Mnuchin Discusses $850 Billion Stimulus and Checks to Americans

(Bloomberg) -- U.S. Treasury Secretary Steven Mnuchin is expected to seek a new round of coronavirus-related economic stimulus of $850 billion or more from Congress Tuesday, and is discussing the idea of combining it with a relief package the House passed over the weekend, according to people familiar with the proposal.

A combined bill would have to go back to the House to get approved before going to Trump for his signature. House members left Washington Saturday, and aren’t currently scheduled to return until next week at the earliest.

Mnuchin, speaking at a White House press conference Tuesday, said the administration wants to provide “business interruption payments” to Americans, possibly delivering checks within the next two weeks.

“Americans need cash now and the president wants to give cash now,” Mnuchin said, adding that he expected to reveal details later in the day about possible payments.

Mnuchin, who will take his stimulus proposal to Senate Republicans on Tuesday, told House Republicans Monday that the market needs more liquidity, one of the people said. After the call, Mnuchin met with Senate Majority Leader Mitch McConnell.

The new proposal is expected to include $400 billion in steps taken by the executive branch -- including delay of tax deadlines and relief for student loan interest payments -- in addition to existing legislation now in Congress to expand sick leave and offer financial support for virus testing, Trump’s economic adviser Larry Kudlow said Monday. Kudlow said the administration was ready to double the next package to $800 billion, with “most” of that coming from a temporary cut in payroll taxes, which lawmakers from both parties have resisted.

The U.S. airline industry on Monday asked the government to provide as much as $60 billion in grants and loans, though it is unclear how much Trump will sign on for, according to a person familiar with the matter. The administration is most likely to approve loans, but the Office of Management and Budget has yet to be asked to provide cost estimates, the person said.

This could be included in the $850 billion White House proposal, along with a payroll tax cut worth $500 billion and $250 billion for small business loans, according to a person familiar with the matter.

Among the possible provisions for small businesses, Mnuchin is considering postponing the due date for quarterly tax payments, and options for fast cash loans. He has been calling small business leaders to ask what aid they might need from the government as the coronavirus dents their income, according to other people familiar with the discussions.

“The president has instructed his team to look very expansively on what we need to do and not be impeded by the potential price tag of what’s necessary here,” Eric Ueland, the White House legislative director, said Monday on Capitol Hill.

Recession Watch

U.S. stocks sought to bounce back at the open Tuesday after equity futures were whipsawed in overnight trading. Goldman Sachs Group Inc. and Morgan Stanley economists joined the rush on Wall Street to declare that the virus outbreak has triggered a global recession.

The Trump administration is expected to ask Senate Republicans to combine the next stage of stimulus with the smaller package of virus-related economic measures already passed in the House.

The Senate was planning to take up the House-passed bill as soon as Tuesday, when Mnuchin is planning to be back on Capitol Hill to meet with Senate Republicans during their weekly lunch.

The dollar amount of the package Mnuchin would propose was reported earlier by Politico. Fox News also reported what will be included in the package.

Alfredo Ortiz, president of the conservative Job Creators Network, said as busy as Mnuchin is, “he’s taking the time to listen to us and quite frankly even act on some” stimulus suggestions. Ortiz said he had three separate calls directly with Mnuchin on Monday.

“One idea we proposed and he likes,” Ortiz said, is delaying the quarterly April tax payments for 90 to 180 days. Businesses would still have to file their taxes, but if a tax payment is due, the government could defer the cash payments. “That would be huge for small business owners,” Ortiz said.

Delaying the deadline for estimated quarterly payments could be an additional benefit for small and medium businesses beyond the tax filing deadline Trump announced last week. This could allow them to delay paying their estimated taxes for the first quarter, and potentially the second quarter, of 2020 in addition to an extended deadline for paying any outstanding taxes due from 2019. The Treasury Department has not yet announced the details of a tax filing delay.

Other ideas Mnuchin discussed include a rapid application for a line of credit from a bank, collateralized by Treasury, to cut through the Small Business Administration loan applications, which can take 3-5 months, Ortiz said.

Also under consideration is a plan to encourage states to leverage unemployment insurance, and to pay workers 80% of the hourly pay the employees are used to, as well as paying tipped employees 80% of their weekly average income rather than their hourly wage.

Trump has urged the payroll tax cut, which has been resisted by lawmakers on both sides of the aisle because it provides a slow infusion of cash over a long period, only helps people who have jobs, and would provide more to wealthier workers. The administration has said it would not affect Social Security.

An alternative proposal by Mitt Romney to send checks of $1,000 or more to every American adult has some bipartisan support. Some senators, including Democrat Brian Schatz of Hawaii, want to target relief to those people who really need it.

Targeting money can be harder and therefore slower to administer, however.

Schumer Proposal

Democrats are floating their own proposals, with Senate Democratic leader Chuck Schumer calling for at least $750 billion.

Granting a full payroll tax holiday for employees and employers with fewer than 100 workers could prove to be a big incentive for companies with workforces above that threshold to cut jobs to claim the tax break.

Businesses bracing for a drop-off in business could cut staff and still meet demand. For example, a hotel could cut cleaning workers and food service staff to get below 100 workers and still be able to meet demand during the downturn and get the perk of the tax break.

The House on Monday passed technical corrections to its coronavirus bill, which was first crafted over a week ago as the virus was intensifying in the U.S. Now the White House and most lawmakers are eager to send the bill to Trump for his signature and to follow up with more ambitious bills.

“We have a lot more work to do,” Mnuchin said Monday on Capitol Hill. He said he spoke with Republican senators about about additional economic stimulus bills they will work on “ASAP.”

Plunging stock prices and the abrupt drop-off of consumer spending during a time of social distancing has crystallized the need for Congress to act quickly and boldly. The Federal Reserve has already used much of its toolbox to shore up the economy, leaving policy makers to dull the extent of the damage with fiscal stimulus.

©2020 Bloomberg L.P.