Trump officials pressed on economic response to coronavirus
The Trump administration is facing growing calls to detail how it will protect the economy as worries grow about the impact of the global coronavirus outbreak.
At a congressional hearing on Tuesday, Treasury Secretary Steven Mnuchin opened the door to actions to boost the economy and help businesses and workers in the future while trying to calm fears about the immediate impact of the outbreak.
Mnuchin stressed that the U.S. was benefitting from a “very resilient economy.”
But even as the Trump administration grapples with the public health aspect of the outbreak, there are mounting questions about its economic response. Democrats were eager for the administration to detail an economic response beyond boosting pressure on the Federal Reserve to slash interest rates, especially after the central bank delivered an emergency cut amid Mnuchin’s testimony.
The Fed announced Tuesday its first intermeeting interest rate cut since 2008 after weeks of pressure from the administration and plunging financial markets.
The 50 basis-point cut, twice the size of a typical Fed rate movement, came amid increasing concern among economists that a coronavirus outbreak could paralyze the global economy and cause a recession.
Analysts have questioned whether the Fed cutting interest rates from already low levels would be enough to power the economy through disrupted supply lines and intense consumer anxiety.
“We do recognize that rate cut will not reduce the rate of infection. It won’t fix a broken supply chain. We get that,” Federal Reserve Chairman Jerome Powell said Tuesday.
“We don’t think we have all the answers, but we do believe that our action will provide a meaningful boost to the economy,” he continued.
The Fed’s rate-cut announcement came while Mnuchin was testifying before the House Ways and Means Committee, and it came after Mnuchin and Powell participated in a call with the Group of Seven finance ministers and central bank governors to discuss the impact of the outbreak on economic conditions. Mnuchin spoke positively about the Fed’s decision to cut interest rates.
“I very much support the Fed’s decision. I think they did the right thing getting ahead of this,” Mnuchin said during the Ways and Means Committee hearing.
While the Fed’s move earned praise from Mnuchin, it did little to satisfy President Trump and his yearlong campaign for 0 percent interest rates. The Fed baseline range is currently set at 1 to 1.25 percent, well below historic averages but above the near-zero and negative rates seen in weaker economies.
“The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors,” Trump tweeted Tuesday. “We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!”
Trump has been touting strong economic data and the stock market this election year, but a rough patch for the economy due to the coronavirus could make it more difficult for Trump to run on the economy in his reelection bid.
The Fed’s action did little to calm financial markets after a massive rally Monday. Yields on U.S. Treasury bonds plunged to new record lows as the rate on a 10-year note sunk below 1 percent for the first time.
The top Republican on the House Ways and Means Committee, Rep. Kevin Brady (R-Texas), issued a statement saying that he appreciated the Fed’s move “to safeguard the gains we’ve made in the face of challenges.”
But Democrats at Tuesday’s hearing expressed concerns in light of the Fed’s move.
“I find it concerning, because this does have echoes of the 2008 Great Recession,” said Rep. Brendan Boyle (D-Pa.).
Mnuchin said that the coronavirus is “very different” from the 2008 financial crisis.
“The good news here is there will be an end in sight,” he said, adding that he has confidence that health professionals will develop treatments and vaccines for the virus.
In addition to calling on the Fed to further cut interest rates, Trump on late Monday urged House Democrats to propose a one-year payroll tax cut, saying that such a move would be “great for the middle class.” Trump reiterated to reporters Tuesday afternoon that he would be interested in a payroll tax cut if Democrats could get one passed.
Mnuchin told reporters after Tuesday’s hearing that a payroll tax cut isn’t something the administration is considering at the moment but that “we will look at different tools that we need.”
Democrats asked Mnuchin about steps the administration might take to help small businesses hurt by the outbreak and workers who may stay home if the virus becomes more widespread but who don’t have sick leave.
Mnuchin said that the administration has created a sub-task force at Treasury to examine business issues related to the outbreak and that the administration may come back to Congress seeking specific actions.
He also said the administration isn’t currently considering suspending tariffs on European and Chinese goods but that the White House would examine its options as the outbreak progresses.
House Ways and Means Committee Chairman Richard Neal (D-Mass.) said that if the administration wants to pursue a stimulus package, it should prioritize infrastructure over temporary tax cuts.
“If we were to develop a stimulus package, the soundest way to do that is clearly to proceed with a major infrastructure initiative,” Neal said.
Mnuchin said if a need for a stimulus package arises, infrastructure would be a “priority” for Trump.