Airline bailouts? Cash handouts? Debate deepens on
inoculating economy against coronavirus
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[March 17, 2020] By
WASHINGTON (Reuters) - The United States
and other rich countries need to start spending their way out of the
coronavirus crisis, White House advisers, the International Monetary
Fund and business groups said Monday, amid growing market panic about
But they are divided about what measures would be appropriate. Proposals
range from rolling back payroll taxes to increasing government lending
guarantees to sending $1,000 checks to every American.
Global markets moved sharply lower on Monday after a drastic move by the
U.S. Federal Reserve to cut interest rates to near zero failed to
assuage growing panic about the outbreak and its impact on business
revenues and supply chains.
IMF Managing Director Kristalina Georgieva said pressure was growing by
the hour for strong, coordinated fiscal stimulus to limit the damage
from the fast-spreading outbreak.
Harry Broadman, managing director of Berkeley Research Group and a
former senior U.S. trade official, said "a real abyss" loomed if the
executive and legislative branches did not soon do "something
economically meaningful on the fiscal side."
Leaders of the Group of Seven countries said on Monday they are making
their response to the coronavirus pandemic a priority and will
coordinate public health measures to help stabilize the global economy.
More than 174,100 people have been infected by the coronavirus across
the world and 6,684 have died, with cases and deaths outside China
overtaking those in the country where the outbreak began, according to a
PAYROLL TAX CUTS
The United States could pump $800 billion or more into the economy to
minimize damage from the coronavirus outbreak if Congress passes a
payroll tax holiday through year end, White House economic adviser Larry
Kudlow told reporters on Monday as U.S. officials scrambled to stem the
U.S. President Donald Trump has been advocating for the payroll tax to
be suspended through the end of the year, a move that would give
employees and businesses each about 7% of gross employee income per pay
period, but would punch a $1 trillion hole in Social Security and
"We have an enormous fiscal plan. It's at least $800 billion and maybe
more," Kudlow said, adding that $400 billion in fiscal assistance was
already in the pipeline.
The U.S. Chamber of Commerce on Monday urged Trump and top leaders in
the U.S. Congress to cancel all payroll taxes paid by employers for the
months of March, April and May; pass new legislation to expand and
streamline loan programs for small businesses; and provide loans and
loan guarantees to employers with more than 500 employees experiencing
significant revenue loss as a result of the outbreak.
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A test tube labelled with the coronavirus is placed on U.S. dollar
banknotes, in this illustration taken on March 1, 2020. REUTERS/Dado
A U.S. House bill that includes small business loans and food security
assistance was being held up on Monday on a technicality.
U.S. Senator Mitt Romney, a Utah Republican, on Monday proposed an expanded bill
that would give every adult American a $1,000 check, and defer student loan
payments for recent college graduates.
CASH FOR AIRLINES
Delta Air Lines Inc <DAL.N>, American Airlines Group Inc <AAL.O> and United
Airlines <UAL.O>, the three largest U.S. airlines, are in talks with the U.S.
government about potential assistance, and that aid will be a key part of any
new fiscal package, U.S. officials briefed on the matter said on Monday.
Kudlow, Treasury Secretary Steven Mnuchin and other White House officials have
made the industry a priority; last week Mnuchin told Americans they should keep
flying domestically, even as officials recommended limiting nonessential travel.
Kudlow told Fox Business news channel that administration officials would talk
to senators on Monday about the industry.
"Flying is such an integral part of our economy," he said. "This is not a
question of systemic failure or bankruptcies. This is really a cash flow
"We don't see any of the airlines failing. But if they get into a cash crunch
we're going to try to help them. We're consulting with the House and Senate to
see what works. And of course the Treasury Department and the Fed have enormous
powers on this."
He added he sees the aid as "a liquidity fix, not a bailout."
CONTROL THE VIRUS
Mark Sobel, a former senior U.S. Treasury official, lauded the Fed's surprise
rate cut as "forceful and huge" move, but said monetary policy had limited
efficacy in this situation.
Until "the United States acts more boldly to bring the virus under control,
profound uncertainty will remain, undermining prospects for recovery and
limiting the effectiveness of the economic response," said Sobel, now U.S.
chairman of the London-based OMFIF think tank.
(Reporting by Andrea Shalal, Jeff Mason, David Lawder, David Shepardson, Lisa
Lambert and Tim Ahmann in Washington; Editing by Heather Timmons and Matthew
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