Mnuchin: More Stimulus ‘Definitely’ Needed

Treasury Secretary Steven Mnuchin said Wednesday that the U.S. economy has begun to rebound from coronavirus closures and will “improve dramatically” over the second half of the year, but that more fiscal support will be needed, especially for hard-hit sectors.

“I definitely think we are going to need another bipartisan legislation to put more money into the economy,” Mnuchin said at a hearing of the Senate Small Business and Entrepreneurship Committee. He later added: “We absolutely believe small business — and, by the way, many big businesses in certain industries — are absolutely going to need more help.”

Mnuchin said that the administration does not want to rush that legislation but plans to spend the next 30 days considering what should go into the next package and would “seriously look” at whether more direct stimulus payments should be included. “Whatever we do going forward needs to be much more targeted to the industries and small businesses that are having the most difficulty reopening as a result of Covid-19,” he said.

Mnuchin pointed to travel, leisure and restaurants as industries that would need more help and that new support measures will be needed to encourage businesses to rehire workers.

Targeting enhanced unemployment benefits: Mnuchin also said again that the enhanced jobless benefits provided by Congress will need to be fixed, since in many cases workers earned more in unemployment than they had at their jobs. “I think we’ve seen from the recent [unemployment] numbers that didn’t have a big impact, because people want their jobs,” he said, but with unemployment expected to remain high, the benefits will have to be evaluated.

Labor Secretary Eugene Scalia said Tuesday that the administration opposes a Democratic proposal to extend the $600 in additional weekly unemployment benefits. Those benefits are set to expire at the end of July. Scalia told the Senate Finance Committee that those enhanced payments were “the right thing to do” when introduced in March, but are no longer needed. “There’s been discussion of perhaps having a smaller benefit ― not $600, but perhaps $250,” Scalia said.

Praise for PPP: Mnuchin credited the Paycheck Protection Program with supporting 50 million jobs and more than 75% of small business payroll in all 50 states. He said that some $130 billion in PPP funds remain unspent and some money would likely be left after the June 30 application deadline passes. He told Republican Sen. John Kennedy of Louisiana that he’s open to repurposing money to help businesses hurt by recent looting.

Loosening loan forgiveness rules: Mnuchin also confirmed that PPP borrowers who don’t spend 60% of their loans on payroll costs will still be able to have a portion of their loan forgiven. The loan program initially required 75% of borrowed funds to be used on payroll in order to qualify for loan forgiveness, but Congress lowered that threshold to 60% in legislation signed into law last week. Mnuchin and Small Business Administration chief Jovita Carranza announced earlier this week that borrowers who use less than 60% of their funds on payroll will still be eligible for partial loan forgiveness — “subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.”

The federal budget deficit grew to $1.88 trillion in the first eight months of the 2020 fiscal year, the Treasury Department announced Wednesday.

Nearly twice the deficit recorded in all of 2019, the gap between revenues and outlays was driven largely by the more than $3 trillion Congress has appropriated to help businesses and individuals struggling amid the coronavirus epidemic. The deficit is likely even larger, Treasury officials said, since the numbers don’t include the more than $600 billion lawmakers have provided for small business loans, many of which will be converted to grants that won’t be paid back.

Despite the enormous increase in the deficit, most lawmakers and economists across the political spectrum agree that the additional spending on relief measures has been necessary and unavoidable, given the severity of the recession caused by the pandemic. “They would have thought you were pretty crazy if you were yelling about the deficit in 1943. It’s a comparable situation now," Dean Baker, co-director of the Center for Economic and Policy Research, told The Washington Post. "You have to spend enough to keep people more or less whole. There is not much of an issue here.”

Still, White House economic advisers have started to express concerns about the issue. And some budget hawks have criticized the lack of fiscal discipline in the years running up the coronavirus crisis that made the current situation worse. “If policymakers had spent the past five years addressing the debt rather than passing massive tax cuts and spending hikes, we could have offered more economic support and still had lower deficits,” said Marc Goldwein of the Committee for a Responsible Federal Budget.

One thing that there’s little doubt about: There’s a lot more deficit spending to come. The Congressional Budget Office estimates that the deficit will hit roughly $3.7 trillion in the current fiscal year.

"We're not thinking about raising rates. We're not even thinking about thinking about raising rates."

– Federal Reserve Chair Jerome Powell, at a press conference Wednesday afternoon after the central bank left its benchmark interest rate near zero and projected no rate hikes through at least 2022.

The Fed also projected that the economy would shrink 6.5% this year before growing 5% next year, and it forecast that the unemployment rate would fall to a still-high 9.3% by the end of the year before dropping to 6.5% by the end of 2021. “It’s possible we will need to do more. It’s possible Congress will need to do more," Powell said.

Michael Strain of the American Enterprise Institute tweeted Wednesday: “Without an additional round of economic recovery legislation, Moody’s Analytics’ macroeconomic model finds that the U.S. will experience a double-dip recession.”

The Small Business Administration has approved more than 1.1 million coronavirus-related Economic Injury Disaster Loans totaling nearly $80 billion out of about $365 billion in available program funds, according to a recent report highlighted by The Washington Post.

The disaster loan program is separate from the $660 billion PPP, and a Post analysis of the EIDL loans found wide variation by state, with about 40% of the funds going to four states: California ($15.1 billion), Florida ($6.9 billion), Texas ($6.7 billion) and New York ($6.1 billion).

“A few states with relatively small economies received an outsize share of the disaster-loan funding after adjusting for the number of small businesses in the state,” the Post’s Aaron Gregg and Andrew Van Dam write. “Meanwhile several states that were hit hard by the coronavirus received a relatively low amount of funding through EIDL, even after adjusting for the number of small businesses in the state.”

The Senate Homeland Security and Governmental Affairs Committee voted 7-4 along party lines to confirm Russell Vought as the permanent director of the Office of Management and Budget.

A staunch conservative long associated with the Heritage Foundation and a protégé of former budget chief Mick Mulvaney, Vought has been serving as the acting director of OMB since January 2019.

The Senate Budget Committee will vote on Vought’s nomination Thursday, with the vote once again expected to fall along party lines. He is expected to win approval in a full Senate vote soon after.

From USA Today: “The Secret Service protection for Donald Trump Jr.'s trip in August 2019 to Mongolia, where he reportedly hunted a rare breed of sheep, cost taxpayers $76,859.36, according to documents published Wednesday by a Washington ethics watchdog.”

• Second U.S. Virus Wave Emerges After State Reopenings – Bloomberg
• White House Goes Quiet on Coronavirus as Outbreak Spikes Again Across the U.S. – Politico
• ‘We Need Help’: Small Cities Face Fiscal Calamity From Virus – Associated Press
  
• Republicans Prepare to Punt on Next COVID-19 Relief Bill – The Hill
• What the Labor Department Is Doing About the ‘Error’ That Led to a Lower Unemployment Rate – Washington Post
• Satisfaction With U.S. Direction Lowest in Four Years – Gallup
• U.S. Lawmakers Propose $25 Billion to Aid Semiconductor Industry – Bloomberg
• As Many As 35 Million People Haven’t Yet Received Stimulus Checks – HuffPost
• Outcry as Some Nursing Homes Try to Grab Stimulus Checks – Associated Press
• Koch-Backed Ad Campaign Urges Congress to Make Coronavirus Changes Permanent – The Hill
  
• Senators Seek Probe into Trump Administration's 'Project Airbridge' Medical Supply Deliveries – The Hill
• Treasury Defends SALT Deduction Cap Against N.Y.-Led Lawsuit – Bloomberg Tax
  
• Billions in COVID Relief Go to Biggest Hospital Chains as Smaller Rivals Await Aid – Reuters
• Pfizer Says It Won't Put "Huge Price" on Coronavirus Vaccine – Axios
• Insurers Limit Which Coronavirus Tests They'll Cover – Axios
• Chicago Announces $5M Fund for People Excluded From Federal Coronavirus Relief Act – Chicago Tribune

• America’s Great(er) Recession Will Last for Years – Noah Smith, Bloomberg
• America Was Not Ready to Reopen – Ryan Cooper, The Week
• The COVID-19 Crisis Reveals The President’s Misplaced Budget Priorities – C. Eugene Steuerle, Tax Policy Center
• Debunking Debt Myths in the COVID Economy – Committee for a Responsible Federal Budget
• The Illusion of a Rapid US Recovery – James K. Galbraith, Project Syndicate
• Businesses Need a Safe Harbor From Covid-19 Lawsuits – Ramesh Ponnuru, Bloomberg
• ‘Defund the Police’ Is a Call to Imagine a Safer America. We Should Answer It. – Washington Post Editorial Board
• ‘Defund the Police’ Isn’t a Winning Campaign Slogan. But It Has a Point. – David Von Drehle, Washington Post