Mnuchin, Powell Say Economy Needs More Coronavirus Aid

By Yuval Rosenberg

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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