The government’s economic stimulus is ballooning into trillion-dollar territory — the largest rescue in modern American history — as major industries flood the Trump administration and Capitol Hill for aid while huge swaths of the economy stall from the coronavirus crisis.
Treasury Secretary Steven Mnuchin met with Senate Republicans behind closed doors Tuesday to present options for aid to airlines, hotels, casinos and small-to-medium-sized businesses. The White House had been discussing a package of more than $800 billion, POLITICO reported Monday. By Tuesday morning, the Treasury Department was preparing to unveil a package of $850 billion including more than $50 billion for the airline industry, $250 billion for small-business support and $500 billion for aid to individuals through direct payments or payroll tax cuts.
By Tuesday afternoon, Mnuchin acknowledged it was more than $1 trillion — and justified given the severity of the downturn.
“This is not like a normal economic situation,“ he said afterward. “The government has requested that parts of this economy shut down.”
Mnuchin warned senators that if they didn’t reach a deal quickly, unemployment could be as high as 20 percent, according to a person familiar with his comments. (The jobless rate peaked at 10 percent in 2009 after the Great Recession and around 25 percent in 1933 during the Great Depression.)
The Trump administration is pushing to send direct payments to Americans in the next two weeks as huge parts of the economy shut down. “Americans need cash now,” Mnuchin said earlier in the White House briefing room. “And the president wants to get cash now. And I mean now in the next two weeks.“ He planned to discuss the move with lawmakers and announce details later Tuesday.
Democrats are pushing their own package of provisions that don’t overlap entirely with the GOP pitch. Senate Minority Leader Chuck Schumer (D-N.Y.) and other Democrats are pitching a package of “at least” $750 billion that is expected to include more emergency aid for hospitals, expanded unemployment insurance, more funds for small business, help with child care, and food assistance for seniors.
The size and scope of the package are morphing rapidly as the economic and market damage mounts. The Trump administration’s goal is to provide individuals and companies with enough cash through emergency payments, loans, tax deferrals or temporary tax cuts to help them survive the sudden downturn.
The presentation was also expected to include an idea President Donald Trump has latched onto — a temporary cut or suspension of the payroll tax cut through the end of the year which would benefit both companies and workers. One version of the payroll tax holiday would cost $950 billion alone through the end of the year.
CEOs, union leaders and lobbyists have been warning the administration of mass layoffs if the government does not help soon. Senators seem poised to act this week, while the House is still in recess.
Cobbling together a stimulus package worth more than $1 trillion would mark a major ideological shift for Republicans, who spent years decrying debt and government bailouts following the 2008 global financial crisis. But with uncertainty surrounding the spread of the coronavirus and the volatility in the stock market, the White House does not seem concerned about the price tag — only stopping the financial freefall.
Other ideas that have circulated throughout the administration in recent days include inserting into the economic stimulus package a large-scale public works project; tweaks to the EB-5 visa program to boost foreign investment; tariff relief; and even a one-time cash payment to Americans between $500 to $750, according to people close to the administration.
The Federal Reserve and Treasury are already launching programs to provide support through emergency powers. The central bank on Tuesday announced a new lending program, the Commercial Paper Funding Facility, under its authority under Section 13(3) of the Federal Reserve Act. The Treasury Department will provide taxpayer backing for the effort with $10 billion in capital from its Exchange Stabilization Fund.
“The economic disruption and uncertainty created by COVID-19 has created challenges for the commercial paper market, constraining access to short-term credit for American businesses,” Mnuchin said. “By providing short-term credit, the CPFF will help American businesses manage their finances through this challenging period.”
Some senior White House officials are also pushing Treasury to issue long-term bonds that would mature in 50 or 100 years to help cover the cost of the stimulus package. Mnuchin has said repeatedly in the past that he is considering issuing such bonds to take advantage of interest rates that the Fed has now pushed to near zero. National Economic Council Director Larry Kudlow has long advocated for the issuance of such bonds, an idea also supported by outside economic advisers to the White House.
Republican Sen. Mitt Romney in recent days has called for giving every American over the age of 18 a check for $1,000 as a form of economic stimulus — a move the administration was moving toward by Tuesday.
The coronavirus relief packages under consideration now by Congress are set to eclipse prior efforts.
The economic stimulus program cleared through Congress in early 2009 under the Obama administration was nearly $800 billion, including a tax cut, infrastructure and numerous other provisions.
The bank bailout plan passed by Congress in 2008 under the Bush administration — formally the Troubled Asset Relief Program or TARP — authorized $700 billion originally intended to buy toxic assets from banks, mainly mortgage-backed securities that plunged in value during the housing crisis. The money was later diverted to multiple different programs to inject capital into banks.
The TARP program ultimately disbursed around $426 billion and eventually recovered $441 billion, earning the Treasury Department a nominal profit of around $15 billion. That figure remains controversial. Taking into account inflation from the time of the bailouts, the government actually lost around $25 billion on the program.
It also generated widespread anger that banks and bankers got bailed out while ordinary citizens received far less. The Trump administration is well aware of this history and taking pains to avoid the same optics; top economic officials like Mnuchin and other senior aides around Trump keep emphasizing the need to help small and medium-sized businesses as well.
“Everyone will need assistance and that is the bottom line. This is the demand issue because consumers have stopped spending,” said Alfredo Ortiz, President and CEO of the Job Creators Network, a conservative-leaning group founded by entrepreneurs including The Home Depot founder, Bernie Marcus. “Every industry will need some level of assistance. In the past, Main Street America has not been as represented in some economic stimulus packages.”
Ortiz said he has been in touch directly with Mnuchin, who seems very amenable to including relief for small-to-medium-sized businesses in any package.
The TARP program also drew widespread criticism for creating a moral hazard — banks could feel emboldened to take risks knowing the government would rescue them — while creating fewer and even larger banks that now enjoy a bigger federal backstop. Part of the reluctance among members of Congress and the administration to direct cash payments to individual industries like airlines and hotels stems from the TARP experience and deep voter resentment toward corporations and their highly paid executives getting aid over regular citizens.
Senior White House officials know that direct aid to airlines in particular may be necessary to avoid crippling bankruptcies, but they are leery of being seen as handing out bailouts and want to be sure that any such aid is dwarfed by proposals that would direct cash to consumers. Democrats are already pushing to ensure any bailout includes strings attached.
As top economic officials and Senate leadership negotiate this stimulus package, Trump is spending the day on the phone with executives from the restaurant and tourism industries, supply retailers and wholesalers. Vice President Mike Pence is scheduled to meet with CEOs of major hotels including Hilton, Marriott, Hyatt and MGM Resorts International.
Marianne LeVine, Theo Meyer, Gabby Orr, Nolan D. McCaskill and Michael Grunwald contributed to this report.
Powered by WPeMatico