White House, senators strike deal on stimulus package of over US$2 trillion

Washington

THE Trump administration struck a deal with Senate Democrats and Republicans on a historic rescue package that tees up more than US$2 trillion in spending and tax breaks to bolster the hobbled US economy and fund a nationwide effort to stem the coronavirus.

"At last we have a deal," Senate Majority Leader Mitch McConnell said early on Wednesday on the chamber's floor. "I'm thrilled that we're finally going to deliver to the country." Senate Democratic leader Chuck Schumer called it an "outstanding agreement".

The legislation was still being drafted but Mr McConnell said the Senate would vote on it on Wednesday. It would still have to pass in the House before it gets to President Donald Trump's desk. House Speaker Nancy Pelosi had consulted with Mr Schumer throughout his negotiations with Treasury Secretary Steven Mnuchin.

The plan includes about US$500 billion that can be used to back loans and assistance to companies, including US$50 billion for loans to US airlines, as well as state and local governments. It also has more than US$350 billion to aid small businesses. Then there is US$150 billion for hospitals and other health-care providers for equipment and supplies.

For individuals, the package provides direct payments to lower- and middle-income Americans of US$1,200 for each adult, as well as US$500 for each child. Unemployment insurance would be extended to four months, the benefits would be bolstered by US$600 weekly and eligibility would be expanded to cover more workers.

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Democrats demanded and won a series of restraints on corporations that would benefit from loans or investments from the Treasury Department, as well as an oversight mechanism for who gets money.

Any company receiving a government loan would be subject to a ban on stock buybacks through the term of the loan plus one additional year. They also would have to limit executive bonuses and take steps to protect workers. The Treasury Department would have to disclose the terms of loans or other aid to companies and a new Treasury inspector general would oversee the lending program.

Notably, Democrats won language that would bar any business owned by Mr Trump or his family from getting loans from Treasury. Businesses owned by members of Congress, heads of executive departments and vice-president Mike Pence also would be blocked.

With the prospect that Congress was closing in on a deal on Tuesday, the Dow Jones Industrial Average rose more than 11 per cent in its biggest advance since 1933, and the S&P 500 rebounded with the biggest one-day gain since October 2008 after starting the week with a rout. In Asia markets, US futures pared early losses after news of the deal.

In a letter to his fellow Democrats, Mr Schumer highlighted a series of transparency measures that would prevent keeping loans secret and create a new inspector-general to oversee the programme.

Mr Schumer also said that hundreds of billions would be spent on Democratic priorities, including the expansion of unemployment benefits, money for hospitals as well as more funding for cities and transportation.

Democrats also rejected the US$3 billion sought by the Trump administration to buy oil to fill the Strategic Petroleum Reserve.

Ms Pelosi said on Tuesday that the House could quickly approve a Senate-passed coronavirus stimulus with a voice vote that doesn't require members to travel to Washington - as long as the bill does not have any "poison pills" Democrats object to.

That would also require the unanimous consent of all House Republicans. The second-ranking House Republican, Representative Steve Scalise of Louisiana, told his vote-counting team during a conference call on Tuesday night that the best option is to accept a Senate-passed economic stimulus bill, according to Scalise spokeswoman Lauren Fine.

Eric Ueland, the White House legislative affairs director, said after the agreement was reached that "the president and his team look forward to swift action for urgently needed assistance to the American people and powerful aid to the nation's economy as we work through this crisis".

The size of the stimulus package is unprecedented, dwarfing the approximately US$800 billion Obama stimulus passed five months after the 2008 global financial crash.

Together with Fed intervention, the proposed legislation amounted to a US$6 trillion stimulus, according to White House economic adviser Larry Kudlow, or about 30 per cent of annual GDP.

The package will likely more than double a US budget deficit that was already set to hit US$1 trillion this year before the outbreak. It also may not be the last infusion of government spending in response to the spread of the virus.

Lawmakers universally expressed a sense of urgency as the nation's economy deteriorates and the health outlook grows more dire. The World Health Organization said the US has the potential to become the new epicentre of the global pandemic as the number of known infections soars.

The proposal is the third - and biggest - plan by Congress to confront the coronavirus crisis as the disease spreads.

An initial US$8 billion plan passed by Congress on March 5 is funding emergency health care needs stemming from the coronavirus, and a second plan enacted last week will provide many Americans with paid sick leave, food assistance and free coronavirus testing. It also will send tens of billions in fresh aid to states. BLOOMBERG