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President Donald Trump and his economic team will weigh measures later Monday to contain the fallout from coronavirus and a sudden crash in oil prices, with funding for a temporary expansion of paid sick leave and aid for battered U.S. energy producers among possible steps.
Administration officials plan to meet with Trump soon after he returns from fund raisers in Florida to present a range of options that also includes additional support to small businesses disrupted by the virus and help for hard-hit airline and hospitality companies, according to people familiar with the matter.
The White House meanwhile is inviting Wall Street executives for a meeting later in the week to discuss the impact of the coronavirus outbreak, according to a person familiar with the matter.
The exact means of delivering financial assistance to industries is still being discussed, according to one of the people, but it’s more likely to come as cash disbursements than tax credits. Other options that have been discussed by administration officials include a possible payroll tax cut and a reduction in tariffs on some Chinese imports, the person said.
Pressure is growing on Trump to take more decisive action in response to the virus outbreak, as the number of cases in the U.S. and worldwide continues to grow. U.S. equities tumbled more than 6% on Monday, triggering New York Stock Exchange circuit breakers that temporarily halted trading, as a plunge in crude prices rattled financial markets already on edge over coronavirus. The rout took the S&P 500’s fall from its Feb. 19 record high toward 20%, threatening to end the bull market that began 11 years ago to the day.
Among the issues that has emerged as a priority is the sudden instability in oil markets touched off by a breakdown in talks between Russia and Saudi Arabia aimed at cutting output. With crude prices down more than 30% on Monday, administration officials are making efforts to reach out to counterparts in Moscow and Riyadh, one of the people said, without elaborating.
While plunging oil prices may reduce gasoline prices, consumers and businesses are dramatically cutting back travel because of coronavirus fears and unlikely to take advantage of the potential bargain. The drop in crude prices also bodes poorly for U.S. shale producers in places like Texas and North Dakota.
Congressional Activity. Republican Senator Chuck Grassley, chairman of the Senate Finance Committee, is looking into possible targeted tax relief measures in response to the outbreak, according to a statement Monday from his office that offered no specifics. Later Monday, House Speaker Nancy Pelosi plans to meet with top Democrats to craft a response to the economic disruption caused by the virus.
Some of the components of the administration’s economic package could change, while others, such as a sick leave plan, may require congressional action. Much of the aid for companies could be carried out by executive action, one of the people said.
A small group of White House and Treasury officials worked on a set of options through the weekend, the people said. The timing of any of the measures is unclear, but they would likely be rolled out on a step-by-step basis, beginning with aid to individual Americans who are infected, then expanding to companies and workers affected by lost business.
So far, the president and his advisers have publicly said the U.S. economy is resilient enough to weather the fallout, instead calling on the Federal Reserve to take action.
While the White House has been pointing to the Fed as the front line, economists have stressed that this crisis will require a multi-faceted response from governments, health care professionals, central bankers and others to stem the human and economic damage.
In addition, the scope of central banks to act this time around is limited because of how low interest rates already are. The Fed cut interest rates last week and acted again Monday by boosting the size of this week’s overnight and term repurchase operations to help add liquidity to the markets. But policy makers have urged governments in recent weeks to respond with fiscal stimulus.
Trump and his top economic adviser, Larry Kudlow, have both questioned whether a broad intervention would be needed in response to coronavirus, pointing to a strong jobs report on Friday. But Kudlow said the same day that limited measures might be considered.
Public health officials have warned that with the case count growing, disruptions to everyday life in the U.S. are inevitable. Airlines, cruise lines and other travel-related businesses are already feeling the pinch as consumers curtail vacations and businesses limit travel.
Late Sunday, the crisis was brought closer to home in Washington when Senator Ted Cruz, a Texas Republican, and GOP Representative Paul Gosar said they would isolate themselves after coming into contact with an infected person at the Conservative Political Action Conference last weekend.
The top two Democrats in Congress urged Trump on Sunday to do more in response to the outbreak, including an expansion of affordable testing and stronger protections for health workers. Pelosi and Senate Minority Leader Chuck Schumer also called for making paid sick leave available to workers affected by quarantine orders and school closings.
President Trump continues to manufacture needless chaos within his administration and it is hampering the government’s response to the coronavirus outbreak, Pelosi and Schumer said in their joint statement.
A short-term expansion of paid sick leave is drawing the attention of top administration officials, the people said, because it would cost less than another proposal floated in recent weeks: a temporary payroll tax cut.
Officials drafting the administration’s package are aware that funding a temporary expansion of sick leave is only helpful if public health authorities can accelerate testing of individuals suspected of having the virus. The U.S. has struggled to roll out testing nationwide, and as of Saturday had tested fewer than 6,000 samples from Americans suspected of the coronavirus infection.
State laboratories now have the capacity to test about 75,000 people, Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases at the Centers for Disease Control and Prevention, said in a briefing for reporters on Monday. She said more testing capacity is expected soon from commercial diagnostic labs.
The House and Senate are in Washington this week, but lawmakers are scheduled to be out of town the following week. That leaves a short window for quick action on any measures requiring congressional approval.
On Friday, Trump signed a $7.8 billion emergency spending bill that that reimburses state and local governments for the cost of fighting coronavirus. It also includes $3.1 billion for stockpiling medical supplies and $300 million for government purchases of tests, vaccines and therapies to ensure that low-income people have access.
Another provision in the bill Trump signed unlocks as much as $7 billion in low-interest loans to small businesses affected by the outbreak. Lawmakers say they expect Congress will have to provide more emergency funding before the virus outbreak subsides.
Trump has insisted that the burden for spurring the economy in response to coronavirus remains with the Federal Reserve, even as some economists have called for a broad-based approach that would require the White House and Congress to act.
The Fed should cut and the Fed should stimulate, Trump told reporters on Friday, reviving some of his long-standing complaints about the central bank.
Kudlow on Friday spurned calls for the wide-ranging approach that some economists have urged.
We don’t want to willy-nilly throw $300-$400 billion, with a thousand-dollar check to every American, Kudlow said in a Bloomberg Television interview. We are in the camp that wants timely and targeted micro-measures.
