President Donald Trump is launching an epic battle to inject hundreds of billions of dollars of stimulus across the U.S. economy. And he’s doing it before government officials can control the coronavirus outbreak, assess the damage or understand what’s needed to sustain an economic expansion that has proven resilient for years.
It’s an approach to stimulus unprecedented in modern times, far unlike the programs launched in the 2008-09 financial crisis and 2001 recession once economic damage had already become clear. It’s also colliding with a Republican Party that built its brand over the past decade in opposing debt-funded stimulus and other government intervention through federal spending.
On Tuesday, Trump personally traveled to Capitol Hill to sell GOP senators on the idea of a broad fiscal stimulus package that he hopes will revive the stock market and give Americans comfort amid mounting uncertainty.
With the senators, Trump and Vice President Mike Pence laid out several ideas including a far-ranging payroll tax cut, an infrastructure plan, paid sick leave for hourly employees and the potential delay of some Americans’ estimated tax payments.
The first idea — some type of temporary payroll tax cut through the end of the year, or a temporary suspension — has received a cool reception from both Republican lawmakers as well as the president’s own top economic aides who privately argue it’s too soon for such a measure.
“We just had a meeting on stimulus, and you'll be hearing about it soon. But it was a great meeting. There's great unity within the Republican Party,” Trump told reporters on the Hill following the lunch.
The president’s move to introduce a sweeping economic stimulus underscores rising worries among the president and his advisers about the state of the economy and his own record heading into his 2020 reelection battle.
It’s a tricky moment for Trump. If the coronavirus spreads quickly and morphs into a more devastating pandemic, the billions of dollars in stimulus money he’s discussing today likely will not be enough to provide relief to American workers, small businesses and major industries hit by an economic downturn.
Yet if the virus turns out to be less threatening in the U.S. than it’s been in China or Italy, Trump will have pushed a party once vocal about fiscal discipline into spending vast sums of money and adding to the already high deficit just before an election in which Trump will be under fire for broken promises.
Republican senators have warned it may be too early to commit to spending that type of cash, a view shared by top administration economic officials like Treasury Secretary Steven Mnuchin.
“A payroll tax cut might be the correct response to an economic downturn, but it is far too broad to have a significant impact on the source of this potential crisis. It might help the stock market in the short run, but it will be expensive,” said Paul Winfree, the former deputy director of the domestic policy council in the Trump administration. The Center on Budget and Policy Priorities estimated in 2009 that a two-month suspension of the payroll tax cut could cost roughly $120 billion.
A similar effort today, if fully implemented and stretched until the end of the year, could make a new stimulus program now even larger than the massive 2009 package.
Republicans argue it would do little to help workers who are laid off from industries hit hardest by the coronavirus; payroll tax cuts only apply if someone is collecting an actual paycheck.
Democrats on Capitol Hill also have been dismayed that Trump is focused on rescuing the economy right now rather than ensuring the health care system or American workers are fully prepared to handle the coronavirus.
Democratic Sen. Debbie Stabenow of Michigan dismissed the president’s enthusiasm for a new round of tax cuts in response to the coronavirus outbreak. “He can push that,” she said, “but we’re not gonna support it.”
“We have to focus on people first,” she said, adding that the administration needs to prioritize consumer-focused measures like paid sick leave. “There’s just no excuse not to focus on what people need from a health standpoint.”
Trump has been eager to do what aides have called a “big” economic package in response to the coronavirus to shock the stock market back into health after weeks of extreme volatility.
When asked about the potential price tag of a package, White House National Economic Council Director Larry Kudlow told reporters at a White House briefing Tuesday evening: “We are working out details right now, so I don’t want to quote any numbers ahead of time,” he said.
“The payroll tax holiday is probably the most important, powerful piece of this, but on the other hand, I want to draw attention: We can use administration and executive authority again to help unpaid sick leave people, which is very important,” he added.
Inside the West Wing, aides have also discussed deferring taxes for industries hurt by any economic downturn caused by the virus, government aid to certain geographic regions where the virus has hit and loans to small businesses.
Top Trump economic aides want to ensure the approach is targeted at first, whereas the president favors a much broader package enacted quickly, according to administration officials.
Several Republican senators said the president did not discuss a timeline for any potential legislative package, or even a price tag — nor has the president settled on deploying any specific tools or policy levers.
Administration aides stressed, leading up to the lunch, that the president wanted to present a range of options and work with the Republican-controlled Senate to develop plans.
“Whether the Congress and Trump can come to an agreement on a payroll tax cut is a huge question,” said one Republican close to the White House.
Trump first previewed a potential economic stimulus package from the White House briefing room podium on Monday just hours after the Dow Jones Industrial Average tumbled almost 8%.
A day later, as stimulus expectations rose, the Dow finished the day up about 5 percent — a boon to the president who aides say has viewed the health of a stock market as another form of polling.
On Wednesday, Trump is scheduled to meet with Wall Street executives to discuss whether banks can support struggling small businesses by extending loans and other measures.
Adam Cancryn, Andrew Desiderio and John Bresnahan contributed to this report.