US Medium-Sized Business Emergency Loans 'Exhausted' in 2 Weeks... Will Additional Stimulus Discussions Accelerate?

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Less than two weeks after the U.S. federal government implemented an emergency loan program for small businesses in response to the novel coronavirus disease (COVID-19) crisis, the entire $349 billion (approximately 430 trillion KRW) in allocated funds has been exhausted. With funds depleting earlier than expected, attention is focused on whether the ongoing bipartisan deadlock in Congress over additional stimulus measures will accelerate.

According to the Wall Street Journal (WSJ) and others on the 16th (local time), the U.S. Small Business Administration (SBA) announced on its website that "due to a lack of available funds, no new applications for the Paycheck Protection Program (PPP) can be accepted." The SBA stated that as of that morning, 1,637,000 loan applications had been received, approving more than $339 billion.

The PPP is a program that provides unsecured loans of up to $10 million over two years to small businesses with fewer than 500 employees, intended for employee payroll. It was officially launched on the 3rd as part of the $2 trillion economic stimulus package passed by Congress at the end of last month. The rapid depletion of funds is interpreted as an indication of the severity of financial difficulties faced by small businesses.

The issue is that, as the COVID-19 crisis continues in the U.S., additional funding for small business support is necessary. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, projected during a conference call with reporters that U.S. small businesses will likely need $500 billion per month to endure the COVID-19 crisis. He added that the recently implemented PPP provides guidance and will serve as a starting point for discussions on how to expand support for small businesses in the future.

Accordingly, the need to accelerate negotiations on additional stimulus measures being discussed in Congress has increased. The Trump administration and Republicans are pushing for an additional $250 billion support package, but Democrats are opposing this, arguing that a larger-scale support package covering hospitals and local governments is necessary. Governors from both parties have requested Congress to approve $500 billion in stabilization funds to prevent economic chaos.

President Donald Trump pressured Democrats to prepare additional support measures via Twitter on the same day. He claimed, "The Democrats are blocking additional funding for the popular PPP," and "They are killing America's small businesses." He added, "Stop the political games, Democrats!" and urged, "Support refilling the PPP immediately. Funds are running out."

Meanwhile, as large-scale stimulus packages continue to be discussed in response to COVID-19, analyses suggest that the government's fiscal deficit will rapidly increase. The U.S. Congressional Budget Office (CBO) reported that within the 2020 fiscal year, an additional $1.6 trillion deficit is expected, and over the next ten years until 2030, an additional $1.8 trillion deficit will occur, forecasting that the scale of the fiscal deficit in dollar terms will be the largest since World War II.

This reflects the $2.2 trillion large-scale stimulus package passed by Congress last month. The CBO noted, "Some support measures include loan guarantees that are not recorded in the budget, so the scale is smaller than the stimulus package," and stated that actual budget outcomes may vary depending on how future support measures are implemented and the impact of COVID-19 on the national economy. The Hill, a U.S. political news outlet, reported that the CBO had already expected the fiscal deficit to exceed $1 trillion this year even before the COVID-19 outbreak.

This content was produced with the assistance of AI translation services.