Friday’s unexpectedly good jobs report was great news but it has produced a typically schizophrenic reaction by the White House. On the one hand, the Trump administration has been emboldened to continue pressing forward with reopening the economy and getting people back to work. The administration also appears to be ignoring some of the more misguided advice on how to do this. On the other hand, it has apparently convinced administration officials that further federal stimulus on top of the $3.5 trillion already authorized may be needed and that there is nothing wrong with having strings attached to that aid.
“First of all, we reopened. That is absolutely essential,” White House economic adviser Larry Kudlow told Fox Business’ Stuart Varney Friday. “Second point is, I think the rescue package was very helpful. I think in particular [it was] the PPP, the Payroll Protection Program, as administered by Treasury Secretary Stephen Mnuchin. By our estimates, we put out over $500 billion in resources and loans. That may have saved 50 million jobs.”
In other words, the White House believes the economy will rebound on its own if just given the chance but still thinks it deserves credit for the good news. Kudlow went on to say that the White House remains in talks with Congress for another stimulus package and they were likely to resume talks with Congress in mid-July. Varney asked: “Do we need it when we have such a strong rebound and such a strong opening in progress?” Kudlow indicated yes, but added that the White House had “slowed down” the talks and might rethink what the package would contain. Previous reporting indicated the next relief bill could be another $1 trillion. Kudlow gave no figure but said, “We need to move from rescue assistance to more long-term economic growth incentives.”
The main thing the White House is advocating at the moment is a payroll tax holiday, which is a good idea. That is about the best way for the federal government to reward people who seek out work: Just let them keep more of the paycheck they earn. This idea typically gets resistance from congressional Democrats, who instinctively oppose anything that can be construed as “weakening” Social Security, which is funded by payroll taxes. It is unclear therefore if this will make it into any additional relief bill.
Still, it is a good sign that the White House is opposing the Democrats’ call to simply extend unemployment payments, which is paying people not to work, and the alternate pushed some Republicans, like Senator Rob Portman, a cash bonus for workers on top of their regular paycheck. The latter would effectively be the same thing as a payroll tax holiday, only much less efficient.
However, as Kudlow’s comments on the PPP loans indicate, the White House is convinced that targeted federal spending also helped to produce the surprise jobs numbers. At the same press conference Friday where President Trump hailed the jobs numbers he signed legislation that modestly reformed the PPP loan program but fell far short of what the business community had wanted. Business groups had objected to a provision that made PPP loan forgiveness contingent on 75 percent of the funds going towards retaining employees.
Businesses argued that they could not use the funds for rent, utilities, vendors, or other expenses that had to be addressed in order to stay open. House Democrats surprisingly agreed and eliminated the 75 percent requirement altogether. That reform effort stalled after the White House opposed it, then fell apart completely after unions pressed Democrats to walk the reform back. The legislation signed by Trump Friday knocked the requirement down to 60 percent, an improvement but one that still leaves many employers in a tough spot.
So, to sum up, the White House’s thinking appears to be that the economy is recovering just by letting people get back to work. Therefore, we should wait and see if this takes before we start shoveling out more taxpayer dollars—but let’s keep those shovels handy just in case.