Mnuchin: More Stimulus ‘Definitely’ Needed

By Yuval Rosenberg

Mnuchin: US Will ‘Definitely’ Need More Stimulus

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.”

Budget Deficit Soars to $1.9 Trillion After Coronavirus Relief
Spending

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.

Quote of the Day: No Rate Hikes Anytime Soon

"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.

Chart of the Day: Double-Dip Recession?

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.”

Map of the Day: Where $80 Billion in Small Biz Disaster Loans
Have Gone

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.”

Trump Budget Nominee Clears First Hurdle

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.

Number of the Day: $76,859.36

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.”

News

Views and Analysis