Mnuchin Calls for Congress to Pass More Stimulus This Month

WASHINGTON — Treasury Secretary Steven Mnuchin called on Congress on Friday to work with the Trump administration to pass additional stimulus legislation by the end of the month as the coronavirus pandemic continued to inject uncertainty into how quickly the economy would recover.

The request comes as the virus continues to surge in certain areas and as millions of Americans are about to see their expanded unemployment insurance benefits expire. Lawmakers are expected to soon embark on an intense stretch of negotiations over what would be the fourth significant bailout package since the virus shuttered large sections of the U.S. economy this year.

In testimony before the House Committee on Small Business, Mnuchin said that the next round of money to support the economy should be targeted to help industries that have been hardest hit by the pandemic, as well as smaller businesses and low- to middle-income families. Mnuchin also said that the Paycheck Protection Program, which provides forgivable small-business loans, should be extended but with a focus on helping the restaurant, hotel, travel and hospitality sectors.

“We are monitoring economic conditions closely,” Mnuchin said in his remarks. “Certain industries, such as construction, are recovering quickly; while others, such as retail and travel, are facing longer-term impacts and will require additional relief.”

Mnuchin added that a rise in virus cases needed to be taken into consideration: “We are also sensitive to the fact that certain areas of the country are experiencing increased numbers of cases of the virus.” Cases are rising in 39 states, according to a New York Times database. But while Mnuchin acknowledged more areas would need help, he continued to suggest a robust recovery was ahead — a far rosier view than many economists were predicting, given continuing infections and renewed restrictions on business activity.

Mnuchin pointed to forecasts of strong economic growth in the third and fourth quarters of this year and to a survey that showed a majority of small businesses have at least partly reopened.

“Recent improvements in unemployment insurance claims suggest that the job market has continued to strengthen in July,” Mnuchin said.

Almost four months after Congress unanimously passed $2 trillion in relief funding, Mnuchin may find that coming to terms on a package is far more difficult than it was in March. With the two parties split over several key policy areas, finding bipartisan agreement on how to help schools safely reopen, continue to prop up businesses and support the unemployed may require significant concessions from both sides and intraparty splits.

Democrats have already started accusing Republicans of refusing to come to the negotiating table, even as they insist they will accept nothing less than the $3 trillion proposal House Democrats passed in May. Republicans, who plan to introduce their own plan as soon as next week, have indicated they want to spend closer to $1 trillion and will focus on “kids, jobs, health care and liability protection” for businesses, schools and medical workers.

“Instead of working with the Democrats to get something done, McConnell’s office is running a partisan process,” Sen. Chuck Schumer of New York, the Democratic leader, said during a call with reporters Friday, referring to Sen. Mitch McConnell, R-Ky., the majority leader.

One big sticking point is whether to send billions in additional money to state and local governments, as Democrats have insisted and Republicans have resisted. Mnuchin underscored his reluctance to offer robust federal assistance at the hearing. He dismissed arguments that states like New Jersey, New York and California send more tax money to the federal government than they receive in assistance and argued that state budget shortfalls should generally be addressed through cost cutting or tax increases.

If states had financial problems going into the crisis, Mnuchin said, “it’s not the federal government’s role to bail them out of that.”

But two former Federal Reserve chairs, Ben Bernanke and Janet Yellen, urged lawmakers to provide help to states facing large budget shortfalls, saying failure to do so could hold back economic growth.

“Congress should provide substantial support to state and local governments,” they told lawmakers in testimony before the Select Subcommittee on the Coronavirus Crisis. “As we learned after the financial crisis, fiscal contraction at the state and local level slows the national economy and offsets the benefits of federal action.”

Both officials also said they supported expanding the extra $600 per week in unemployment benefits that are set to expire July 31, with Bernanke suggesting there could be tweaks made to address concerns about disincentives.

“I think you could modify the structure to satisfy some of your Republican colleagues,” Bernanke said, but added that it was “very important” to consider further support for the unemployed.

White House officials have been debating how to structure another round of economic impact payments that would be sent directly to American taxpayers. They are also weighing whether to continue the enhanced unemployment benefit payment that Democrats say is providing a vital financial cushion and that many Republicans say is encouraging people not to return to work.

President Donald Trump has publicly called for a payroll tax cut and tax deductions for dining and entertainment expenses, but these proposals have received little support in Congress from either party. Larry Kudlow, Trump’s economic adviser, made the case for a payroll tax cut during an interview on Fox News Radio and said a cap should be placed on how much expanded unemployment insurance someone can receive. He and other Republican lawmakers are pushing for a rehiring “bonus.”

“This one will be smaller, much more targeted, much smarter and efficient going after things,” Kudlow said of the bill that Republicans would support.

Lawmakers agree that Congress needs to allocate more money for schools trying to reopen their doors this fall, but the White House has shown interest in trying to require schools that take money to bring students back in person. And it also wants to extend funds to private and religious schools. Democrats have balked at those proposals, while Senate Republicans are weighing possible approaches to prod or incentivize schools to open their campuses.

“We can’t have a normal country unless kids are in school,” McConnell said this week.

A proposal by McConnell that circulated Friday would also convey sweeping liability protections on businesses, schools, hospitals, charities, government agencies and front-line medical workers trying to navigate the coronavirus pandemic. McConnell said he would not put any bill on the Senate floor that did not include liability protections, but Democrats have taken the opposite approach, proposing new protections for workers facing increased health and safety risks, rather than for employers.

Mnuchin was joined at the hearing by Jovita Carranza, administrator of the Small Business Administration, whose agency has been responsible for deploying the $660 billion Paycheck Protection Program.

Lawmakers questioned both Mnuchin and Carranza over how well the small-business program was working, including whether money was getting to businesses that needed funds and if companies faced too many hurdles to getting their loans forgiven.

Asked about simplifying the loan forgiveness process, Mnuchin said that automatically forgiving all small loans was “something we should consider.” He suggested that some measures would be needed to prevent fraud and to make sure that the money was used appropriately.

In the next legislative package, Mnuchin said he would like to see the small-business lending program extended so that businesses that already received loans could apply a second time. Businesses that have been hit the hardest — based on a combination of lost revenue and size — should be prioritized for approval.

Mnuchin and Carranza also reiterated that the government would review large loans to ensure that they were appropriate and within the government’s guidelines.

Data released on loans exceeding $150,000 showed that while much of the money had gone to restaurants, medical offices and car dealerships, Washington lobbying shops, high-priced law firms and special-interest groups also received big loans.