US economy 'definitely' needs more fiscal stimulus

Fresh funding should be funnelled towards hardest-hit sectors such as retail, travel and leisure, says Treasury Secretary

Steven Mnuchin, U.S. Treasury secretary, arrives before a Senate Small Business Committee hearing on coronavirus relief aid and "Implementation of title I of the CARES Act.", in Washington, U.S., June 10, 2020. Al Drago/Pool via REUTERS

US Treasury Secretary Steve Mnuchin said the country “definitely” needs additional fiscal stimulus – particularly funding for industries struggling to reopen from coronavirus-related closures.

“I definitely think we are going to need another bipartisan legislation to put more money into the economy,” Mr Mnuchin said on Wednesday before the Senate Small Business and Entrepreneurship Committee. “Whatever we do going forward needs to be much more targeted to the industries and small businesses that are having the most difficulty reopening as a result of Covid-19.”

Democrats have been seeking an additional funding bill. House Speaker Nancy Pelosi is pushing for nearly $1 trillion (Dh3.67tn) in state and local aid to make up for revenue lost during the Covid-19 pandemic and has argued that failure to enact the funding would lead to job losses. President Donald Trump said he’ll ask Congress to pass more economic stimulus, including a payroll tax cut.

House Democrats passed an additional $3.5 trillion stimulus bill last month, including a new round of $1,200 cheques to individuals and expanded unemployment insurance. But Republicans controlling the Senate have rejected that proposal and plan to wait until late July before considering their own alternative.

Mr Mnuchin singled out the retail, travel and leisure industries as needing more help. He said retailers lost more than 2 million jobs in April, but just 16 per cent of those workers returned in May.

“I do think the economy is going to rebound significantly, but there is still significant damage in parts of the economy,” Mnuchin said. “We’re going to use all of our fiscal tools to work with Congress” to “restore this economy to where it was.”

Mr Mnuchin said that capital gains tax cuts have been discussed but indicated he didn’t think that was a good approach.

He praised the Paycheck Protection Program, designed to help small businesses keep employees on the payroll during the pandemic, with saving 50 million jobs.

Mr Mnuchin said it appears there will be $130 billion in PPP funds remaining after the Small Business Administration stops taking new applications on June 30. He told Senator John Kennedy of Louisiana that he’s open to the idea of repurposing money from the small business relief loan programme to help businesses hurt by recent looting.

May unemployment unexpectedly declined to 13.3 per cent as employers added 2.5 million workers to payrolls, defying expectations for a Depression era-style surge in joblessness and stoking optimism the economy is bouncing back from a virus-induced recession.

“I was very pleasantly surprised by the recent numbers, I thought we were going to bottom in June, not in May,” Mr Mnuchin said. Other economists, including White House adviser Kevin Hassett, had predicted 20 per cent unemployment before the recovery began.