The White House is considering providing low- or no-interest loans for affected companies and could defer taxes for them until a later date, multiple senior administration officials said. The situation is evolving rapidly. The White House is also considering offering low- or no-interest loans to oil and gas producers that have been hit by plummeting oil prices, officials said.
It is unclear which of these measures would require congressional approval. But Mnuchin suggested that he would consult with lawmakers after talking to business leaders.
“This is not a bailout. This is considering providing certain things for certain industries. Airlines, hotels, cruise lines,” said Mnuchin, who denied at least four times that the plans amounted to a “bailout.”
The George W. Bush and Obama administrations took steps to prop up parts of the economy during the 2008 financial crisis, including injecting cash into the banking and automotive industries. Those measures would ultimately become controversial, leading to a populist backlash against government initiatives that appeared to pick winners and losers during a crisis.
During the hearing, Mnuchin stressed that the administration was trying to advance other measures such as paid sick leave and a payroll tax cut aimed at helping the broader economy.
The Trump administration may defer the April 15 tax-filing deadline as firms and individuals nationwide deal with the effects of the coronavirus. But the impact of this move is unclear, in part because the tax obligations would probably still have to be paid back in the near future.
Mnuchin compared the potential programs to the decision to help the airline industry after the terrorist attacks of Sept. 11, 2001, which caused a temporary downturn in air travel. But the White House’s plan may be a difficult sell politically. The Trump administration has already faced criticism for approving close to $30 billion in direct cash payments to farmers hurt by its trade war with China.
“I want to be clear: This is not bailouts. We are not looking for bailouts. But there may be specific industries that are highly impacted by travel and have issues with lending,” Mnuchin said. “Loan guarantees are a very effective way of making sure the government is paid back without putting the government at risk.”
A loan guarantee is a way for the government to backstop certain credits, offering assurance to lenders that the loan will be paid back one way or another. If the borrower doesn’t repay the loan, the government will step in because it has provided a type of insurance.
Some conservatives and liberals slammed Mnuchin’s remarks, arguing that the White House’s plans do amount to a bailout. Paul Winfree, who served as deputy director of the White House Domestic Policy Council under President Trump in 2017, said the plan did appear to represent help for a specific industry.
“It sounds like a bailout to me,” said Winfree, who is now at the Heritage Foundation, a conservative think tank. “We are going to have to see specifics, but when you are dealing with special treatment given to one industry or sector of the economy, that is, almost by definition, a bailout.”
Some liberals have said that federal help should be directly given to low-income workers, or that the government should send cash rebates to people nationwide. Targeted assistance for specific industries is not expected to be in the Democratic package to address the coronavirus that is likely to be voted on this week. Workers who get laid off are unlikely to be able to receive special low- or zero-interest loans from the federal government.
“You do bailouts and then say, ‘This is not a bailout,’ ” said Bob Hockett, a public policy expert at Cornell University, comparing Mnuchin’s remarks to a famous painting by René Magritte of a pipe known as, “This Is Not a Pipe.” “If they’re going to do bailouts — even if they don’t call it that — why not do it for line workers and retail workers who don’t have a lot of savings or paid leave time?”