Trump wants at least $2tn for next coronavirus stimulus

Published on

Almost daily, we see some news related to the second stimulus package. However, there is still no confirmation on whether there will be a second round, or if there is to be one, what it might offer. On Saturday, we got the biggest hint that President Donald Trump is possibly considering the next coronavirus stimulus relief package.

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2020 hedge fund letters, conferences and more

How big will round two be?

Speaking to Fox Business on Saturday, White House trade adviser Peter Navarro signaled that Trump wants the next coronavirus stimulus to be at least $2 trillion.

“The president is very interested in something on the order of at least $2 trillion,” Peter Navarro said.

Since March, Trump has signed into law three relief bills totaling about $3 trillion in federal funds. It would be interesting to see how congressional leaders would react to the idea of a $2 trillion package.

Some of Trump’s own party members are not in favor of a lavish relief package. For instance, Senate Majority Leader Mitch McConnell has already stressed that the next relief package would be around $1 trillion.

Democrats, on the other hand, are backing a $3 trillion package – the HEROES Act. The bill, which has already been through the House, focuses on giving direct payments to Americans.

Trump may be willing to spend $2 trillion on the next coronavirus stimulus package, but Navarro shared no information about whether it would include direct payments to Americans.

What does Trump want in relief package?

Talking about what the next bill might include, Peter Navarro said the White House would want to see a “critical” payroll tax cut. Also, the bill would focus on bringing manufacturing jobs back to the U.S.

Navarro said the economy is facing structural headwinds because coronavirus has hit certain service-oriented industries hard, including entertainment, hospitality and transportation. According to Navarro, the only solution to get the economy up is to give a push to the manufacturing base.

“Put simply, we need to create more manufacturing jobs," Navarro told CNN. "Manufacturing jobs not only provide good wages but also create more jobs both up- and downstream through multiplier effects."

Navarro said that for he and the President the key thrusts going forward is on manufacturing jobs with a focus on “buy American, hire American, make it in the U.S.A.”

When asked what incentives the White House could offer to bring back manufacturing jobs, Navarro indicated that the next stimulus would need to spur demand, supply and investment. He said that the payroll tax cut is crucial to encourage employers to retain workers and is “an implicit pay raise for the workers.”

“First-time tax cuts, deregulation, cheap energy and above all fair trade deals,” Navarro said. “We’re going to do all of that, but we’ve got to do more.

Navarro specifically mentioned that the bill would likely target pharmaceutical companies and medical supplies. “We need to make our medicines here, we need to make our masks here, our ventilators and all of that,” he said.

Further, the official noted that coronavirus has “hit the twin pillars of our major cities, which are the … high-rise density and mass transit,” Navarro said. “If you don’t have those working, you don’t have a city.”

Next coronavirus stimulus: when to expect it?

Talking of when to expect the next package, Navarro told CNN that it must be done before the August recess "for the sake of American workers and small businesses now in pain." However, he added that “it's hard to pass bills when Capitol Hill is a ghost town.”

Congressional Democrats are in favor of passing the next stimulus package as quickly as possible. Republicans and the White House, however, have adopted a wait and watch approach. They are more in favor of assessing the impact of the first stimulus package before deciding on the next.

Many even don’t see the need of a stimulus package presently. They argue that encouraging unemployment numbers in May go against the need for more economic stimulus.

Speaking to Fox News on Friday, White House economic adviser Kevin Hassett said officials are evaluating coronavirus economic impact data. Further, he noted that the plans to resurrect the economy will be shared at the "end of July."

Separately, Hassett told the Wall Street Journal that the odds of a fourth package "are very, very high." Administration officials say that a team is preparing options for a package and that the president met with the economic team recently to talk about the issue, according to CNN.

Speaking to reporters, White House counselor Kellyanne Conway said, "He's been very clear about looking at a phase four, possibly infrastructure, more relief for distressed industries and individuals, growing the economy."

Earlier, Treasury Secretary Steven Mnuchin said the Trump administration is “seriously considering” the relief package. Mnuchin noted that the stimulus would include “direct money” but would primarily focus on assisting people getting back to work.