Mnuchin accuses Democrats of playing politics on US aid deal

[WASHINGTON] US Treasury Secretary Steven Mnuchin on Wednesday accused Democratic leaders in Congress of playing politics to block a new emergency pandemic spending package, which he said should be narrowly targeted.

The White House and Democratic leadership have failed to reach a deal for a new round of emergency aid to workers and businesses struggling to recover from the Covid-19 shutdowns, and no new talks have been held this week.

"I think the Democrats are very focused on the politics. Perhaps they think that any deal is good for the president and that's why they don't want to do it," Mr Mnuchin said on Fox Business.

Mr Mnuchin repeated the stance that a deal is possible, if Democrats are willing to compromise and agree to something smaller than the US$3 trillion package they approved in the House of Representatives.

"Our view is let's spend a little over a trillion dollars on areas of the economy that are going to be very impactful now that we can agree on. And if we need to do more we'll come back and do more and work together," he said.

"We don't need to do everything at once."

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But Democratic House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer have rejected the idea of scaling back the proposal to that extent, although they did agree to cut it down to around US$2 trillion.

"We have again made clear to the administration that we are willing to resume negotiations once they start to take this process seriously. The lives and livelihoods of the American people as well as the life of our democracy are at stake," they said in a statement.

A RECOVERY?

Meanwhile, President Donald Trump signed an executive order to provide US$400 a week in additional unemployment benefits to jobless workers. That's less than the US$600 approved in the last package, but White House economic advisor Larry Kudlow said it would put the economy back on track.

"The executive orders provide considerable assistance and economic growth incentive. So we can stay with that as we are entering what I think is a self-sustaining economic recovery," Mr Kudlow said on Fox Business Network.

Mr Trump has also floated a capital gains tax, which would mostly benefit wealthy investors who trade stocks. Mr Mnuchin said it would help spur investment and an economic recovery, but Mr Schumer slammed the proposal.

"President Donald Trump and Senate Republicans say a tax cut for wealthy investors will help fight the COVID economic crisis, but think US$600/week is too much for 30 million unemployed Americans," Mr Schumer said on Twitter.

"They simply don't understand the magnitude of the problems on Main Street."

Mr Mnuchin continues to oppose the Democrats' demand to provide aid to state and local governments which lost massive amounts of revenue when businesses shut down nationwide.

He said there is plenty of money left over from the previous bill that has not been spent and would allow states to chip in US$100 of the US$400 weekly jobless benefit.

However, Treasury's own data through July 23 shows that major cities and populous states have used much of the funding: California has spent 75 per cent, while Detroit used over 90 per cent and New York city nearly 100 per cent.

Economists note that pandemic funding pressures mean many state and local governments may be forced to lay off teachers, police and firefighters.

Separately, Treasury Wednesday reported a 224 per cent surge in the deficit to US$2.8 trillion as of the end of July, compared to US$867 billion in the same month last year.

AFP