Another $2 Trillion for Coronavirus Relief?
Treasury Secretary Steven Mnuchin said late last week that it was premature to speculate about the size of the next coronavirus relief package. “Before we rush back and spend more money, whether that’s a trillion dollars or whether that’s more, we want to make sure we’re careful in knowing how much more we need to spend,” he said.
So maybe White House trade adviser Peter Navarro was being premature, but twice in recent days he has said that President Trump is looking for the next stimulus to be at least $2 trillion and wants the package to be focused on boosting U.S. manufacturing.
“The president is very interested in something on the order of at least $2 trillion, with the bulk of that focused on bringing home our manufacturing base, starting with pharmaceuticals and medical supplies and equipment,” he told Fox Business on Friday.
He made similar comments on CNN on Saturday, saying that Trump wants to see "at least $2 trillion that is strategically focused around the president's two simple rules—buy American, hire American—along with incentives for American companies to bring offshored jobs back home."
The $2 trillion figure floated by Navarro falls between the $3 trillion that House Democrats provided in a bill they passed a month ago and the $1 trillion that Senate Majority Leader Mitch McConnell reportedly set as a ceiling for the next package.
Kudlow Says $600 Unemployment Benefit Boost Will End
Larry Kudlow, director of President Trump’s National Economic Council, said on Sunday that the $600 in extra weekly unemployment benefits provided by the federal government as part of coronavirus response efforts are creating a “disincentive” for some workers to return to their jobs and will end in late July.
"Unemployment benefits will not stop in August," Kudlow said, clarifying that regular state benefits will continue. "The $600 plus up, that's above the state unemployment benefits that they will continue to receive, is in effect a disincentive, or I mean we're paying people not to work. ... That might have worked for the first couple of months. It will end in late July.”
Kudlow added that Trump and the administration are “looking at a reform measure that will still provide some kind of bonus for returning to work, but it will not be as large and it will create an incentive to work."
Lawmakers are debating whether to continue the $600 payments, which Democrats want to extend through January 2021.
The Congressional Budget Office projected this month that if the payments were extended for six months, about five out of six workers on unemployment would earn more in jobless benefits than their potential earnings through work. The likely result, CBO said, would be that employment levels would be lower over the second half of this year and in 2021.
At the same time, CBO said that extending the benefits would help the economy by increasing demand for goods and services. “The additional $600 per week in unemployment benefits under current law allows people to continue to consume goods and services that they might otherwise be unable to afford and to save for future contingencies,” the budget scorekeeper said.
The Labor Department said earlier this month that 21 million Americans were unemployed in May.
House Dems Press for Details of Small Biz Bailout Loans
House Democrats overseeing the coronavirus response are demanding details from eight big banks about the implementation of the Paycheck Protection Program of coronavirus relief loans to small businesses.
In letters to Bank of America, Citibank, JPMorgan Chase, PNC Bank, Santander, Truist Bank, U.S. Bank and Wells Fargo, House Majority Whip James Clyburn (D-SC) and six colleagues said the House Select Subcommittee on the Coronavirus Crisis “is investigating whether implementation of the Paycheck Protection Program (PPP) has favored large, well-funded companies over struggling small businesses in underserved communities—contrary to Congress’ clear intent.”
The Paycheck Protection Program has approved more than $512 billion in loans, but the program has also been plagued by reports that large companies with access to other funds received loans while some smaller businesses had difficulty in getting approved.
“We have significant concerns that the two-tiered system that some banks reportedly developed for wealthy clients may have diverted PPP funds intended for vulnerable small business owners in underserved and rural markets, including small businesses owned by veterans, members of the military, socially and economically disadvantaged individuals, women, and businesses in operation for under two years,” the Democrats wrote in their letters.
Treasury Secretary Steven Mnuchin also set off a storm of criticism last week when he reversed course on a pledge to provide “full transparency” regarding recipients of more than $500 billion in Paycheck Protection Program funds. Mnuchin told Congress last week that the names of loan recipients and amounts they received are “proprietary” and “confidential.”
Watchdog groups and lawmakers, including some Republicans, have objected to the administration’s refusal to disclose details of PPP loans. Clyburn and his colleagues on Monday also wrote to Mnuchin and Small Business Administration chief Jovita Carranza asking for their communication with the banks and financial industry associations as well as details, including names and loan amounts, for PPP borrowers and applicants.
“Contrary to Secretary Mnuchin’s recent testimony, there is nothing ‘proprietary’ or ‘confidential’ about a business receiving millions of dollars appropriated by Congress, and taxpayers deserve to know how their money is being spent,” the lawmakers wrote in their letter.
Mnuchin on Monday tweeted that he “will be having discussions with the Senate [Small Business Committee] and others on a bipartisan basis to strike the appropriate balance for proper oversight of #ppploans and appropriate protection of small business information."
The Fed Fires Up $600 Billion Main Street Lending Program
The Federal Reserve Bank has finally opened its highly anticipated lending program for small and medium-sized businesses.
Using $75 billion provided by Congress through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March, the Fed announced in April that it would lend up to $600 billion through the Main Street Lending Program to provide relief to businesses struggling during the coronavirus crisis. On Monday, the Federal Reserve Bank of Boston opened for banks to register as lenders within the program.
“The Main Street Lending Program is designed to help credit flow to small and medium-sized businesses that were in sound financial condition prior to the COVID-19 pandemic but now face cash flow interruptions,” the Federal Reserve Bank of Boston said in a statement.
Eligible businesses can have as many as 15,000 employees or up to $5 billion in annual revenues. Loans will range from $250,000 to $300 million, with five-year terms and floating interest rates. No interest is due in the first year, and no principal is due for two years.
The Federal Reserve will purchase 95% of the loans, with the goal of reducing risk to enable lenders to make more loans.
New York Could Lose 40% of Its Tax Revenue Due to Pandemic: Report
States can expect to see a 20% drop in tax revenues on average due to the coronavirus slowdown, and the 10 hardest-hit states could experience losses of more than 30%, according to a new analysis from a pair of economists published over the weekend. New York, the epicenter of the crisis, will likely see the biggest losses, with revenues falling by about 40%.
Examining 25 years of economic data, the researchers found that states record a 1.56 percentage point increase in tax receipts for every 1 percentage point rise in employment, with the revenues flowing primarily from higher sales, corporate and individual income taxes. Extrapolating from the results, the economists estimate that states will lose about $63.7 billion in revenues in the coronavirus recession, with the average state seeing a $1.25 billion drop, or 20%. (Both revenue figures are in 2012 prices.)
On Monday, New York State Comptroller Thomas DiNapoli provided some anecdotal evidence that jibes with the analysis, announcing that sales tax revenues for local governments in the state had fallen 32% in May compared to the year before.
Why it matters: Economists worry about the negative effects of fiscal belt-tightening at the state level. “Budget shortfalls are forcing state and municipal authorities to cut jobs and spending, as they did after the 2008 financial crisis when local austerity held back the economy’s recovery,” Bloomberg’s Alexandre Tanzi said Monday, adding that “Congress is deadlocked over sending more cash to the states to plug the gap.”
- Why a 2nd Shutdown Over Coronavirus Might Be Worse Than the 1st -- and How to Prevent It – Holly Yan, CNN
- We Have the Technology to Stop a Second Wave – Faye Flam, Bloomberg
- U.S. Isn't Ready for the Contact Tracing It Needs to Stem the Coronavirus – Paige Winfield Cunningham, Washington Post
- Bailing Out the States Is Smart Economics – Noah Smith, Bloomberg
- United States of Despair – Anne Case and Angus Deaton, Project Syndicate
- Fed's Powell Can Send a Forceful Message to Congress – Tim Duy, Bloomberg
- Millions of Job Losses Are at Risk of Becoming Permanent – Olivia Rockeman and Jill Ward, Bloomberg
- A Deal to Save Medicaid, the Unemployed and State Budgets – Ezekiel J. Emanuel and Rahm Emanuel, New York Times
- It's Finally Time to Spend Money on Infrastructure – Paul La Monica, CNN
- At a Time of Great Need, Public Health Lacks ‘Lobbying Muscle’ – Angela Hart, Kaiser Health News
- PPP Isn’t Enough for Black-Owned Businesses – Timothy L. O’Brien, Bloomberg
- The Pandemic Hit Black Workers Hardest. Relief Must Help Them Most. – Washington Post Editorial Board
- How America’s Hospitals Survived the First Wave of the Coronavirus – Charles Ornstein, ProPublica
- The Case Against More Transparency for Coronavirus Relief Loans – Ben Werschkul, Yahoo Finance
- Despite Trump’s Claim, the Increase in New Coronavirus Cases Isn’t Just a Function of Testing – Philip Bump, Washington Post
- Instead of ‘Defund’ the Police, Imagine a Broader Role for Them With Public Health – Leana S. Wen, Washington Post