COVID-19, the CARES Act, and Families' Financial Security

39 Pages Posted: 25 Jun 2020 Last revised: 9 Jul 2020

See all articles by Neil Bhutta

Neil Bhutta

Board of Governors of the Federal Reserve System

Jacqueline Blair

Board of Governors of the Federal Reserve System

Lisa J. Dettling

Board of Governors of the Federal Reserve System

Kevin B. Moore

Board of Governors of the Federal Reserve System

Date Written: July 1, 2020

Abstract

In response to the economic shock induced by the COVID-19 pandemic, Congress passed the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. Using household data on savings, income and expenses from the Survey of Consumer Finances, we show that cash assistance included in the CARES Act –namely, unemployment insurance benefit expansions and stimulus payments-- are instrumental in allowing almost all families to cover their recurring, non-discretionary expenses in the event of long-term unemployment. In the absence of such substantial government support, we document that nearly half of families who lose their income for six months would not be able to cover their expenses due to low levels of liquid savings and standard UI benefits that typically fall well below full replacement of income. Even though the increased UI payments expire after four months, because these benefits substantially exceed lost earnings for many workers, they have the potential to help households cover expenses well beyond four months by allowing otherwise paycheck-to-paycheck families to save.

Keywords: Emergency Savings, Unemployment Insurance, COVID, Coronavirus, Pandemic, Household Finance

JEL Classification: D14, H31, J65

Suggested Citation

Bhutta, Neil and Blair, Jacqueline and Dettling, Lisa J. and Moore, Kevin B., COVID-19, the CARES Act, and Families' Financial Security (July 1, 2020). Available at SSRN: https://ssrn.com/abstract=3631903 or http://dx.doi.org/10.2139/ssrn.3631903

Neil Bhutta (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jacqueline Blair

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Lisa J. Dettling

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Kevin B. Moore

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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