US stimulus hopes dim as Mnuchin says negotiators 'far apart'

WASHINGTON: US Treasury Secretary Steven Mnuchin on Wednesday said despite some progress, he still has not reached an agreement with Democratic lawmakers on a stimulus package, dampening hopes the US economy would get a new injection of cash before the presidential election.

Wall Street sunk on the downbeat comments from Mnuchin, who has been negotiating for months with Democrats over passing a measure to restore expired provisions of the $2.2 trillion CARES Act approved as the coronavirus pandemic struck in March.

"We continue to make progress on certain issues, on certain issues we continue to be far apart," Mnuchin said during a virtual appearance at an economics conference.

The official has been leading negotiations on behalf of President Donald Trump, and said he had a lengthy conversation with his Democratic counterpart House Speaker Nancy Pelosi on Wednesday morning.

Pelosi aide Drew Hammill confirmed the talks and said they would continue on Thursday

"One major area of disagreement continues to be that the White House lacks an understanding of the need for a national strategic testing plan," he tweeted.

"The Speaker believes we must reopen our economy and schools safely and soon, and scientists agree we must have a strategic testing plan."

After advancing cautiously at the open, Wall Street returned to the red after Mnuchin spoke, with the Dow sinking to close 0.6 percent lower.

The two sides are deadlocked over how much to spend and what form to spend it in, with Democrats demanding aid for struggling state and local governments that are on the front lines of delivering aid.

"We continue to have discussions and try to compromise on a broader package," Mnuchin said, adding Pelosi rejected a stand-alone measure to fund airlines that have furloughed tens of thousands of workers this month.

"From our standpoint, the all or nothing approach doesn't make sense," he said, echoing comments from Republican Senate Majority Leader Mitch McConnell that passing an expensive spending package is increasingly unlikely as the November 3 presidential election draws near.

Under their latest proposal, Democrats want to enact a broad measure costing $2.2 trillion, but the Trump administration's latest offer was for $1.8 trillion.

McConnell on Tuesday said he would move to pass a bill allocating money to a now-lapsed program of loans and grants to small businesses, but Democrats controlling the House of Representatives have said they will only pass a larger package.

The CARES Act has been credited with supporting consumption and blunting the damage to small businesses caused by the coronavirus downturn, but key provisions expired around the end of July.

An agreement with struggling US airlines to avoid layoffs in exchange for payroll funding lapsed at the start of October, and the carriers have since announced tens of thousands of job cuts.

On Wednesday, executives from JPMorgan and Citigroup reported better-than-expected earnings but warned their fortunes could reverse without more stimulus.

"It's important and it needs to happen as quickly as possible," said Citi Chief Financial Officer Mark Mason, who added that massive spending from Washington has helped avert a tidal wave of delinquencies so far.

Trump threw the negotiations into chaos last week when he ordered Mnuchin to halt the talks, but quickly backed off and has since been urging big measures.

IMF chief economist Gita Gopinath told AFP on Tuesday that a new stimulus package on the order of $2 trillion could boost US growth next year by two percentage points.