And they’re watching a flood of announcements from multinational U.S. companies signaling trouble that could strangle the American economy for months to come.
The frenzied push to boost the economy is colliding with Republican orthodoxy opposing short-term stimulus during the last recession. But it’s a reflection of what some Republicans recognize as an existential threat to Trump’s reelection: a potential downturn in the economy and financial markets in the run-up to a close and heated presidential election.
“I don’t think it’s good policy,” one senior administration official said. “The whole litany of temporary measures to stimulate the economy … I don’t think it works.”
During a meeting with lawmakers last week, Republican Sen. Steve Daines of Montana suggested to Trump the idea of a temporary payroll tax cut to give employed consumers additional cash — an idea that Daines said Trump liked enough to then champion on Twitter.
Meanwhile, former House Speaker Newt Gingrich is pushing the idea of a one-time tax credit for companies that bring manufacturing back to the U.S. from China.
And Treasury Secretary Steven Mnuchin said his agency would talk to independent bank regulators about easing rules for lenders. Mnuchin also said Treasury had set up a subtask force to examine how coronavirus is hitting small businesses.
The flurry of discussion comes as the White House struggles to settle on the best public health and economic response to the fast-traveling coronavirus — of which there are now 77 cases in the U.S. throughout 14 states and cities and nine deaths.
The spread of the virus inside Italy, Iran, South Korea and the U.S. last week spooked investors and triggered the stock market’s worst weekly decline since 2008. Now it threatens to disrupt a wide range of U.S. businesses such as manufacturers, airlines, automakers and the hospitality industry that either rely on China for materials or labor, or that are dependent on consumer confidence to maintain a robust bottom line.
The White House plans to meet with airline executives on Wednesday amid growing concerns about international air travel.
The widening worries across the U.S. are already spurring flight cancellations, school closures and unusual moves to corporate headquarters to encourage employees to work from home.
“If we have rational behavior, we don’t need a stimulus,” said one Republican close to the administration. “If you can’t leave your house, or if kids can’t go to school and the parents can’t go to work, what good is a payroll tax cut? It’s not like you can go out and buy stuff.”
Trump himself told reporters on Tuesday that he would go along with a payroll tax cut as well as middle-class tax cuts, if Democrats would approve them. “I think it would be a good time,” he said.
Amid the frenzied backdrop, the Fed voted Tuesday to slash interest rates by half a percentage point, an emergency move intended to protect the U.S. economy from damage. The rate cut marked the first time the central bank has lowered interest rates outside of a regularly scheduled meeting since the 2008 global financial crisis.
The former chairman of the White House Council of Economic Advisers, Kevin Hassett, is advising the White House on economic stimulus measures, said a second Republican close to the administration, while the National Economic Council held a meeting on Tuesday afternoon to discuss the coronavirus.
A second senior administration official stressed the White House has not made any decisions yet on a potential package, saying aides were still looking over the data to see if they needed to act.
When asked about a potential stimulus package on Capitol Hill on Tuesday, Mnuchin said, “I don’t really think that’s the right question. This is an evolving situation where we’re meeting daily on this. We’re looking at things.”
If the coronavirus keeps up its path throughout the U.S., sectors like airlines, cruise ships and large conferences and events are likely to see business plunge and seek federal bailouts, similar to the billions of dollars farmers received last year to offset the aftermath of the trade war, Bruce Mehlman, a longtime Republican lobbyist said in his quarterly analysis on Washington politics.
“Additional billions for emergency response and recovery costs are likely, if needed (as with natural disasters, regional costs are often borne by federal taxpayers),” Mehlman wrote, calling a $7 billion to $8 billion emergency package “imminent.”
“Some people are saying we should treat this like any other disaster, like after Hurricane Katrina. That will depend on how much it spreads and what it does to the economy,” said former Republican Sen. Trent Lott, who now represents automakers and airlines as part of his practice at the firm Squire Patton Boggs. “I don’t think we are there yet. Congress is just trying to pass emergency funding now to benefit the CDC.”
Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth, said the administration should first target stimulus measures toward individuals who are most economically vulnerable to the virus.
“The individuals who become ill, who are quarantined, who are not able to go to work — there’s a nontrivial number of workers that if they do not show up to work for two weeks, they lose their job,” said Sahm, a former Fed economist. She pointed out that a payroll tax cut wouldn’t benefit those people.
Ideally, she said, the government would target discrete areas where the outbreak is concentrated, as the government does in a disaster declaration, and direct money toward those households, for example, to help them make their mortgage and auto payments.
“It could get much worse for the economy as a whole,” she added. “Then, only then, do I think the conversation should shift to broad-based fiscal stimulus, like sending out checks.”
The White House faces the unenviable challenge now of appearing calm in the face of a spreading virus, while also seeming responsive to volatile markets and an economy under pressure.
Several White House officials have expressed skepticism about the effectiveness of short-term stimulus measures — even as outside allies and lawmakers push their own specific ideas.
“I would say this is no different than any other severe situation. This is going to have an impact in the short term on the economy,” Mnuchin told the House Ways and Means Committee on Tuesday.
“It’s very different than the financial crisis,” he added. “The good news here is there will be an end in sight. This will have an impact on the economy, but I have confidence in our health professionals that they will develop both viral medical treatments and vaccines, so this will have a time period.”
Sarah Ferris, Marianne Levine, Theo Meyer, Zachary Warmbrodt and Caitlin Oprysko contributed to this report.