Talks about the next major coronavirus relief package stalled in Congress in mid-August, and remained on hold until this month. The failure led President Donald Trump to announce a series of executive orders, though how much weight, both legal and stimulative, they carry remains to be seen.
Chances are the House and Senate will ultimately agree on another round of measures, injecting some capital into the economy but also piling more deficits on an already eye-popping national debt.
Timothy Gill, chief economist for the AISI, was asked about the rising red ink during an August webinar with Steel Market Update. He acknowledged they are a concern, but not the main one for now.
“The overriding principle is, when your house is on fire, you don’t worry about pumping water out of the basement right away.”
He described whatever efforts are taken as a “necessary evil” to get the economy back on its feet. He noted the U.S. still has a smaller debt to GDP ratio than Japan, plus the dollar’s service as the primary reserve currency, as two arguments against the idea the growing debt will not lead to a crisis.
Gill said the first major action, the CARES Act, actually did a decent job at achieving its aims, forestalling an even worse downturn.
For that reason, he believes another measure will ultimately be agreed upon and enacted. And, as we see elsewhere in this issue, the metals industry welcomes more efforts from the federal government to protect their enterprises.
A recent survey from the Precision Manufacturers Association revealed both interest in another round of loans, and healthy use of the first batch. The overwhelming majority of respondents to the survey applied for a PPP loan, a full 90 percent having been awarded the loan and provided the funds, and an almost equal amount claiming it allowed them to keep employees they otherwise would have let go. Additionally, 80 percent of survey respondents said if another round of loans was made available, they would seek them out.
As for what they’d like to see in the next COVID economic package, metalformers’ responses were pretty varied. The top score went to the idea of making 100 percent of business expensing permanent, followed closely by a 6.2 percent payroll tax holiday from March to December 2020. A plan for five-year government guaranteed loans and 2 percent (not forgiven) loans for equipment, materials and other expenses; tax incentives for training and recruitment; and establishment of business liability protection for employers rounded out the five highest-scoring answers.
The coronavirus is going to be a drag on the U.S. economy for a while, until at least early next year. While government intervention in the market is rarely for the better, this is one instance when we need thoughtful, and meaningful, action from our elected officials.