U.S. stocks rebounded from the worst drop since the global financial crisis after President Donald Trump said he would announce “substantial” economic measures on Tuesday to combat the fallout from the coronavirus.
Trump’s economic plan—which he said could include a payroll tax cut and paid sick leave—does not have buy-in from Congress yet, though he is dispatching his top aides to start pitching the measures on Capitol Hill. The president dismayed some officials with an announcement during a Monday press briefing that he would unveil a plan in 24 hours, as they had vied for taking the plan to lawmakers first.
Still, the S&P 500 jumped more than 3% at the open, as investors digested Trump’s announcement. U.S. stocks plunged more than 7.5% on Monday—the worst day on Wall Street since the financial crisis—as a full-blown oil price war rattled investors already on edge over the outbreak.
It was, in large part, the market crash that pushed the White House into action on Monday, according to people familiar with the matter.
The president caused some dismay in the West Wing when he announced during a Monday press briefing that he would unveil a plan in 24 hours, before the White House had briefed lawmakers.
As outlined by Trump, the proposal will likely include a payroll tax cut and a short-term expansion of paid sick leave, according to the people, who described the plan on condition of anonymity ahead of its planned release on Tuesday.
The package will leave out for now any aid for the travel industry, which has been battered by travelers curtailing plans since the coronavirus outbreak, according to people familiar with the matter. While the White House wants to find a way to help airlines and hospitality companies reeling from a plunge in demand from travelers, administration officials remain uncertain about the best way to do so.
Treasury Secretary Steven Mnuchin on Tuesday will speak with Senate Republicans about the plan. A payroll tax cut requires legislation, while paid sick leave may be implemented through executive action, the people said.
Elements of the package could still shift, including the payroll tax changes, which drew opposition from Richard Neal, the chairman of the tax-writing House Ways and Means Committee late Monday, as well as other Democratic congressional leaders.
While Trump has been pointing to the Federal Reserve as the front line, economists have stressed that the crisis will require a multi-faceted response from governments, health-care professionals, central bankers and others to stem the human and economic damage.
The measures emerged following a tense meeting Monday of Trump’s top advisers in a bid to contain the widening fallout from coronavirus and tumbling oil prices, the people said.
About a dozen officials, including Treasury Secretary Steven Mnuchin and economic adviser Larry Kudlow, hashed out the details before Trump. Peter Navarro, the president’s trade adviser, urged sweeping measures, including a payroll tax cut, while Mnuchin recommended more targeted steps.
The Treasury chief opposed going to Congress on the payroll tax cut, two of the people said. Details for such tax relief are preliminary and would have to be worked out with lawmakers, they said.
On paid sick leave, Tuesday’s announcement will most likely lay out an option that targets hourly wage workers who are quarantined because of the coronavirus, they said. The measure may be executed through executive action rather than through legislation.
The administration is aware that airlines, cruise operators and hotel companies will need some help after meetings with industry representatives. But Trump’s economic team for now is uncertain of what steps are needed, according to people familiar with the matter.
Until Monday, Trump and his administration were sticking to their message that the American economy was in a strong position to weather any fallout from coronavirus, but the dramatic market drop shifted their position, the people said.
Trump, speaking at a White House news conference Monday, said that he plans to announce “very dramatic” actions to support the economy at a news conference on Tuesday, following discussions with lawmakers. “I will be here tomorrow afternoon to let you know about some of the economic steps, which will be major,” Trump said.
Trump said he wants to help hourly wage earners who could lose pay by staying home “so they don’t get penalized for something that’s not their fault.”
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