- McConnell supported the Treasury’s Mnuchin in his extraordinary clash with the Federal Reserve.
- Both want Congress to reallocate unused stimulus funds to support small businesses.
- “U.S. workers should not lose their jobs unnecessarily when a second round of the job-saving paycheck protection program for the hardest-hit small businesses would make a huge difference,” the Kentucky Republican said.
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Senate Majority Leader Mitch McConnell issued a statement Friday afternoon supporting Finance Minister Steven Mnuchin̵
McConnell said “there is an obviously correct use” of the unused funds. He argued that it should be aimed at “urgent, important and targeted relief measures” that Republicans have been seeking for months because of repeated democratic objections, they are not enough to dampen courage among people and many sectors of the economy.
“U.S. workers should not lose their jobs unnecessarily when a second round of the job-saving paycheck protection program for the hardest-hit small businesses would make a huge difference,” the Kentucky Republican said. “Our medical system should not be denied further support, including for the distribution of life-saving vaccines that appear to be on the horizon.”
The statement omits any reference to helping unemployed Americans, a move Mnuchin said Congress could take with the funds on Friday. Next month, the U.S. economy faces another cliff with 12 million unemployed Americans at risk of losing all of their unemployment benefits because federal initiatives expire.
McConnell’s comments come as Mnuchin on Friday defended his decision not to extend five Fed emergency lending programs offering credit to businesses, cities and states after Dec. 31. The move sparked a rare reprimand from the central bank, which said it wanted them to continue and formed a rift between two government institutions that had worked closely together to manage the economic breakdown of the pandemic this year.
In a CNBC interview, Mnuchin said Congress designed the programs to end this year, and the Fed erred in its interpretation of the law. “They were not in the room, it is not their job,” he said.
He also called on Congress to redistribute the money, even though it would also require the Fed to sign.
“We do not need this money to buy corporate bonds. We need this money to help small businesses that are still closed or damaged without their own fault,” he said. “Or people coming on unemployment who are running out.”
The Fed programs at the center of the dispute were introduced shortly after the CARES law was passed in March. Congress allocated $ 454 billion to the Treasury to stop Fed lending and settle roiling markets when the pandemic hit.
On Friday afternoon, Federal Reserve Chairman Jerome Powell took to Mnuchin a more conciliatory tone with Mnuchin in a letter. He credited the programs for maintaining the stability of the financial system and said unused funds would be returned.
“We are preparing arrangements with you to return the unused portions of the funds allocated to the Cares Act facilities in connection with their termination at the end of the year,” he wrote.
Democrats attacked Mnuchin for not expanding the programs. They argued that it would limit the tools available to President-elect Joe Biden to strengthen the economy. The Biden transition team skipped the move in a statement to the Washington Post, calling it “deeply irresponsible.”
“In this fragile moment, as COVID and economic crises accelerate, we should strengthen the government’s ability to respond and support the economy,” said spokeswoman Kate Bedingfield.
The tax secretary was also subjected to criticism from economists and some Republicans as virus cases rise, leading to renewed restrictions and closures that experts fear could set the economic recovery back. However, the Trump administration struck a more optimistic note about the risks facing the U.S. economy.
“The economy has tremendous momentum,” White House Director Larry Kudlow told reporters Friday. He also said there is “a lot of hardship out there” and reiterated the administration’s support for targeted assistance.