WASHINGTON — President Donald Trump aims to shovel $2.2 trillion into the U.S. economy over the next few weeks to try to cushion its free fall. But that means putting his fate in the hands of banks, profit-minded businesses and government bureaucrats he has frequently derided, along with a man who has emerged as arguably the biggest power broker to business in Washington: Treasury Secretary Steven Mnuchin.
The massive bailout package, which includes direct cash payments, $349 billion in loans for small businesses and a $500 billion corporate rescue fund, is the biggest ever in U.S. history. It’s an attempt to keep the economy afloat as Trump warns Americans to brace for a “hell of a bad two weeks,” with 100,000 to 240,000 coronavirus deaths now — projected in the U.S. even if current social distancing guidelines are followed. At the same time, the country is hemorrhaging more than 3 million jobs a week, with economic forecasters warning of a deep recession that could compromise the president’s reelection chances.
At the centre is Mnuchin, a former hedge fund manager and movie producer who helped to write the package and shepherd it through Congress and now has enormous discretion over which industries are most in need and how to dole cash out accordingly.
And then there is the matter of the president — and questions about whether he’ll want to meddle.
Trump has already made clear he is more inclined to work with those who earn his favour , including returning the calls of governors who praise him and prioritizing requests for equipment and vital supplies in states that will be crucial to his reelection, like Florida.
Neil Barofsky, a partner at Jenner & Block who served as the first special inspector general of the 2008 Troubled Asset Relief Program (TARP) program, said the package gives the administration “a ton of discretion,” but it’s too soon to know exactly how much because the programs for distributing funds have yet to be set up.
“I think it’s unlikely the Treasury Secretary’s going to call up Bank of America and say, ‘Hey, you’ve got to give a loan to this guy,’” Barofsky said, “so the opportunities are more in the design of the program that tilts it toward a particular industry or a subset of an industry.”
Still, Peter Henning, a law professor at Wayne State University and a former Justice Department attorney, said the act was written to give Mnuchin tremendous power. “He can negotiate the terms of any loan or loan guarantee, so it’s a much broader authority than back in 2008,” when Congress offered a bailout to banks and automakers during the last financial crisis.
With so much discretion, Henning wondered whether businesses with political ties to Trump might end up benefiting. “Is he going to favour businesses that are friendly to the president? I don’t know.”
The legislation does establish a system of oversight on how companies can use the money that is widely thought to exceed the standards set in 2008-09. Borrowers, for instance, must be based in the U.S. and companies cannot repurchase outstanding stock or pay dividends until one year after their borrowing is repaid. The legislation also makes companies ineligible for loans if top Trump administration officials, members of Congress or their families have 20% control of the company or more.
The law also created a new government watchdog — a special inspector general to be appointed by Trump — and a panel appointed by Congress to monitor how the aid is deployed. Trump, however, has already rejected the independence of the office and disputed other aspects of the oversight rules, including that Congress should be consulted in the allocation of money.
The Treasury Department did not respond to questions about Mnuchin’s role. The White House declined to answer questions about the potential for influence and instead offered a statement trumpeting the legislation, saying it would “take care of all Americans, including affected industries and small businesses, in unprecedented ways during this ongoing pandemic.”
The $2.2 trillion relief bill also contains up to $50 billion in support for passenger airlines and $8 billion for air cargo carriers, half of the money intended to pay workers.
Administration officials indicate that the first major wave of cash to hit the economy will likely start flowing Friday in the form of $349 billion in forgivable loans, provided on a first-come, first-served basis, to small businesses that agree to retain or rehire their workers. That will be followed by cash deposits of $1,200 per person with incomes below $75,000. The infusion will depend on banks approving loans at a record pace and an Internal Revenue Service with 20,000 fewer workers than it had a decade ago.
It will also depend on bank websites not crashing amid a crush of loan applications and checks reaching the proper accounts without the money being garnished for people’s past debts.
Mary Miller, who oversaw efforts to revive the economy after the Great Recession as the Treasury Department’s undersecretary for domestic finance, noted that many banks appear unready to process loans that are forgivable if small businesses keep their workers on payroll.
“I want to see the money hit the ground as quickly as possible, but I’m skeptical that it can work like magic,” said Miller, who is now running for mayor of Baltimore. “We’re racing against time. Small businesses can’t wait a few weeks before they fail.”
“Time is of the essence,” Mnuchin stressed Wednesday in an interview on CNBC. “We have a lot of money. We need to get that money in Americans’ hands.”
If the money is exhausted, he said, the administration plans to go back to Congress for more. “That will be at the top of the list to go back to Congress,” he said.
The Small Business Administration has expanded from 3,000 employees to 5,000 and more in order to manage the effort. But the IRS, which will help distribute nearly $300 billion in checks, has lost more than 20% of its workers since fiscal 2010. There are also unfilled spots at Treasury, which will force Mnuchin to scramble in order to distribute funds successfully.
“You can’t get the medicine administered if you don’t have the people to administer it,” said Sarah Bloom Raskin, who succeeded Miller at Treasury and later served as a Federal Reserve governor.
Tony Fratto, a former Treasury and White House spokesman during George W. Bush’s administration, said the scope of the effort means, “There are absolutely going to be mistakes. There’s no doubt about it. You just can’t do something this big, this quickly, with so little documentation without mistakes.”
Still, Fratto said, “The objective right now to minimize damage to the U.S. economy means that you put a much higher priority on pushing money out the door as quickly as possible.”
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Associated Press writer Martin Crutsinger contributed to this report.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
