Mnuchin, Powell Say Economy Needs More Coronavirus Aid

Mnuchin, Powell Say Economy Needs More Coronavirus Aid

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Plus, Pentagon used coronavirus funds for military supplies
Tuesday, September 22, 2020

Lawmakers Close In on a Deal to Avert Shutdown

House Majority Leader Steny Hoyer (D-MD) said he expects to hold a vote Tuesday night on a three-month funding deal that would avert a shutdown of the federal government when the current fiscal year ends on September 30.

Earlier in the day, Democrats paused their plans to vote on a partisan version of the stopgap funding bill after Democratic and Republican negotiators revived talks to include additional money for farmers and for children’s nutritional assistance in the legislation. However, it’s not clear if the bill scheduled for a vote will include those funding provisions, which have been a source of significant conflict.

“I think we’ve made some progress, and I’m hopeful we’ll be able to move it tonight,” Hoyer said. "I don't want to get into specifics until we have it hammered out.”

Number of the Day: 200,558

U.S. deaths from Covid-19 surpassed 200,000 today, according to data compiled by Johns Hopkins University. That’s more than any other country in the world — and it likely undercounts the true toll. But based on the data, the United States has about 4% of the world’s population but accounts for about 21% of confirmed coronavirus deaths. The country has had about 61 deaths per 100,000 resident, the 11th highest rate in the world. Over the past seven days, the United States has reported an average of more than 43,300 new cases a day, up nearly 20% compared with a week ago, according to a CNBC analysis of Johns Hopkins data.

Mnuchin, Powell Say Economy Needs More Coronavirus Aid

Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell told lawmakers Tuesday that Congress’s early response to the coronavirus pandemic helped support the economy — but that more relief spending will be needed to sustain the recovery.

“Household spending looks to have recovered about three-fourths of its earlier decline, likely owing in part to federal stimulus payments and expanded unemployment benefits,” Powell told a hearing of the House Financial Services Committee. The housing sector has rebounded and business investment shows signs of picking up, he said. He noted, though, that both the job market and overall economic activity remain well shy of their pre-pandemic levels. A faster recovery would require more help from Congress, he said.

“We still have 11 million people out of the 22 million who were laid off in March and April,” Powell said. “There's a lot of work to do there — and you know our policies will support that — but it will go faster for those people if it's all government working together.”
Powell has repeatedly urged Congress to provide more help. “More fiscal support is likely to be needed,” he said last week.

Mnuchin told lawmakers Tuesday that he believes a “targeted” relief package is still needed.

“It should be focused on kids and jobs, and areas of the economy that are still hard-hit — particularly areas such as the travel business and restaurants,” he said, according to Roll Call. “I think there's broad bipartisan support for extending the [Paycheck Protection Program] to businesses that had revenue drops for a second check.” The Treasury secretary reportedly also reiterated that the administration supports another round of $1,200 stimulus checks.

Powell and Mnuchin both said that existing Fed and Treasury lending programs can’t take the place of congressional relief money. “I unfortunately think there’s not more we can do,” Mnuchin said.

The public also wants another aid package:
Nearly 90% of likely voters say the government needs to pass another coronavirus relief package, according to a Financial Times-Peter G. Peterson Foundation poll released Tuesday. The survey found that 42% now say they are more worried about the economy than public health, a 9-point rise from last month. A plurality of voters, 39%, say Democrats and Republicans are equally responsible for the failure to pass another relief bill so far. Another 26% say the blame lies with Republicans, while 23% say Democrats are to blame.

The poll was of 1,003 likely voters conducted between September 9 and September 14 and has a margin of error of plus or minus 3 percentage points.

What’s next:
Well, it’s not another relief package. Despite widespread agreement that Congress needs to do more, these calls for additional stimulus won’t jumpstart stalled talks on another relief package. The odds of a deal before Election Day likely only got smaller with the death of Justice Ruth Bader Ginsburg and the coming fight over her replacement on the Supreme Court.

Meanwhile, Bloomberg economist Andrew Husby projects that the lapse in enhanced unemployment benefits and small business assistance will subtract at least 5 percentage points from fourth-quarter growth and that growth over the coming two quarters will be “little better than stall-speed.”

Goldman Sachs analysts similarly say that the lack of an additional stimulus package would likely lead them to downgrade their growth projections, according to Bloomberg News — but that the outlook could change significantly depending on the presidential election results. “If the 2020 election results in unified Democratic government, this would likely allow a President Biden to pass a large spending increase,” Goldman economists reportedly wrote in a note Monday.

Powell and Mnuchin are set to testify Thursday before the Senate Banking Committee.

Chart of the Day

Here's a look at how jobless benefits have begun to drop off in recent weeks, via Bloomberg.

Pentagon Used Coronavirus Funds for Military Supplies: Report

As part of the $2 trillion Cares Act in March, Congress allocated $1 billion to the Defense Department to help it “prevent, prepare for, and respond to coronavirus.” The Washington Post on Tuesday reported that much of that money has been used to pay for things that are not directly related to the pandemic, including aircraft parts and dress uniforms.

Pentagon officials say their use of the funds helps maintain capabilities in the defense industry during the coronavirus recession, but lawmakers have made it clear that the allocation was intended to be used for items directly related to the pandemic, such as the production of personal protective equipment (PPE). According to a report from the House Committee on Appropriations cited by the Post, the “expectation was that the Department would address the need for PPE industrial capacity rather than execute the funding for the [defense industrial base].”

The repurposing of the money illustrates just how hard it is to ensure that trillions of dollars in coronavirus relief funds are used properly. The Post’s Aaron Gregg and Yeganeh Torbati report:

“The $1 billion fund is just a fraction of the $3 trillion in emergency spending that Congress approved earlier this year to deal with the pandemic. But it shows how the blizzard of bailout cash was — in some cases — redirected to firms that weren’t originally targeted for assistance. It also shows how difficult it has been for officials to track how money is spent and — in the case of Congress — intervene when changes are made.”

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