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Treasury Secretary Hands Off to Congress

Friday, November 20, 2020

Ahead of Friday’s opening bell, and following Thursday afternoon’s announcement from Treasury Secretary Steven Mnuchin that congressional stimulus programs are coming to an end, markets are hovering around unchanged. Federal emergency programs scheduled to expire December 31st are, according to Mnuchin, going to do just that. But with things like Pandemic Unemployment Assistance (PUA) and its more than 10 million Americans drawing from it, what happens on January 1st?

CNBC’s “Squawk on the Street” was fortunate enough to have a live interview with Secretary Mnuchin, where he explains his position on these stimulus expirations. Basically, he points to hundreds of billions in earmarked funds having gone unused; Mnuchin says these should be returned to Congress and distributed via a new stimulus program. He cited $130 billion for the Paycheck Protection Program (PPP), more than $500 billion in appropriated funds and $750 billion in “firepower” yet unused for economic stimulus as the Covid-19 pandemic rages on.

The Fed has been especially vocal that retiring these programs is a bad move for the economy; the Fed itself has pulled out every stop to allow cheap money to flow through the markets, lowered the bar for borrowing from banks, etc., which has helped buoy the stock market, various business sectors, employment levels and GDP since the pandemic struck this past spring. The problems in stimulus funding have all come from the inability of Congress to continue programs like the CARES Act, which expired in July.

It’s a dicey time for Congress: a lame-duck session between presidential administrations (assuming President-elect Biden’s electoral victory is validated) with a Senate chamber with two outstanding run-off elections scheduled for early next year appears to aggravate legislative abilities to enact anything meaningful in terms of economic assistance. For this reason, the Treasury Secretary’s move yesterday — and explanation today — would remain problematic. Especially because the decision was in his hands to do something about stimulus relief during this precarious political period.

Meanwhile, Covid-19 continues to break new records in the U.S. ahead of holiday season: 187,396 new cases were reported yesterday, which is an all-time high. This brings the total number of domestic cases to 11.8 million, with 252K fatalities from the disease as a result. Cities and regions are re-instigating shutdown measures to curb the spread of coronavirus, which will hinder economic growth. And it seems as if the clock is about to run out on relief, as of now.

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