The Coronavirus Aid, Recovery, and Economic Support Act (CARES Act) was passed on March 23, 2020, under former president Donald Trump’s administration. This act was passed to mitigate the damage that the sudden and rapid emergence of the COVID-19 virus had on the economy in the United States—particularly local businesses—and the livelihoods of citizens.
Past Recessions and Government Action
The economic downturn caused by COVID-19 was not the first time that America has suffered a recession. For instance, in 1907, 73 financial institutions failed, primarily due to the bankruptcy of two small brokerage firms, which sparked distrust in companies and banks. However, this panic also convinced Americans that the government had a role to play in solving economic crises. In 1910, discussions about the formation of a central bank began, and by 1914, the Federal Reserve was created. Similarly, at the start of the Great Depression in 1929, the unemployment rate stood at 3.2% and peaked at 24.9% by 1933. To recover the economy, the Social Security Act of 1935 was passed, authorizing funds to be paid out to states (through the Social Security Administration), based on wages earned a few years before a beneficiary turned 65. Overall, the Great Depression changed the structure of the government and the general attitude towards the role of the government in solving economic crises.
Economic Provisions
Many provisions within the CARES Act directed financial support to businesses and individuals whose finances were directly impacted by COVID-19. For example, Section 2102 expanded unemployment compensation between January to December of 2020, granting 39 weeks of federal unemployment compensation to individuals who may have previously been ineligible under the laws of their state or territory. In addition, Section 1102 amended Section 7(a) of the Small Business Act by allowing the Small Business Administration to lend money to businesses that do not employ more than 500 people. This section required that such businesses use these loans solely to repay necessary business expenses, including compensation (i.e. wages and salaries, paid vacation time, health benefits, paid or unpaid leave, etc.) and utility costs. These measures provided money to both individuals and businesses to reduce the effects of the pandemic.
Housing Provisions
However, economic recessions and depressions not only impact employment prospects, but housing prospects as well. For example, not long after the pandemic began, tenants felt the impact of the contraction of the economy. Concerns over the spread of COVID-19 prompted private and governmental employers to either shut down or only partially open their workplaces, which left many employees, or residential tenants, without the stream of income that they had received before. Thus, the CARES Act also imposed a national foreclosure moratorium through Section 4022, and a national eviction moratorium through Section 4024, which ended in June 2021. Since the end of the foreclosure and eviction moratoriums, there has been a rising trend in eviction numbers. For example, since March 2020, Houston, Texas has seen 67,304 eviction filings by landlords, while Albuquerque, New Mexico has seen 9,339 evictions, and New York City 89,312. In response, states have supplemented provisions of the CARES Act with their own anti-eviction legislation. This provided tenants with additional time to make payments towards rent and business expenses. However, state moratoriums were also a temporary measure.
As a whole, the CARES Act provided temporary financial assistance to Americans. It gave money to individuals and businesses to support the recovery of lost wages and revenue and protected tenants via a federal eviction moratorium. However, as the measures within the CARES Act were only temporary, the future of American businesses, as well as American people’s tenancy and homeownership status, will depend largely on the state of the economy as it works to recover from the COVID-19 pandemic.
