Trump Signs 5-Week PPP Extension With Fiscal Cliff Looming

The White House released a statement Saturday morning indicating President Trump has signed a bill extending the Paycheck Protection Program (PPP) until August 8. 

On Saturday, July 4, 2020, the president signed into law: S. 4116, which (1) reauthorizes lending under the Paycheck Protection Program (PPP) through August 8, 2020; and (2) separates the authorized limits for commitments under the PPP from other Small Business Administration loan programs. - the statement read 

PPP is designed to support businesses impacted by coronavirus-lockdowns, which had expired last Tuesday with $130 billion in leftover funds. 

The bill provides the president with five additional weeks, while Congress is set to debate the next round of stimulus. 

The Small Business Administration (SBA) recently said the program approved over 4.8 million emergency loans to millions of small businesses.

On Wednesday, the president told Fox Business he supports another round of direct payments - also promoting a payroll tax holiday and tax incentives for corporate America. 

At the moment, there is mass confusion in Washington as coronavirus cases erupt across the country, and economic data rebounds: 

"It's a little confusing for people because you've got a higher rate of covid in the last few weeks and better job numbers than anybody expected," said Sen. Rob Portman, adding that the recovery could reverse if the virus pandemic continues. 

Portman could be right, as virus cases surge, and reopenings across the country are paused or reversed, economic data in the coming weeks, if not by the end of summer, could start beating to the downside. 

We recently outlined the latest economic surge is almost entirely a function of the massive government spending spree, a spree which in just over a month will be effectively over.

Quarterly Change US Economic Surprise Index vs. S&P500 

Citing a Bank of America report, we noted how the economy is facing fiscal cliffs which could cause the recovery to disintegrate, with four particular areas of focus:

  1. expiration of extended unemployment insurance,
  2. the fading support from stimulus checks,
  3. exhaustion of PPP
  4. stress from state and local aid gov'ts.

"In summary, after July 31, the US economy is set to fly off a fiscal cliff that could be just as painful as what happened in late March/April unless there is a bipartisan agreement in Congress on trillions more in fiscal stimulus. The clock is now ticking," we noted. 

Could the Democrats have the Trump administration at a so-called checkmate? Dems could easily send the economy off a fiscal cliff by withdrawing support for the next round of stimulus, something that could affect the president's reelection odds.