WASHINGTON (Reuters) – The United States and other wealthy countries must start spending to emerge from the coronavirus crisis, White House advisers, the International Monetary Fund and business groups said on Monday in a context of growing market panic over the pandemic.
But they are divided on which measures would be appropriate. The proposals range from cutting payroll taxes to increasing government loan guarantees to sending checks for $1,000 to every American.
Global markets fell sharply on Monday after a drastic move by the U.S. Federal Reserve to cut interest rates to near zero failed to quell growing panic over the outbreak and its impact on economies. business income and supply chains.
IMF Managing Director Kristalina Georgieva said pressure was mounting hour by hour for a strong and coordinated fiscal stimulus to limit the damage from the fast-spreading epidemic.
Harry Broadman, managing director of the Berkeley Research Group and a former top US trade official, said “a real chasm” looms if the executive and legislative branches don’t soon do “something economically meaningful in terms of budgetary”.
Leaders of the Group of Seven countries said on Monday they were making their response to the coronavirus pandemic a priority and would coordinate public health measures to help stabilize the global economy.
More than 174,100 people have been infected with the coronavirus globally and 6,684 have died, with cases and deaths outside China exceeding those in the country where the outbreak began, according to a Reuters tally.
WAGE TAX CUTS
The United States could inject $800 billion or more into the economy to minimize damage from the coronavirus outbreak if Congress passes a payroll tax waiver through the end of the year, officials told Monday. reporters White House economic adviser Larry Kudlow as U.S. officials rushed to stem market alarm.
US President Donald Trump has argued for the payroll tax to be suspended until the end of the year, a move that would give employees and businesses about 7% of employees’ gross income per pay period, but which would punch a $1 trillion hole in Social Security and Medicare budgets.
“We have a huge budget plan. It’s at least $800 billion and maybe more,” Kudlow said, adding that $400 billion in tax relief is already in the pipeline.
The U.S. Chamber of Commerce on Monday urged Trump and top U.S. congressional leaders to cancel all payroll taxes paid by employers for the months of March, April and May; pass new legislation to expand and streamline small business loan programs; and providing loans and loan guarantees to employers with more than 500 employees experiencing significant loss of income as a result of the outbreak.
A US House bill that includes small business loans and food security assistance was held up on a technicality on Monday.
U.S. Senator Mitt Romney, a Republican from Utah, on Monday proposed an expanded bill that would give every American adult a $1,000 check and defer student loan payments for recent college graduates.
MONEY FOR AIRLINES
Delta Air Lines Inc. DAL.NAmerican Airlines Group Inc. AAL.O and United Airlines UAL.Othe three largest U.S. airlines, are in talks with the U.S. government about potential aid, and that aid will be a key part of any new tax package, U.S. officials said Monday.
Kudlow, Treasury Secretary Steven Mnuchin and other White House officials have made the industry a priority; last week, Mnuchin told Americans they should continue to fly domestically, even as authorities recommended limiting non-essential travel.
Kudlow told the Fox Business news channel that administration officials would speak to industry senators on Monday.
“Theft is an integral part of our economy,” he said. “It’s not about systemic failure or bankruptcies. It’s really about cash liquidity.
“We don’t see any of the airlines failing. But if they are short of money, we will try to help them. We consult the House and the Senate to see what works. And of course the Treasury Department and the Fed have tremendous powers over this.
He added that he viewed the aid as “a liquidity solution, not a bailout”.
CONTROL THE VIRUS
Mark Sobel, a former senior US Treasury official, hailed the Fed’s surprise rate cut as a “strong and huge” move, but said monetary policy had limited effectiveness in the situation.
Until “the United States acts more boldly to bring the virus under control, deep uncertainty will remain, undermining prospects for recovery and limiting the effectiveness of the economic response,” said Sobel, now U.S. President of the London-based think tank OMFIF.
Reporting by Andrea Shalal, Jeff Mason, David Lawder, David Shepardson, Lisa Lambert and Tim Ahmann in Washington; Editing by Heather Timmons and Matthew Lewis