This post was originally published on this site
Wall Street should temper its high hopes for any U.S. fiscal stimulus measures to fight the expected economic fallout of the coronavirus, political analyst said Tuesday. Any fiscal package faces “major hurdles” and final action may not come until April.
“Do not look for fast action from Congress, even on small ball options in play at the moment,” said Beacon Policy Advisors, in a morning note to clients.
“The markets are viewing a stimulus bill as a panacea and that’s unrealistic,” agreed Greg Valliere, chief U.S. strategist for AGF Investments.
On Monday night, President Donald Trump said he is seeking “very substantial relief” to the payroll tax. The announcement, which was said to surprise even the president’s closest advisers, led to a rebound in financial markets. The president said he wanted to aid the airline, cruise ship and hotel industries.
Read:Trump to seek payroll tax relief
Analysts noted right away that Trump’s proposal seemed paper thin.
“The measures are still in flux or else Trump would have announced them at last night’s briefing when he had the opportunity,” Beacon’s analysts noted.
The idea of a payroll tax is not popular among Congressional Democrats and even Republicans would only back it grudgingly, analysts noted.
Democrats don’t like the payroll tax cut because they think it will harm the Social Security program, and would harm hourly workers.
Sen. Mark Warner, a Democrat from Virgina, said a payroll tax cut isn’t going to help workers who have been furloughed or lost their jobs.
“My feeling is this payroll tax cut seems to be a quickie traditional response and not something that has been thought through,” Warner said, in an interview on MSNBC.
Democrats said any new tax cuts for major corporations would have to be matched by assistance to workers.
While Democratic opposition doesn’t make a payroll tax cut impossible, analysts said the president would have to accept a long list of spending proposals favored by Democrats in order to assure its passage.
These include funding for paid sick leave, more generous unemployment benefits, additional food stamp spending and other aid to victims.
The negotiations would likely be tough, with distrust evident on both sides, analysts said. Trump and House Speaker Nancy Pelosi have not met since a contentious meeting in the Oval Office last October.
U.S Treasury Secretary Steven Mnuchin and National Economic Director Larry Kudlow are set to launch the process of finding out what is politically feasible in a meeting with Senate Republicans later Tuesday. Trump indicated to reporters that he also planned to go up to Capitol Hill.
Trump said Monday he would hold a press conference following these talks.
U.S. equity benchmarks gave back some of their early gains by midday Tuesday after hopes for fiscal stimulus boosted shares at the open. The Dow Jones Industrial Average DJIA, +0.67% was up 200 points in late morning trading.
