The stock market responded positively on Tuesday to President Donald Trump’s announced plans to tackle the deadly coronavirus and its attendant economic impact.
Stocks rebounded sharply after the president floated an economic stimulus plan to mitigate fallout from the virus, the Washington Examiner reported — then fell again on Wednesday as details of the proposed package remained unclear. The president is interested in a payroll tax holiday as well as other measures designed to help workers and industry sectors struggling due to the public health crisis.
Market roller coaster
There are nearly 1,000 confirmed cases of the deadly virus in the U.S. thus far and at least 29 deaths, with outbreaks primarily concentrated in New York, Washington, and California, according to the Centers for Disease Control and Prevention (CDC). With more schools closing and employers sending workers home, an economic downturn is starting to look like less a matter of speculation as hard-hit countries like Italy, which is on a country-wide lockdown, seem to provide a foreboding hint of the future.
The president is clearly sensitive to the ongoing developments, and he floated a bare-bones economic stimulus plan Monday that is centered on a payroll tax holiday and may include family leave for workers affected by the virus, NBC News reported. Trump is also considering loans to help small businesses and assistance for the airline and cruise ship industries, which have taken major hits as global travel and tourism have contracted.
Trump’s reassurances made an immediate impact on the stock market, which suffered the worst sell-off in years Monday amid the uncertainty of the crisis. The Dow Jones Industrial Average gained 800 points following a 2000 point drop the day before, and the S&P 500 and Nasdaq also saw increases.
In a sign of continued market volatility, the Dow dropped 1,000 points on Wednesday as details of the stimulus remained hazy, CNBC reported. Stocks in airlines such as American, Delta, United, and JetBlue all fell at least 7%.
Payroll tax a key component
Trump, who had promised to lay out a “very dramatic” plan the night before, was not present at a press conference Tuesday night on the coronavirus. There, Vice President Mike Pence and his coronavirus task force said that the stimulus plan was still being hammered out, but that Trump wants a payroll tax holiday through the rest of 2020 to be the centerpiece, Fox News reported. The tax cut would drop the payroll tax rate to 0% — representing a huge cut to federal revenue.
The idea has received a chilly reception from fiscal hawks in the Republican Party and from Democrats who, in a contrarian spirit to the whole of Trump’s coronavirus response, have decried the tax cut as a giveaway to corporations that will not help working families. Trump’s economic adviser Larry Kudlow acknowledged that the tax cut would run up deficits in the short-term, but he predicted that the stimulus would pay for itself with subsequent economic growth.
“We are working out details right now so I don’t want to quote any numbers right now,” Kudlow said. “The outline of the thing is very important. The payroll tax holiday is probably the most important part of this.”
Paid leave, tax deferrals possible
Kudlow also floated assistance for workers with unpaid sick leave and tax deferrals for hard-hit industries.
Vice President Pence, for his part, reiterated Trump’s support for working families, saying that Trump does not want any American to feel that they need to miss a paycheck or risk exposure to the virus to take care of their families:
What the experts have said, is if you’re sick, if you have reason to suspect that you may have coronavirus, we want you to stay home. And the president’s absolutely adamant working with the Congress or using his executive authority to ensure that hourly workers, people working for small or medium sized businesses that don’t currently have paid family leave, will be able to stay home and be confident that they’re not losing a paycheck. I think every American can identify with that concern.
The press conference capped off a day of speculation about the particulars of Trump’s economic plan, as the president and his team met with Senate Republicans to discuss the situation at their weekly luncheon. Trump also dispatched Treasury Secretary Steve Mnuchin to meet with House Speaker Nancy Pelosi (D-CA) to get the ball rolling on a legislative package.
Although Trump has blamed Democrats and the media for blowing the outbreak out of proportion, his response shows a growing concern about the impact of COVID-19 on the economy as he heads into a re-election fight, likely against Joe Biden. The president’s 2020 campaign is betting heavily on the continued strength of the American economy to carry him to a second term.