Steven Mnuchin: ‘Definitely’ think we will need more economic rescue legislation

Treasury Secretary Steven T. Mnuchin on Wednesday endorsed a new round of federal spending to help the U.S. climb out of a steep economic downturn from the coronavirus crisis, a marked shift from the administration’s previous “wait-and-see” approach after already spending trillions to save the economy.

“I definitely think we are going to need another bipartisan [bill] to put more money into the economy,” Mr. Mnuchin told members of the Senate Small Business Committee.

Federal Reserve Chairman Jerome H. Powell also nudged the White House and Congress to do more, saying the public health emergency could continue to take a significant economic toll in the near-to-medium term.

A better-than-expected jobs report from last week had led some to speculate that Washington might be content to take an extended breather after President Trump signed off on roughly $3 trillion in emergency spending for the pandemic.

The Labor Department reported last week that the U.S. unemployment rate unexpectedly dropped to 13.3% in May. Employers added about 2.5 million jobs last month amid forecasts of approximately 8 million job losses.

Mr. Mnuchin did predict a strong third and fourth quarter but said additional “targeted” assistance will likely be needed for certain industries.

“I do think the economy is going to rebound significantly, but I’d also say there is still significant damage in parts of the economy,” said Mr. Mnuchin, who has been the administration’s point man in negotiations with Congress on previous rescue packages.

He mentioned the travel, leisure and restaurant industries as among the hardest-hit.

All 50 U.S. states are in the process of relaxing stay-at-home orders that shuttered most businesses, and even particularly hard-hit areas such as New York City are now at least partially open for business.

Mr. Mnuchin said he’s happy that Washington, D.C., is now allowing restaurants to open and that he’s tried to support the industry.

“I don’t see why, on an indoor basis, socially distanced, that restaurants can’t be serving indoors particularly in parts of the country where COVID is under control,” he said. “This distinction between indoor and outdoor seems a bit random, and I don’t know what people would do when it rains.”

With millions of Americans still out of work, Mr. Mnuchin hinted there could be an appetite for additional money for unemployment benefits but said the current system needs fixing.

The $2.2 trillion rescue package Congress passed in March provided an additional $600 per week in unemployment help on top of individuals’ state benefits.

Democrats want to extend the juiced-up unemployment benefits through January, while Republicans have warned that it’s now more lucrative for many Americans to take the unemployment rather than return to work.

“We knew there [were] issues with the enhanced unemployment where in certain cases we were paying people more not to work than work,” Mr. Mnuchin said. “I think we’ve seen from the recent numbers that didn’t have a big impact because people want their jobs.”

White House economic adviser Larry Kudlow said return-to-work incentives, which some Republicans have mentioned as a possible replacement or supplement to unemployment, could be part of the next package.

Mr. Trump also is eyeing cuts to payroll and capital gains taxes, infrastructure spending, and tax breaks for the restaurant and tourism industries, he said.

The negotiations are expected to heat up after lawmakers break for the Fourth of July.

“We’re on our way to a very big comeback,” the president said on Wednesday.

Much of the immediate attention on Capitol Hill is now on legislation to overhaul policing after the killing of George Floyd, a black man whose death in Minneapolis police custody sparked worldwide protests and calls for racial justice.

House Speaker Nancy Pelosi said there’s no time to waste on more virus-related stimulus, pointing to new projections from Congress’s budget scorekeeper that the recent rescue legislation should help boost GDP and employment in the coming years.

“Now is not the time to take our foot off the gas,” the California Democrat said.

The Democrat-led House passed a more than $3 trillion package last month that extended the unemployment benefits through January and included another round of direct payments for Americans.

But it also included items tied to elections and other issues that Republicans said were extraneous to the economic rescue mission.

The bill was dead on arrival in the Republican-run Senate.

Senate Majority Leader Mitch McConnell has made liability protections for reopening businesses a top priority for the next rescue package, though Democrats consider it a poison pill for the legislation.

Sen. James Risch, Idaho Republican, said his message on additional relief would be to “go slow.”

“I think we ought to be cautious,” Mr. Risch said on Fox News. “We ought to put the next foot down slowly as we put it down.”

Mr. Powell said the new federal programs such as expanded unemployment benefits, direct stimulus checks and a popular small business lending program are likely having a positive impact.

“It’s possible that we will need to do more, and it’s possible that Congress will need to do more,” he said, stressing that it’s not his place to dictate fiscal policy.

The Fed on Wednesday projected that the central bank would keep benchmark interest rates at or near zero through 2022, news that briefly jolted Wall Street in the afternoon.

Mr. Powell said officials are committed to using their full range of tools to do what they can to help prop up the economy.

Central bankers also released a median projection that U.S. GDP would drop 6.5% in 2020 before rebounding to increase by 5% in 2021 and 3.5% in 2022.

Fed officials also projected that the U.S. unemployment rate would drop to 9.3% by the end of the year under a median forecast.

Mr. Powell welcomed the unexpectedly good news on the jobs front last week, but said unemployment is still “historically high” and that classification issues likely mean the Labor Department’s report understated the full scope of the unemployment picture.

Mr. Mnuchin credited the Paycheck Protection Program, a key feature of the $2.2 trillion rescue package, for helping stem some of the job losses associated with the coronavirus shutdowns.

Mr. Trump recently signed into law bipartisan legislation that relaxes some of the program’s requirements in terms of how businesses have to spend the money through the program for the loans to be forgiven.

If businesses don’t spend 60% of their loans on payroll, down from a 75% requirement under the original law, they could still be eligible for partial forgiveness of the loan.

Jovita Carranza, who runs the Small Business Administration, said about $130 billion in funding is still available for the program.

Businesses have until the end of the month to apply, leaving some to speculate that there could be significant money left over.

At the hearing, Sen. John Kennedy, Louisiana Republican, asked Mr. Mnuchin to look into whether leftover funds could be used to help businesses that were looted or vandalized in the protests and riots over George Floyd’s death.

Mr. Mnuchin said he would look into it.