With the economy reeling, US President Donald Trump on Friday declared a national emergency to stem the damage from the coronavirus, a move that unlocks $50 billion in federal spending, while also unveiling plans to stockpile oil and waive interest payments on student loans.
Trump’s speech cheered Wall Street which roared back to life, sending the Dow up 9.3%, much needed good news after a week that saw the index suffer its worst day of trading since 1987, and the Federal Reserve inject $1.5 trillion into money markets to keep the financial system running.
“To unleash the full power of the federal government, I’m officially declaring a national emergency,” Trump told a news conference on the White House lawn.
“The action I am taking will open up access to up to $50 billion… for states and territories and localities in our shared fight against this disease,” Trump said.
But details remain scarce and he provided no update on a broad spending package that can win approval from Congress, something economists say is critical to prevent an economic downturn.
Trump said the US will also “purchase at a very good price large quantities of crude oil” for storage in the Strategic Petroleum Reserve (SPR) – the government’s emergency stockpile – a move that could help US producers hit by falling prices.
“We’re going to fill it right up to the top, saving the American taxpayer billions and billions of dollars,” Trump said, but gave no specific amount or timing for the oil purchase. The SPR most recently held 635 million barrels of its capacity of 713.5 million.
Oil prices of which have plunged as the outbreak spread, falling to into the low $30s from more than $50 a barrel a month ago amid concerns about falling demand and a spat between Russia and OPEC that prevented producers from reaching an agreement to cut output.
Trump called the measure to waive interest payments on federal student loans “a big thing for a lot of students that are left in the middle right now” as universities close temporarily.
Stimulus in question
Earlier in the day, Democratic House leader Nancy Pelosi said her party would pass a bill “focused directly on providing support for America’s families” that includes expansions of paid sick leave, unemployment insurance and access to coronavirus testing.
But it was unclear if Republican leadership in the Senate was behind the proposal, and Trump said no agreement had yet been reached with Democrats.
“We don’t think the Democrats are giving enough. We didn’t agree to certain things they agreed to,” the president said.
Flanked by executives from health care companies and retailers, Trump outlined his own moves to expand testing, amid widespread criticism that the US has lagged behind other countries. He called on states to partner with the private sector to further improve diagnoses and set up drive-through testing sites at hospitals.
The fear surrounding the pandemic has pushed Wall Street indices into a bear market, while efforts to contain its spread shut down Disneyland and Broadway, and led major sports leagues to cancel or postpone their seasons.
“There’s no question there’s a short-term economic issue, but we will get through this,” Treasury Secretary Steven Mnuchin told CNBC early Friday.
Mnuchin has discussed the planned stimulus bill with Pelosi numerous times over the past two days – including while Trump was speaking – to try to reach an agreement. He has said some options include a payroll tax cut and other ways to provide funds for people who cannot work because of the virus.
The Federal Reserve made an emergency interest rate cut last week, and on Wednesday is expected to lower the benchmark borrowing rate again, possible cutting all the way to zero to counteract the economic damage from the virus, but economists say that will not be enough.
The University of Michigan’s monthly consumer sentiment survey showed Americans are worried by the impact of Covid-19 on the economy, with its chief economist Richard Curtin saying that while “the pandemic is widely regarded as a temporary event,” the economy needs stimulus quickly.
Since breaking out in China, the Covid-19 virus has killed more than 5,000 people as of Friday and spread globally with cases topping 140,000, according to an AFP tally.
Health authorities have warned that the outbreak is already well-entrenched in the US: the state of Ohio likely has more than 100,000 people carrying the virus, its health department says.
Multiple states have ordered schools closed and Louisiana has become the first state to postpone its Democratic presidential primary election, while US airlines have announced further steps to ground planes.