Trump White House Infighting Clouds Next Stimulus

By Yuval Rosenberg

$1 Trillion? $2 Trillion? Trump White House Can’t Agree on Next
Stimulus

At the beginning of the week, we
pointed out that White House trade adviser Peter
Navarro had said in a couple of television interviews last Friday
and Saturday that President Trump wants a manufacturing-focused
stimulus package “on the order of at least $2 trillion.”

But this is Trumpworld, where fractious infighting is more than
norm than planned and coordinated policy rollouts, so The
Washington Post’s Jeff Stein
reports that Navarro’s comments came as a surprise
to other administration officials and “appeared to be a sharp
departure from what other White House officials were considering.”
Stein reports that congressional Republicans and administration
officials downplayed Navarro’s television comments. “Navarro speaks
for Navarro,’ one unnamed senior administration official said.
Another offered this simple explanation: “Peter went rogue.”

Two unnamed senior administration officials told the Post that
the administration is more likely to support a stimulus plan
costing around $1 trillion.

‘Widening White House fissures’ over a recovery plan:
Navarro’s apparent freelancing, and the “startled” reaction to it,
illustrate just how far the White House has yet to go to overcome
what Stein calls “widening White House fissures” over the economic
recovery and a next stimulus plan.

“A number of advisers want to reconsider the tremendous amount
of spending that they are pumping into the economy, but they face
growing demands from economists and Federal Reserve Chair Jerome H.
Powell to spend more to prop up the economy,” Stein writes.
“President Trump and his senior economic advisers have said they
want to pass additional stimulus legislation, but jockeying over
that package has intensified as ideological rivals within the
administration vie to shape it.”

Among those efforts, acting budget director Russell Vought and
Mick Mulvaney, the former acting chief of staff, have reportedly
proposed measures that would require long-term reductions in the
deficit to be part of any plan.

Negotiating over the negotiators: The jockeying
reportedly includes some pressure from conservative GOP lawmakers
and activists to have Vice President Mike Pence or Chief of Staff
Mark Meadows take on a bigger role in the dealmaking, amid
complaints that the packages negotiated thus far with Treasury
Secretary Steven Mnuchin as the administration’s point person “have
been too generous to Democrats and allowed spending and other
policy changes that run counter to GOP priorities.”

The bottom line: At a point when many economists say the
economy still needs significant additional support, we’re still a
long way away from a next stimulus package. Many of the White
House’s priorities for the next bill aren’t clear, and those that
are face substantial resistance.

“At this point, there is not a concrete White House proposal, in
part because different economic advisers keep floating different —
and at times contrasting — ideas,” Stein writes.

“The White House has not reached a final decision on whether it
supports an infrastructure package; aid to state and local
governments; another round of $1,200 stimulus checks; delaying the
tax filing deadline beyond July 15; and a fix to the coming
expiration of additional unemployment benefits, among other issues.
Although it is clear Trump is eager to pass a payroll tax cut, a
cut to taxes on capital gains, and deductions for the restaurant
and entertainment industries, the administration has not formulated
a concrete proposal, and these ideas have largely been dismissed by
congressional lawmakers.”


Read more at The Washington Post.

Not Much Help for Small Business, Local Government From $500
Billion Relief Fund: Report

A $500 billion program intended to provide businesses and state and
local governments with low-interest loans and grants during the
coronavirus crisis has mostly benefited large companies so far, a
congressional oversight group said Thursday.

Congress authorized the relief program in the CARES Act in March
and put the Treasury Department and the Federal Reserve Bank in
charge of disbursing the funds. The program includes $454 billion
for emergency lending facilities targeting cash-starved companies,
nonprofits and state and local governments, as well as $46 billion
for airlines and national security contractors.

The latest
report from the Congressional Oversight Commission
says that the Fed has announced how it plans to use $195 billion of
the funds in five lending areas, part of an effort that could
support $2 trillion in loans. But most of the lending facilities
are not operational, and only $6.7 billion of the total package has
been spent so far.

Bond market rebound: The Fed’s plan to buy corporate
bonds has boosted the market, as investors snapped up corporate
debt now backed by the Fed. But the market rebound seems to be the
only significant outcome from the program so far, leaving smaller
businesses and governments out in the cold.

“In some areas of the economy, such as the ability of larger
companies to issue debt to continue operations, the agencies’
actions have had a clear and powerful impact,” the commission
wrote. “But there is less evidence that the actions of the Treasury
and the Federal Reserve have been as beneficial for small and
mid-sized businesses and state and local governments.”

The commission questioned whether the Fed should continue to
purchase corporate debt, given the more robust health of larger
businesses, and suggested that the central bank should focus more
on other entities that need help.

Little help for governments: The lending program
targeting state and local governments, called the Municipal
Liquidity Facility (MLF), has only recently begun to operate and
has made just one loan so far. The Treasury is putting $35 billion
into the fund, which will back as much as $500 billion in lending
by the Fed. But the only loan so far has been in Illinois, where
the Fed purchased $1.2 billion in notes.

Small business program has only just begun:
The Fed is using $75 billion from the Treasury to back as
much as $600 billion in lending to small and mid-sized businesses,
defined as those with as many as 15,000 employees or up to $5
billion in annual revenues. But the Main Street Lending Program
just started taking applications this week, and has yet to extend
any loans.

Will Congress Provide More Support for Small
Businesses?

The Paycheck Protection Program, the $660 billion rescue program
for small businesses, is set to stop accepting applications at the
end of the month after having approved
more than $510 billion in forgivable loans to more
than 4.6 million applicants.

The question is what comes next, as lawmakers, economists and
small business advocates say more help may be needed, especially
for vulnerable industries like restaurants and hotels. Politico’s
Zachary Warmbrodt
reports:

“While there is still $130 billion left unspent in the
so-called Paycheck Protection Program, lobbyists say that's because
there were onerous restrictions — chiefly that businesses are
prohibited from borrowing a second time, so if they're out of
money, they're out of luck. Others say that many potential
borrowers were largely left out of the process, including minority
employers, who often don’t have relationships with bankers.”
“Still others are looking for a longer-term solution: There is
emerging bipartisan support for new government-backed lending that
would last much longer than lawmakers first envisioned with the
Paycheck Protection Program, which was designed to delay mass
layoffs in the early days of the pandemic.”

The bottom line: PPP critics are
pushing for stricter limits and better targeting for funds provided
through the program, but support is reportedly growing for letting
businesses apply for a second round of loans. The PPP may yet be
revived, but if it is it could be with some sizable
changes.

Quote of the Day

“It really does feel like the U.S. has given
up.”

– Siouxsie Wiles, an infectious-diseases
specialist at the University of Auckland in New Zealand, in a

Washington Post piece on the many health experts
in countries with falling coronavirus case numbers watching the
U.S. response “with a growing sense of alarm and
disbelief.”

Fiscal Flashes

Coronavirus Will Likely Lead to Thousands More Cancer
Deaths: Norman “Ned” Sharpless, director of the National Cancer
Institute, warned Thursday in an editorial
in the journal Science that delays in screenings, diagnoses and
treatment resulting from the pandemic will lead to an estimated
10,000 more deaths from breast and colorectal cancer over the next
decade, or about a 1% increase over what would have been expected
otherwise. “Cancers being missed now will still come to light
eventually, but at a later stage (“upstaging”) and with worse
prognoses,” he wrote. Sharpless added that the estimate may be too
conservative. (Washington
Post)

Trump Administration Has Paid $7.3 Million for Unusable
Mini Soda Bottles: The Trump administration has
paid a first-time federal contractor $7.3 million for test tubes
used in tracking the coronavirus, and the deal could still grow to
cost $10.16 million. But the company, Fillakit LLC, has supplied
FEMA with more than 3 million plastic tubes made for bottling soda
— tubes that are medically unusable because of their size and
shape, and likely contaminated to boot. “The Fillakit deal shows
the perils of the Trump administration’s frantic hiring of
first-time federal contractors with little scrutiny during the
pandemic,” write J. David McSwane and Ryan Gabrielson. (ProPublica)

Wishing you a joyous and reflective
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