The Trump administration and Congress are scrambling to find ways to inject cash and confidence into the economy as the rapidly spreading coronavirus grinds the country to a halt.
Democrats and Republicans are floating options to quickly put cash into the hands of consumers and the White House is pursuing options to target relief for airlines, cruise companies and other industries hardest hit by a public that is staying shuttered at home.
Congressional leaders have already assigned key committee leaders to develop a third package of legislation in response to the outbreak. This one would more directly stimulate the economy than the $8 billion allocated for equipment and supplies and a bill awaiting Senate action that would provide free virus testing, extend paid sick leave benefits, funnel money to the states for health care, and unlock loans for some small businesses.
“This is like the scene in ‘Jaws’ where they say they’re going to need a bigger boat,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities who was an economic adviser to former Vice President Joe Biden. “The bill that the Senate is considering this week is going to provide like half a percent to GDP, and we are going to need way more than that.”
Senate Democratic leader Chuck Schumer said Monday he will soon announce a $750 billion aid package that would “mainline money into the economy and directly into the hands of families that need it most” as well as address hospital capacity issues, expand unemployment insurance, provide immediate payment forbearance or all federal loans, and pause all evictions and foreclosures.
The White House has taken some action to help buoy the economy, including actions announced last week to delay the tax filing deadline, suspend interest payments on federal student loans and increase oil purchases for a strategic reserve.
“We will reach for every possible way to gird the health and economic side,” Larry Kudlow, President Donald Trump’s top economic adviser, said on Fox Business Monday. “Whatever it takes we are prepared to do.”
Congress will need to sign off on any large, broad based stimulus. Here’s what is likely to be at the center of negotiations for upcoming coronavirus-related bills:
Relief to Airlines, Travel Industry
Trump and Vice President Mike Pence have called on Congress to provide some sort of stimulus to airline, cruise and travel industry companies that have seen business drop — or in some cases, such as Carnival Corp., come to a complete halt.
The airline industry is seeking grants and loans totaling as much as $58 billion from the U.S. government as well as temporary relief from various taxes.
The White House is considering allowing airlines to keep some of the ticket taxes and fees they collect to help shore up their bottom line. House Republicans are drafting a plan that would allow airlines access to federal loans to buy jet fuel and boost grants to fund airport cleanings.
Checks to Households
The White House has been talking about a large payroll tax cut for employers and employees, which would increase workers’ take-home pay and increase cash that companies would typically have to remit to the government.
Trump is keen on the idea and “so am I,” Kudlow said. But, so far, it’s gotten a bipartisan cool reception on Capitol Hill.
Republicans and Democrats, however, are looking at ways to send checks to households, which would get the money into the economy more quickly than a payroll tax cut and would provide a cash infusion to people who don’t earn a paycheck.
Senator Mitt Romney, a Utah Republican, has proposed to immediately send $1,000 checks to every adult American.
Democratic Representatives Tim Ryan, of Ohio, and Ro Khanna, of California, have also proposed sending checks to Americans who earn less than $65,000, which would mean approximately two-thirds of households would qualify. Those checks would range from $1,000 to $6,000 depending on income.
Treasury Secretary Steven Mnuchin, who brokered the most recent coronavirus bill with House Speaker Nancy Pelosi, has said the administration might be open to such payments in the form of a refundable tax credit, saying on Fox News Sunday, “that has certain advantages of we can inject money really quickly.”
Among economists, the idea of across-the-board cash handouts as a response to the epidemic has been rapidly gaining support in recent days as the scale of the shock has become much clearer. Sending checks to all Americans would help households to keep current with financial obligations, from rent to payments due on various kinds of loans, while the economy is on pause and normal incomes dry up. It’s a way of ensuring that people don’t lose their homes or see their credit scores tumble because of a severe but temporary downturn caused by an epidemic.
Retail, Restaurants Boost
Lawmakers are also considering helping retail stores and restaurants that are likely to see large sales drops as they are forced to shut down to stop the virus’s spread. These businesses are likely to see depressed sales for months as a downturn in consumer sentiment keeps shoppers away and some, who rely on overseas imports, are unable to get products from factories in China that have shuttered.
Under consideration is Small Business Administration grants for some businesses that don’t qualify for emergency loans from the agency. Democrats are also looking at ways to provide tax credits to employers who keep employees on the payroll even if they have to temporarily shut down.
Republicans are also keen to fix a mistake in the 2017 tax law that restricted tax breaks for restaurants and retailers renovating their stores. Republicans would likely have to concede a Democratic priority in the bill to get that through, but lawmakers note it could help the economic response because it would encourage businesses to spend and hire construction teams for the renovation.
Democrats are enthusiastic to include funding for infrastructure projects to inject money into the economy and to provide jobs. House lawmakers have begun to identify projects that could be good candidates for spending.
However, infrastructure has proven to be the one issue with theoretical bipartisan agreement that can’t ever seem to gain traction. The most recent infrastructure negotiations ended last year when Trump walked out of a White House meeting with Pelosi and other Democratic leaders. The talks haven’t resumed since then.
Infrastructure has another drawback as an emergency stimulus: it’s slow moving. Even so-called shovel-ready projects can take months to start, and even longer to complete, mitigating any immediate reaction in the economy.
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