Treasury Secretary Steven Mnuchin provided more hints Wednesday about what the next coronavirus economic relief package might look like.
“I definitely think we are going to need another bipartisan legislation to put more money into the economy,” he told the Senate Small Business and Entrepreneurship Committee. “I think whatever we do going forward needs to be much more targeted, particularly to the industries and small businesses that are having the most difficulty in reopening as a result of COVID-19.”
“We’re going to need money for businesses, to encourage businesses to rehire people — especially in areas that have been most impacted, whether it’s travel, leisure [or] restaurants,” he said, signaling more support for a temporary $450-a-week back-to-work bonus idea floated by Sen. Rob Portman, R-Ohio.
Mnuchin also said he wants to address the extra $600-a-week in unemployment benefits, “where in certain cases we were paying people more not to work.” But he said that disincentive to going back to work hasn’t had as large an impact as many Republicans feared. “We’ve seen from the recent numbers, that didn’t have a big impact because people want their jobs,” he said.
Mnuchin also said the administration would “seriously look at whether we want to do more direct money to stimulate the economy,” with a focus on getting Americans back to work.
His call for another relief bill echoed White House economic adviser Kevin Hassett, who said Tuesday he “would definitely support” another round of aid.
But Mnuchin, who has been the Trump administration’s lead negotiator on coronavirus legislation so far, urged patience on the next package. “As I’ve said, we don’t want to rush into that,” he said.
Mnuchin testified alongside Small Business Administration chief Jovita Carranza at an oversight hearing for the $660 billion Paycheck Protection Program that doubled as a victory lap for the scheme’s architects and administrators.
Mnuchin laid out two broad concerns for the next round of COVID-19 spending: where to send the stimulus funds and how much. He hinted at worries over inflation once the economy recovers.
“We want to be careful at this point, seeing how the money is in the economy — a lot of the money is still not in it,” Mnuchin said.
According to the Federal Reserve Bank of St. Louis, the money supply has jumped 16 percent from February, fueled by the Fed’s aggressive quantitative easing and congressional spending. The Fed still hasn’t launched its Main Street Lending Program for midsize businesses, which could inject more than $600 billion into the economy.
The money supply didn’t see a similar boom during the 2008 recession despite the fiscal and monetary stimulus measures deployed because banks hoarded cash in the wake of the financial crisis. Banks entered this crisis better capitalized and have continued to lend.
Mnuchin offered his hints at the White House’s legislative preferences as he received bipartisan praise for the PPP’s successes.
The program started in April, a week after Congress established it. But it ran out of its $349 billion in just two weeks despite crashing websites and complaints that smaller borrowers were getting left out. A week after that, Congress appropriated another $310 billion. After an initial rush, demand has slowed and as of Monday, the SBA has approved $511.5 billion in loans to 4.5 million small businesses.
FiscalNote, parent company of CQ Roll Call, has received a loan under the Paycheck Protection Program.
“Overall, the Paycheck Protection Program has been, in my opinion, an extraordinary success,” said Senate Small Business Chairman Marco Rubio, R-Fla., one of the program’s authors. “It was, in my view, no disrespect to anyone else, by far, the most effective and most impactful portion of the CARES Act.”
“Those who have lost faith in the ability of government to respond in a time of crisis and a time for national unity will take some hope in the fact that that happened,” he added.
Rubio wasn’t alone in taking a bow. Nearly every member of the committee had positive things to say about the program, and Mnuchin and Carranza joined in on patting themselves on the back.
“This has been a proud moment of our Senate careers and working together to develop three very, very important programs that help small businesses during COVID-19,” said ranking member Benjamin L. Cardin, D-Md., referring to the PPP as well as changes to the SBA’s economic injury disaster loan, or EIDL, program and a loan forgiveness program for existing SBA lenders. “We did that in a way that put the interest of our nation first and interests a small business and their workers.”
“America’s economy has begun to rebound, and our recovery is underway. While estimates predicted nearly 8 million jobs lost in the month of May, the actual data released Friday showed 2.5 million jobs gained — the largest one-month jobs gain in recorded history,” Mnuchin said. “This economic positioning is the direct result of the Trump administration and Congress working together to pass bipartisan legislation to provide necessary liquidity to workers and markets.”
Carranza remarked on the historic levels of loans processed by her agency, the smallest in the Cabinet, in record time. With the PPP alone, the SBA approved in two weeks 15 times what it usually processes in a year.
“With respect to the economic injury disaster loan program, SBA’s Office of Disaster Assistance has now approved and distributed more in loans for COVID-19 than for all other disasters combined in the history of the agency,” Carranza added, noting that the $7 billion dispersed in 2017 after hurricanes Harvey, Irma and Maria would be just 8 percent of what the SBA has approved since March.
‘Pattern of unresponsiveness’
Wednesday’s hearing wasn’t a complete love fest, however.
Cardin questioned Carranza on the relatively slow speed of EIDL loans going out.
Carranza also caught flak from Republicans for PPP loans going to Planned Parenthood affiliates, which got $80 million. The SBA ordered the local affiliates to return the loans, saying they were too closely connected to Planned Parenthood’s national organization to be considered independent entities. Democrats have decried the move as unfairly holding the organization to a stricter affiliation standard because it is an abortion provider.
Carranza acknowledged that safeguards to prevent closely linked affiliates from receiving PPP funds weren’t initially in place, but that didn’t satisfy Sen. Josh Hawley, R-Mo., who continued to grill her for details about Planned Parenthood’s loans. But Carranza said it would be inappropriate to share an individual borrower’s information.
“The pattern of unresponsiveness from the SBA throughout this process has been disturbing,” Hawley said.
The program has garnered its share of criticism.
Beyond the rocky rollout, over $1 billion went to publicly traded companies that still fell under the 500 employee cap. Money went to large franchises and chains like Shake Shack and AutoZone, and to lucrative businesses like the Los Angeles Lakers basketball team. More money went to some less-affected sectors, such as construction and manufacturing, than to those that were nearly completely shuttered by the coronavirus, such as retail and food services. While the average loan is $113,000, more than a third of the loans were for more than $1 million.
Restaurateurs say the PPP funds haven’t been enough help. Their businesses spend relatively little on payroll, and more on rents and raw food — costs that can’t be forgiven under the program. The Independent Restaurant Coalition, which is calling for a $120 billion bailout fund for the industry, says more than 85 percent of restaurants still risk permanent closure.
Despite the relief efforts from Congress and similar, smaller efforts at state and local levels, more than 100,000 small businesses have closed for good since the pandemic’s start.