Larry Kudlow, President Donald Trump’s top economic advisor, said Tuesday afternoon that the broad economic recovery from Covid-19 doesn’t necessarily require additional fiscal stimulus even if select industries or businesses could benefit from additional aid.
“I don’t think the V-shaped recovery depends on the package, but I do think a targeted package could be a great help,” Kudlow said from the White House. “Even though I think the economy is improving nicely, it could use some help in some key, targeted places.”
Kudlow added that the White House has for weeks championed more funding for schools and the Paycheck Protection Program, a facility established by the Cares Act earlier this year that provides loans to small businesses so long as employers agree to use the funds to keep staff on payrolls.
He also acknowledged that while the overall U.S. economy appears to be in the middle of a comeback after a recession, there are still industries that are suffering as a result of the virus and efforts to contain its spread.
“We also wanted to extend the assistance plan, the PPP plan, to small business. I mean, we actually had money – it’s over $100 billion – that could be repurposed to go back in through that plan,” Kudlow added. “I think that plan was very effective. I think it did save, perhaps, 50 million jobs.”
“Unfortunately, we couldn’t reach agreement with the other side. And that was before the judicial issues came up,” he added. “I wish we could break the stalemate.”
Kudlow’s suggestion that the U.S. economy could continue in a sharp rebound without further aid appeared to mark a deviation from statements made by both Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin just hours earlier.
In testimony before the House Financial Services Committee, both Mnuchin and Powell suggested that additional stimulus may be needed — especially in certain industries — until Americans resume their everyday business per usual.
For his part, Powell said that most forecasters who project further economic recovery in the U.S. assume that Congress will be able to reach a compromise on additional coronavirus relief.
Though the central bank chief was clear to say that economic growth is in the middle of a rebound, he added that there are risks to employment and GDP growth if lawmakers can’t agree on an additional relief package.
“I would say many, most, [forecasters] assume some fiscal action. Fiscal action underlies many, many current forecasts,” Powell said. “What’s happened lately is the economy has proved resilient both to the broader spread of the disease over the summer in some of the southwestern states and also to the expiration of the Cares Act benefits.”
“The risk is that, over time, they go through those savings, they haven’t been able to find employment yet because it’s going to take a while to get 11 million people back to worth, so their spending will decline,” he added. “Their ability to stay in their homes will decline. So, the economy will begin to feel those negative effects at some time.”
Mnuchin said in his testimony that the White House was ready to reach a bipartisan agreement and that he believes “a targeted package is still needed.”
The comments from all three officials came as Wall Street continued to lose faith that no more stimulus is coming. The U.S. stock market is down the past three weeks in part thanks to gridlocked negotiations between Mnuchin, White House chief of staff Mark Meadows and Democratic House Speaker Nancy Pelosi.
The rift between the two sides appeared to widen after the death of Supreme Court Justice Ruth Bader Ginsburg and Republican efforts to fill her seat.