Impact of Covid-19 on BEA’s Economic Accounts

Erich H. Strassner, Benjamin A. Mandel and Mark S. LudwickAdvisory Committee Meeting

May 15, 2020

Snapshot: What We’ll Cover

• Overview of first quarter GDPo A look at the datao Measurement challenges and solutions

• Pandemic response: new recovery lawso Classification of new programso Brief overview of NIPA Impacts

• Communications strategy

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Gross Domestic Product

3Real (inflation-adjusted) estimates seasonally adjusted at annual rates

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Recession Real GDP, Percent Change

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-1.30-1.98

-2.72

2.55

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-0.27

-4.99

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-0.53-1.02

2.32

0.13

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4GDP Goods Services Nonres. Inv. Res. Inv. CIPI Exports Imports Gov

2008Q4 2020Q1

Contributions to Percent Change in Real GDP

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GDP Goods Services Nonres. Inv.

Res. Inv. CIPI Exports Imports Gov

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Current Dollar DPI, Personal Outlays, and Saving

5Estimates are seasonally adjusted at monthly rates

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Saving Rate

Disposable Income

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Personal Outlays

Real Consumer Spending on Goods and Services

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Measurement Challenges and Solutions Q1 2020

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• Partnered with Census and BLS to understand quality and coverage of routine source data

• Identified and vetted alternative data sources and methods, and assessed closures to account for rapid shift in activity in March

• Monitored and evaluated government responses to ensure accurate and reliable treatment in the accounts

Pandemic Response: New Recovery Laws

$8.3 Billion: Coronavirus Preparedness and Response Supplemental Appropriations Act (CPRSA)

5/14/2020

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April 24

March 27

March 18

March 6

$484 Billion: Paycheck Protection Program and Health Care Enhancement Act

$1.8 Trillion: The Coronavirus Aid, Relief and Economic Security Act (CARES)

$192 Billion: The Families First Coronavirus Response Act (FFRCA)

Recording New Recovery Laws in the NIPAs

• Legislation Assessmento CBO and Congress’ Joint Committee on Taxation (JCT) analysiso News reports

• Classification Assessmento Based on BEA NIPA methodologies and international guidelines (SNA) (see

ISWGNA’s COVID-19: How to Record Government Support to Employers, Self-employed and Households)

o BEA published COVID-19 Pandemic: Federal Recovery Legislation and the NIPAs to communicate the likely classification of the major provisions

• Measurement Assessmento Source Data Monthly Treasury Statement provides outlays and receipts by program Agency reports or other sources as available If no direct data are available, develop estimation assumptions and methods

o Timing (accrual vs cash/disbursement) Determine if adjustments are needed to record transactions in the correct time

period

5/14/2020

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https://statswiki.unece.org/download/attachments/278038679/Recording%20of%20government%20support%20to%20employers%20and%20self-employed.pdf?version=2&modificationDate=1587380197615&api=v2https://www.bea.gov/system/files/2020-05/COVID-19%20Pandemic-Federal%20Recovery%20Legislation%20and%20the%20NIPAs.pdf

Example: Paycheck Protection Program (PPP)

• Loan or transfer payment?o While structured as a loan, the intent of the program is to provide grants to

businesses that use the funds for payroll and other specified expenses.o A portion of loans that are not forgiven should be treated as regular loans.

• Subsidy or Social Benefit?o BEA classifies the forgivable portion of these loan disbursements as subsidies.o Recognizes employers benefit by retaining the employer-employee relationship

and by being positioned to re-open faster.• Measurement

o Subsidy amount should include only the portion of loans that will not be repaid, but this won’t be known in the short-term.

o The subsidy payments are intended to pay payroll for eight weeks after the loan is disbursed, so timing adjustments may need to be made to align operating surplus, subsidies, and compensation.

o These subsidies need to be allocated to proprietors, corporations, and non-profits as well as by industry.

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See FAQ: How does the Paycheck Protection Program of 2020 impact the national income and product accounts (NIPAs)?

Classification of PPP

https://www.bea.gov/index.php/help/faq/1408

Recovery Laws’ Impacts on Federal NIPA Transactions

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Transfers to State and Local Governments: Grants to S&L

Transfers to Businesses: Subsidies

Transfers to People & Non-Profits: Social Benefits

Federal Government Purchases: Consumption & Investment

• Increased spending to replenish the Strategic National Stockpile

• Increased VA Hospital funding• Increased R&D funding

• Economic impact payments • Increased and expanded

unemployment benefits• Expanded SNAP benefits• Non-profit support: community health

centers, etc.

• Paycheck Protection Program• Tax credits to fund emergency sick and

family leave• Employee retention tax credit• Support for hospitals

• Increased Federal Matching Assistance Percentage (FMAP)

• Support for hospitals and community health centers

• Several other grants programs

Outreach & Communication: bea.gov/recovery

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Notes & Technical Information

Paper, Blogs, Articles

FAQs

Impact of Covid-19 on BEA’s Economic AccountsSnapshot: What We’ll Cover Gross Domestic ProductContributions to Percent Change in Real GDPCurrent Dollar DPI, Personal Outlays, and SavingReal Consumer Spending on Goods and Services Measurement Challenges and Solutions Q1 2020Pandemic Response: New Recovery LawsRecording New Recovery Laws in the NIPAsExample: Paycheck Protection Program (PPP)Recovery Laws’ Impacts on Federal NIPA TransactionsOutreach & Communication: bea.gov/recovery