The Proposed $1.2 Trillion Stimulus
The Trump administration is discussing a plan that could amount to as much as $1.2 trillion in spending -- including direct payments of $1,000 or more to Americans within two weeks -- to blunt some of the economic impact of the widening coronavirus outbreak.
Treasury Secretary Steven Mnuchin pitched $250 billion in checks to be sent at the end of April with a second set of checks totaling $500 billion four weeks later if there’s still a national emergency, according to a person familiar with the matter.
“Americans need cash now, and the president wants to give cash now. And I mean now, in the next two weeks,” Mnuchin said Tuesday at a White House briefing alongside President Donald Trump.
“It is a big number,” Mnuchin told reporters later on Capitol Hill. “This is a very big situation in this economy, we put a proposal on the table that would inject $1 trillion into the economy.”
The administration had been discussing a total aid package of $850 billion, but discussions later included spending as much as $1.2 trillion, according to people familiar with the matter.
The cash payments would be part of a stimulus plan Mnuchin is negotiating with Congress. The administration hasn’t decided on how much to send Americans, but wants the checks to exceed $1,000, according to two people familiar with the matter.
Mnuchin’s proposal included $300 billion for small business loans, $200 billion in stabilization funds, $250 billion in cash payments and a possible second round of checks, people familiar with the matter said. Including tax deferrals, that would bring the cost of the plan to around $1.2 trillion.
Mnuchin said the administration will aim not to send checks to millionaires but stressed the need for urgency. The checks will be subject to some kind of income test, according to one of the people familiar with the matter.
He said he talked Tuesday morning with House Speaker Nancy Pelosi and he met with Republican senators at the Capitol later.
The Senate GOP will work with the administration to come up with a stimulus bill and then begin negotiating with Democrats, whose votes will be needed to get the package through, McConnell said.
“We’re not leaving town until we’ve constructed and passed another bill,” he said.
The Senate will vote on the House-passed package and not try to combine it with a stimulus plan.
While some Senate Republicans object to the House bill, “my counsel to them was to gag and vote for it,” McConnell said. Any shortcomings can be addressed in the next piece of legislation.
Earlier Tuesday, Trump said, “I think we’re going to do something that gets money to them as quickly as possible.” The president said he still favored a payroll tax holiday but indicated he was willing to defer to his advisers and a growing number of lawmakers who are getting behind direct payments.
Mnuchin also said the government intends to keep stock markets open.
Plunging stock prices and the abrupt drop-off of consumer spending during a time of social distancing has crystallized the need for Congress to act quickly and boldly. The Federal Reserve has already used much of its toolbox to shore up the economy, leaving policymakers to dull the extent of the damage with fiscal stimulus.
News of stepped-up government efforts to offset the financial damage caused by the outbreak prompted a rebound in U.S. stocks. The S&P 500 jumped as much as 7% before paring back to 4%, continuing a streak of volatility last seen during the Great Depression. The Dow Jones Industrial Average notched a 2% gain.
The Senate on Tuesday was poised to take up a House-passed economic relief measure. That package, negotiated by Mnuchin and Pelosi last week and endorsed by the president, pays for virus testing, bolsters unemployment and food assistance and will send tens of billions in fresh aid to states.
Its centerpiece gives workers at companies with fewer than 500 employees up to 12 weeks of paid family and sick leave to deal with issues involving the coronavirus, including staying home to care for children home from school. The tax credits for paid family, sick and medical leave in the virus bill would cost nearly $104.9 billion, according to the Joint Committee on Taxation.
It wasn’t clear whether the Senate would attempt to add additional provisions to that legislation or take up a bigger stimulus bill separately.
Senator John Thune, the No. 2 Republican leader, said lawmakers have not determined a path forward on added stimulus beyond the House bill, but various options are under discussion.
“We’re not going to slow the process down on the House-passed package unless there’s a good reason to do it,” he said.
The idea of issuing checks to Americans has been endorsed by lawmakers across the ideological spectrum. But it may not be practical to get money to Americans as fast as Trump desires. When Congress sent stimulus checks in 2009 to combat the financial crisis it took more than two months from the signing of the bill to checks hitting the mail. It’s quickest and simplest for Congress to send the same amount to every individual person, but still will take months to happen, Marc Gerson, a former tax counsel for the House Ways and Means Committee, said. If lawmakers decide to give more money to lower-income workers, it becomes even more complicated. “There are practical limitations with cutting checks,” he said.
Jared Bernstein, an economist at the Center on Budget and Policy Priorities, said that if the checks do, in fact, go out in two weeks, the boost to the economy will be seen in three weeks. “That’s how much people are already pressed. Those checks will go right into revolving debt payments like mortgages or credit cards, or putting food on the table.”
In a further move to relieve financial stress on average Americans, Mnuchin said that individual taxpayers can get a deadline extension on paying taxes of up to $1 million and corporations can defer tax payments of up to $10 million. The deferments can total as much as $300 billion, Mnuchin said, up from $200 billion he proposed last week.
The 90-day delay gives taxpayers additional time to pay their outstanding tax liabilities without interest or penalties. The White House is encouraging taxpayers to still file by April 15 if they don’t owe the IRS any money.
Trump on Monday advised Americans not to meet in groups larger than 10, to avoid restaurants and bars and to educate their children at home if practicable. Vice President Mike Pence said that if those social-distancing guidelines are followed, the U.S. may see “a substantial reduction in the spread of the coronavirus.”
There have been more than 5,000 cases of the virus in the U.S. and 91 deaths, according to Johns Hopkins University.
Pence also said Tuesday the White House is asking construction companies to donate their supplies of N95 air-filtering masks to hospitals and to “forgo making additional orders” in order to ensure health-care workers have sufficient access to the gear.
—Bloomberg News provided this article.
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