Trump to Propose Steps to Ease Economic Fallout From Coronavirus
Date: Tuesday, March 10, 2020
Source: The Wall Street Journal
Measures may include payroll-tax cut, relief for hourly wage earners, president says
WASHINGTON—President Trump said his administration would discuss with Congress several measures to ease the economic pain inflicted by the coronavirus, including a possible payroll-tax cut and help for hourly wage earners.
Administration officials were planning to meet with congressional Republicans about the proposals on Tuesday. Mr. Trump said he would hold a news conference Tuesday afternoon to lay out the proposals in more detail. “They will be very major,” he said.
“We’re also going to be talking about hourly wage earners getting help so they can be in a position where they’re not ever going to miss a paycheck,” the president told reporters in the White House briefing room on Monday evening, adding that the administration was considering “creating loans for small businesses.”
White House officials were split, however, over whether the president should embrace a payroll tax cut now, and if so, how big it should be, according to two people familiar with the discussion, who said there were strong views from both sides and a spirited debate at a closed-door meeting the president held with senior administration officials Monday.
Trade adviser Peter Navarro—backed by Jared Kushner, the president’s son-in-law and senior adviser, and legislative affairs director Eric Ueland—argued in favor of pushing for a payroll tax cut now, the people said.
On the other side, National Economic Council Director Lawrence Kudlow and Treasury Secretary Steven Mnuchin called instead for narrowly targeted measures aimed at helping workers without sick leave and businesses facing virus-related disruptions, the people said. They questioned how expensive and how effective a payroll tax cut would be.
Mr. Navarro attended Monday’s press conference, but was one of the few officials to depart the briefing room with Mr. Trump, while the others stayed and took questions about the proposals.
A White House spokesman declined to comment.
Some in the White House support a proposal unveiled on Monday by Sen. Steve Daines (R., Mont.) that would temporarily suspend the payroll tax, though it wasn’t immediately clear how long a suspension Mr. Daines is proposing.
A challenge with payroll tax cuts is that they only directly help people who are working, not anyone who gets laid off. And the benefits would accumulate over the year rather than shoring up consumer spending immediately.
However, a full suspension would be quite large, as much as 4% of gross domestic product. For a worker making $75,000 and getting paid twice a month, the cut would amount to $387.50 per paycheck, split between employees and employers. Economists generally believe that workers bear the burden of both sides of the payroll tax, but it’s far from clear what companies would do with their share of the savings.
Earlier Monday, top Republican senators signaled they were hesitant to move forward quickly with either a broad-based stimulus package or narrower measures, cautioning that it was too early to assess the economic damage from the outbreak.
“Let’s see where we are in a month from now or three weeks from now. It’s just too early, I think people need to stay calm as much as they can,” Sen. Richard Shelby (R., Ala.), the chairman of the Senate Appropriations Committee, said Monday.
Mr. Shelby said no one from the administration had been in touch with him about a possible stimulus package and that he would review any White House proposal.
“We don’t have a time frame because we are still assessing risk,” said Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee.
The White House and Congress are under pressure to shore up the economy as markets reel on fears of a global recession. The Dow Jones Industrial Average dropped 2,014 points, or 7.8 percent, to close at 23,851.01. The yield on the 10-year Treasury, which moves inversely to bond prices, dropped to 0.501% as investors sought a haven in government debt.
Messrs. Kudlow and Mnuchin are scheduled to meet with Senate Republicans at their weekly policy lunch on Tuesday.
The most significant proposals mentioned at Monday’s briefing, including a payroll tax cut, would require congressional approval. But Mr. Mnuchin, speaking at Monday’s briefing, said “there are certain authorities that the president has that we can do on our own.”
A payroll tax cut met with skepticism from House Appropriations Committee Chair Nita Lowey (D., N.Y.), who said it wouldn’t help people who lose their jobs.
Democrats are focused on helping “the average working people around this country who are worried about how they’re going to feed their families, because their businesses close,” she said before a meeting with senior Democratic Party leadership.
The viral epidemic reached a new stage globally Monday, with confirmed cases outside China tripling over the past week and Italy under lockdown. The new coronavirus is now close to becoming a pandemic, the World Health Organization said, given its spread to more than 100 countries. In the U.S., the number of cases grew to 603, with 22 deaths.
House Speaker Nancy Pelosi (D., Calif.) and Senate Minority Leader Chuck Schumer (D., N.Y.) over the weekend outlined a series of measures including paid sick leave and expanded nutrition assistance, especially if school lunch programs need to close. They didn’t call for broader fiscal stimulus.
Mrs. Pelosi and Mr. Schumer late Monday said they hoped to prepare a legislative package with their priorities by the end of the week. Mrs. Pelosi said it was unlikely that the House could both craft and vote on an economic response this week, adding that it was possible the House stay in Washington longer to complete a bill.
Both Democratic leaders said any legislative responses should be focused on helping people directly hurt by the spread of the disease and that they would consider the White House’s proposal.
Senior administration officials met privately Monday afternoon to discuss coronavirus measures. In addition to the payroll tax cut, they discussed paying hourly employees who miss work because of the virus and deferring taxes for industries hardest hit by the virus, including the airline and cruise industries, administration officials said.
Mr. Mnuchin said Monday the Treasury is exploring ways to provide liquidity for firms facing disruptions from the virus through the Small Business Administration, as well as tax relief for companies and individuals beyond the payroll tax cut.
The White House has tasked the Treasury Department with developing fiscal policy responses to the virus. Mr. Mnuchin tapped a handful of aides from the agency’s legal, domestic and international finance teams to begin exploring options about a week ago. He is also having daily conversations with Federal Reserve Chairman Jerome Powell.
Administration aides worked through the weekend to assemble a package of 12 to 15 fiscal proposals to respond to the widening epidemic, from narrowly targeted and temporary measures aimed at responding to public health challenges, to a broad-based stimulus to combat a prolonged economic downturn.
Officials were coalescing around the need for an economic-policy response, but some were skeptical that the president should embrace a broad stimulus effort, arguing it is too soon to take that approach. Some top health officials advocated a bigger response, while others are unconvinced that stimulus is needed right now.
Vice President Mike Pence, who heads the White House’s coronavirus task force, was planning to meet with health-care industry officials on Tuesday. The White House invited Wall Street executives to a Wednesday meeting to discuss the effects of the coronavirus on the economy, according to an administration official.
Mr. Trump last week signed an $8.3 billion emergency spending bill to combat the coronavirus. He has called on the Fed to do more to protect the U.S. economy, renewing pressure he has put on the central bank during previous bouts of financial-market volatility. “We have a Fed that is not exactly proactive,” he said at the White House Friday.
Fed officials last week announced an emergency cut of half a percentage point to their benchmark federal-funds rate, lowering it to a range between 1% and 1.25%. Markets expect another large cut at the central bank’s March 17-18 policy meeting, but with rates already close to zero, the Fed has limited room to cut further.
On Monday, the New York Fed said it would boost the amount of short-term lending it conducts on a daily and biweekly basis to satisfy rising demand from financial institutions and avoid further strains as U.S. banks and businesses prepare for greater disruptions from the coronavirus epidemic.
Meanwhile, a group of state and federal financial regulators, including the Fed and the Consumer Financial Protection Bureau, called on banks to be flexible with customers struggling to make payments on debt such as mortgages and other loans.