POLITICO Pro on Thursday held the latest in a series of subscriber-only conference calls to discuss the coronavirus pandemic.
Pro Financial Services editor Mark McQuillan, Pro Financial Services reporter Zachary Warmbrodt and Pro Health Care editor Adriel Bettelheim discussed the state of the economy, the small business loan program, the spread of the virus and the progress of testing in the U.S.
Here are three main takeaways:
The numbers seem to be stacked against the economy, and economists are saying that the numbers will get worse. There were 3.8 million new jobless claims last week, pushing the tally to 30.3 million as the coronavirus pandemic continued to batter the economy. Consumer spending also declined by 7.5 percent in March, the steepest monthly decline recorded since 1959. Some projections for the second quarter GDP include a decline of 35 percent or more, which would be the biggest drop in 70 years. The unemployment number for April is also expected to be in the double digits.
While some economists are optimistic about a rebound because the economy was in good shape before the pandemic hit the U.S., Federal Reserve Chair Jerome Powell has been realistic about how gradual the rebound will be, Zach said.
The Federal Reserve and Congress will continue to have a big role in helping consumers, employees and businesses. The Fed is under pressure to keep interest rates at zero, to buy bonds and to create lending programs, according to Zach. The Fed has said it's not pulling these measures back anytime soon, but it's also said it can’t do this by itself.
Congress has already passed four coronavirus relief bills and more are expected. But Democrats and Republicans are divided on what they want to do with the next package. Senate Majority Leader Mitch McConnell wants liability protections for businesses; Democrats don’t want to roll back protections for employees. Democrats also want to give money to states and municipalities, a proposal that could have some support from lawmakers representing hard-hit red states.
The Paycheck Protection Program, created in March through the CARES Act, H.R. 748 (116), gives emergency loans to small businesses so they can keep paying their employees. It might have been implemented too quickly before any real planning: there were a lot of questions about how the program should be implemented; banks didn’t get the guidelines they needed before the program launched; the Small Business Administration also wasn’t prepared to run a program this big, Zach noted. The program shut down for a few weeks after its initial pot of money was quickly exhausted, but it restarted earlier this week after Congress approved a second round of funding.
There was also backlash after big, publicly traded companies like Shake Shack got loans before smaller businesses. The Trump administration has since asked those companies to return the loans, and the SBA has said it will make sure the loans go to businesses that really need it most.
The Trump administration has now shifted the responsibility of handling the pandemic response to states. It’s up to the governors to decide what’s next. The fear is that inconsistency and lack of synchronized plans between states could prolong the outbreak or drive a second wave of cases in the fall. Some states like Texas, Georgia and Colorado are moving quickly to reopen even before they meet CDC’s guidelines for reopening, so people will be watching those states to see if cases surge, Adriel said. The other states might start reopening by mid-May.
According to the CDC, the metrics that states should look at before reopening includes a consistent two-week decline in people suffering flu-like symptoms, hospital admissions for coronavirus and in coronavirus deaths. States also need to look at their hospital surge capacity, and make sure that they won’t be overwhelmed should there be a huge resurgence. No state has met all of the CDC’s guidelines. There’s also not enough testing to ensure that they’re close, Adriel said.
There’s been a well-documented shortfall in testing, Adriel said, but the number of tests analyzed has risen dramatically in the last week. President Donald Trump has repeatedly said that the U.S. has the most number of tests, but Adriel noted that the question is whether there are enough supplies to actually process the tests.
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said that he wants to see the U.S.’ testing capacity double in the next week as more states begin to reopen. Many public health experts say that we need to have a robust testing capacity before we start relaxing social distancing guidelines. The accuracy of serological tests, which measure whether a person had coronavirus by looking for antibodies in the blood, has been questioned recently because there have been too many false positives.
Many coronavirus drugs and therapies are in clinical trial phases, but it will take a vaccine to really ensure people are safe. A trial has shown that Gilead’s remdesivir drug lowered recovery time for coronavirus patients. But the drug isn’t a silver bullet, Adriel noted. While it could begin to inhibit the spread of the virus, the results were modest and there still isn’t any solid evidence that it definitely works.