $198,000 if married, in 2020.
• You were laid off, had “extraordinary” out-of-pocket medical expenses (more than 7.5% of adjusted gross income (AGI)), or had a “substantial” loss of household income.
• You needed to do everything you could to make “timely” partial payments as close to the rent you owe as “circumstances may permit.”
• Eviction would “likely” lead you to either be homeless or have to move to a place where you would be crowded closely with other people.

People who met these conditions were to write a signed declaration that this was the case and give it to their landlord. If you met the conditions, then it applied to all landlords and residential renters in the country—except for jurisdictions that had local moratoriums with the same or better protection for renters, including American Samoa, unless that territory reported COVID-19 cases: If that was the case, it would then apply there. It also did not apply to hotels, motels, or Airbnb rentals.

Stimulus and Relief Package 4

On Dec. 21, 2020, Congress passed the CAA, a $900 billion stimulus and relief bill, attached to the main omnibus budget bill. Then-President Trump signed the bill on Dec. 27, 2020, but urged Congress to increase the direct stimulus payments from $600 to $2,000. Its contents included:

• Direct payments of $600 per person, including for dependents ages 16 and younger. The payments were to be available to individuals making up to $75,000 per year.
• Eleven weeks of expanded unemployment benefits starting on Dec. 27, 2020. The benefits would be expanded by $300 a week. The Pandemic Unemployment Assistance (PUA) program for self-employed and contract workers was extended, as was Pandemic Emergency Unemployment Compensation (PEUC) for people who exhausted their unemployment assistance. These programs expired on Sept. 5, 2021.
• $325 billion in help for small business loans, including $284 billion in forgivable PPP loans, $20 billion for EIDL grants for businesses operating in low-income areas, and $15 billion for live cultural venues.
• An extension of the CDC eviction moratorium through Jan. 31, 2021, which expired on Aug. 26, 2021.
• $45 billion for transportation funding, including $15 billion in airline payroll support, $14 billion for transit, and $10 billion for state highways.
• $69 billion to public health measures, including $22 billion in aid to states for testing and tracing, $20 billion to the Biomedical Advanced Research and Development Authority (BARDA), $9 billion to the CDC and state governments for vaccine distribution, and $9 billion to support healthcare providers.
• $82 billion in education funding, including a $54.3 billion K–12 Emergency Relief Fund and a $22.7 billion Higher Education Emergency Relief Fund.
• $25 billion in emergency rent assistance.
• $26 billion in nutrition and agriculture funding, including a 15% increase in Supplemental Nutrition Assistance Program (SNAP) benefits and food bank funding.

Stimulus and Relief Package 5: American Rescue Plan

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021, implementing a $1.9 trillion package of stimulus and relief proposals. Some facets of the plan, such as raising the minimum wage to $15 an hour, were excluded to pass the plan using budget reconciliation. This Senate procedure allows bills to be passed using a simple majority.

Roughly $350 billion of the total funding was allocated to state and local governments. The key points of the plan as it was passed are the following:

• Direct cash payments of up to $1,400 for individuals earning less than $75,000 a year, plus $1,400 per dependent. The amount of the payment decreases for people with income over $75,000, phasing out entirely for individuals with an income of $100,000 a year.
• Increasing the maximum annual Child Tax Credit from $2,000 to $3,000 per child ages 6 through 17, and $3,600 for each child under age 6. The increase lasted through 2021, and payments began phasing out for couples making more than $150,000 a year and individuals who are heads of households and made more than $112,500 a year. (Legislation to extend the increased credit for 2022 was not passed. The credit will revert to $2,000 and be partially refundable annually for the tax year 2022).
• $300 a week in expanded unemployment insurance lasting through Sept. 5, 2021.
• $10,200 in unemployment benefits were free from federal taxes in 2021 for households with incomes less than $150,000 a year. That figure was doubled for married couples filing jointly.
• $121 billion in funding for K–12 schools.
• $50 billion for the CDC to administer and distribute vaccines, diagnose and track COVID-19 infections, and purchase testing and personal protective equipment (PPE) supplies.
• $39 billion in funding for higher education.
• $30.4 billion in funding for public transit.
• $21.5 billion in emergency rental assistance.
• $25 billion for the Small Business Administration to make grants for “restaurants and other food and drinking establishments.”
• $40 billion in funds for childcare—$15 billion in childcare assistance and $25 billion to help childcare providers continue to operate and meet payroll.
• $15 billion to support airline industry workers.
• $7.25 billion in additional PPP funding, in addition to expanding which nonprofits can benefit from the program.
• A provision treating any student loan forgiveness passed from Dec. 31, 2020, to Jan. 1, 2026, as nontaxable income.

National COVID-19 Preparedness Plan

In March 2022, the White House released a preparedness plan, in which it outlined key goals and identified areas for which it will secure funding for:

• Tests and supples for schools and businesses to stay open, and assistance with improving ventilation and air filtration
• Paid sick leave for workers who need time off due to infection or to care for a loved one who has contracted COVID-19
• Child care centers, to ensure they are able to stay open, allowing parents to go back to work
• Expanding services at public-facing offices

The Bottom Line

The COVID-19 pandemic continues to affect households and businesses. Government programs and stimulus checks have worked throughout the pandemic to reduce the financial strain many consumers and businesses felt.

Because federal stimulus programs and funds have ended, some states have implemented stimulus programs for residents that meet specific criteria during a period of intense inflation. Check with your state to find out if it has or is developing a stimulus or economic relief program.