(Bloomberg) --Treasury Secretary Steven Mnuchin has won bipartisan praise for quickly shoveling billions of dollars in pandemic relief into the economy -- a rare bright spot in an administration under intense criticism for its coronavirus response.
Yet whether that round of applause is fleeting depends on how quickly the world’s largest economy recovers from the coronavirus outbreak.
Mnuchin is optimistic. He says he doesn’t think the U.S. will suffer rolling shutdowns for 18 months or longer until a vaccine is widely available, the prediction of Minneapolis Fed President Neel Kashkari.
“That’s highly unlikely that this goes on for that period of time,” the Treasury chief said in a Bloomberg News interview on Thursday. “You’re going to see an opening up in May and June. You’re going to see a strong rebound in the economy in the end of the third quarter and the fourth quarter.”
If so, that would be just in time for President Donald Trump as voters head to the polls to decide whether to return him to the White House.
As Trump’s point person on the economy, Mnuchin negotiated the biggest stimulus in American history last month and added to it this week, working side by side with his boss’s arch-enemy, House Speaker Nancy Pelosi. He’s also partnered with Federal Reserve Chairman Jerome Powell -- another frequent target of Trump’s criticism -- on programs to shore up small businesses and bolster families’ checking accounts.
“He gets that there’s an urgency in getting money out the door quickly,” said Jared Bernstein, who served during the global financial crisis as chief economist to Vice President Joe Biden, the presumptive Democratic nominee to challenge Trump for the White House in November.
But the road ahead for Mnuchin only gets tougher as the pandemic’s economic damage deepens and scrutiny grows of the administration’s handling of bailout programs, including a small business initiative that excluded many mom-and-pop firms. Securing more stimulus -- including aid for states battered by the crisis -- will prove far trickier politically as top Republicans in Congress grow wary of the mounting price tag.
The growth of coronavirus infections and deaths has begun to stabilize, but more than 26 million Americans are out of work, and the country won’t return to normal social and economic life any time soon. And while Mnuchin has acted fast, Bernstein and others say his record is far from blunder-free.
Markets have signaled their approval. The benchmark S&P 500 index has risen more than 20% since mid-March, reversing a steep decline earlier in the outbreak.
“Market prices reflect trust in the Treasury and Federal Reserve to get the job done,” said Gray Schweitzer, a member of the Fed’s insurance policy advisory panel. “To avoid fighting a war on too many fronts, the current focus is thoughtful program implementation and execution.”
Billions Mobilized
“I give him credit,” Senator Mark Warner, a Virginia Democrat, said on MSNBC on Thursday. “I don’t always agree with the Trump administration by any means, but Steve Mnuchin’s been working his tail off on this.”
In just four weeks since Trump signed a $2.2 trillion virus relief package into law, Mnuchin has spent or committed to spending roughly $881 billion from the major programs that Congress authorized him to launch.
“We’ve had an unprecedented fiscal and monetary response,” Mnuchin said. As he spoke by phone Thursday afternoon at his office at the Treasury, he was closely monitoring a House vote to clear another $484 billion in virus-related spending.
While Mnuchin and his team worked rapidly, not everything has been smooth. Some cash payments for families landed in the bank accounts of the deceased. Many smaller concerns that make up half of America’s workforce and are desperate for a financial lifeline say they were shut out of the Paycheck Protection Program, the loan program intended for small businesses.
Several of the stimulus programs have yet to begin, including $17 billion for companies deemed critical to national security and some lending programs Mnuchin authorized Powell to launch.
Still, his work so far has earned him plaudits from both sides of the aisle, including from some who questioned whether the banker-turned-Hollywood-producer was fit for the job -- even before it required navigating what is shaping up as the biggest economic calamity in the U.S. since the Great Depression. Pelosi credited Mnuchin last month for his cooperation on the stimulus.
Mnuchin was under pressure to mobilize several new emergency programs at once. They included the $349 billion loan program for small businesses, $1,200 cash payments to many American families, and a $32 billion airline rescue. He authorized nine lending programs for the Federal Reserve.
‘Unbelievable Calm’
The small business program went into operation within a week of being signed into law, and required the rapid expansion of the Small Business Administration, which previously made less than $30 billion in loans each year.
Mnuchin’s “ability to analyze complex problems quickly, adapt to rapid developments, and with unbelievable calm, helped make Treasury’s response more effective,” said Geoffrey Okamoto, first managing director for the International Monetary Fund who was a senior aide at Treasury until last month.
After wrapping up the small business loans, Mnuchin turned to the airlines, whose business had all but collapsed after Americans stopped traveling for fear of infection. But he played hard ball with the industry, earning compliments from Democrats, insisting on strict repayment guidelines in exchange for taxpayer money.
But the crisis he faces has no clear end in sight. And if the outbreak endures, the Treasury chief will run low on ammunition.
The Trump administration cut U.S. taxes two years ago, driving up a federal deficit that hadn’t yet recovered from the last crisis. It’s seen quadrupling this year to nearly $4 trillion, according to the Committee for a Responsible Federal Budget. That estimate doesn’t count the additional $484 billion in spending that lawmakers approved on Thursday.
And while Mnuchin has suggested what’s been provided so far may be enough for the economy to recover from Covid-19, Pelosi sees the need for yet more spending.
“It’s going to be a major package that’s going to address, again, the needs of the states and localities,” she said Wednesday in a Bloomberg TV interview.
Mnuchin faces the added pressure of trying to chart a course for an economic revival with a boss whose re-election likely depends on it. Before the pandemic, Trump’s key pitch to voters was the strength of the economy.
Current polls show that most Americans disapprove of Trump’s handling of the outbreak, and he is trailing Biden in the key swing states of Michigan, Pennsylvania and Wisconsin, according to a Ipsos survey published by Reuters on Thursday.
The small business lending program -- a key piece of the stimulus package Mnuchin helped put together -- ran out weeks before he predicted. Many banks and businesses have complained about glitches that prevented them from issuing or applying for loans. And the administration has faced public outrage after national restaurant and hotel chains obtained money when many smaller businesses couldn’t.
While the roll-out was “not perfect,” the Treasury secretary’s ability to stand up a brand-new loan program “in this short a period of time is outstanding,” Tony Fratto, a Bush administration official who signed a “Never Trump” letter in 2016, said in a tweet.
In the end, Mnuchin and his team at Treasury and the SBA oversaw more than 1.6 million loan applications at an average size of $206,000 filter into the economy through almost 5,000 lenders.