House Democrats To Hear From Economists Over Coronavirus Response; One Suggesting $350 Billion Package

Update (1515 p.m.): House Democrats will hear from Harvard economist Jason Furman and Equitable Growth's Claudia Sahm on Wednesday for their input as they consider a fiscal package in response to the coronavirus.

According to WaPo's Tory Newmyer, both economists have called for going big and fast - with Furman advocating for approximately $350 billion.

Harvard Professor Jason Furman

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Update (1249 p.m.): Senate Finance Committee Chairman Chuck Grassley (R-IA) is exploring tax relief to mitigate the impact of coronavirus.

"While we continue to assess the economic impacts, Chairman Grassley is exploring the possibility of targeted tax relief measures that could provide a timely and effective response to the coronavirus," said a Grassley spokesperson.

"Several options within the committee’s jurisdiction are being considered as we learn more about the effects on specific industries and the overall economy."

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Shortly after we posted a prediction from Goldman's David Mericle that the government and/or the Fed will need to immediately step in with monetary and fiscal stimuli to try and manage the recent chaos in the markets, VOA's Steve Herman reports that the White House will be holding a meeting to discuss economic stimulus later this afternoon. The meeting will include Treasury Secretary Mnuchin and the economic team.

Trump, meanwhile, is blaming an oil-driven spat between Saudi Arabia and Russia - not coronavirus fears - as "the reason for the market drop!"

To review some of the options on the table, according to Goldman:

Beyond funding for virus testing and treatment, the most direct avenue is aid to corporates and small businesses, especially in sectors hit by the virus shock. A US precedent is the post-9/11 help for the airline industry, which involved $5bn in direct payments and up to $10bn in loan guarantees.

Another avenue—at least in the US where the central bank is very limited in what it can legally buy—is for the Treasury to backstop credit easing facilities for the Fed; however, it would probably take a material further deterioration in market conditions and functioning for such facilities to be reestablished. 

On the Fed side, Goldman expects easing in March and April, with 100bp on the table. That said, it may have limited impact given where rates already are.

So far there's been virtually no reaction to news of the meeting.