Mnuchin spars with Democrats on new virus aid, economy

Friday, August 28, 2020, Vol. 44, No. 35

WASHINGTON (AP) — Pressed by Democrats to quickly negotiate a new coronavirus relief package, Treasury Secretary Steven Mnuchin said Tuesday the administration remains willing to work on a bipartisan agreement to help small businesses, the unemployed, children and schools. Democratic leaders in Congress are holding it up with hardened positions, he said.

"Let's move forward on a bipartisan basis on points we can agree upon," Mnuchin urged at a hearing by the House Select Subcommittee on the Coronavirus Crisis. "The president and I want to move forward."

Mnuchin made the case that the economy's recovery has strengthened in recent weeks, citing improved consumer spending, growth in manufacturing and a rebounding housing market. It's the failure of some states to reopen activity that is holding back the economy, he said.

But Democrats insisted that dire economic conditions persist for many. "Millions of Americans are now facing eviction, debt and hunger," said the panel's chairman, Rep. James Clyburn, D-S.C. "As the pandemic drags on, states, cities and businesses are warning that more layoffs may be coming."

The subcommittee's Democratic staff, meanwhile, said it has identified lapses pointing to possible fraud and abuse in a signature piece of the administration's relief effort, the $660 billion-plus small business loan program — including more than $1 billion awarded to businesses that received multiple loans.

The staff investigators said in a report that a lack of government oversight and accountability for the program "may have led to billions of dollars being diverted to fraud, waste and abuse, rather than reaching small businesses truly in need."

With bipartisan agreement, Congress enacted an unprecedented $2.3 trillion pandemic rescue package in March. Now the Trump administration and top congressional Democrats have been in a monthslong stalemate over new relief legislation, with the two sides trillions of dollars apart. Lawmakers left Washington for the August recess without an agreement.

The impasse left millions of jobless people without a $600-per-week pandemic bonus unemployment benefit that had helped families stay afloat, left state and local governments seeking fiscal relief high and dry, and held back a more than $100 billion school aid package.

An estimated 27 million people are receiving some form of unemployment benefits, according to the Labor Department, though the figure may be inflated by double-counting by states.

Mnuchin identified additional spending on aid to small businesses as the area where Democrats and Republicans are most likely to agree. In sometimes sharp exchanges, he and Democrats on the panel disagreed over the state of the economy and traded blame for the impasse over new rescue legislation.

Mnuchin pinned the blame on a refusal to compromise by House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer. While touting the economy's partial recovery, he acknowledged that "we have more work to do."

Pelosi this week said the talks faltered because administration officials "do not understand the gravity of the problem" facing the country.

The Small Business Administration's Paycheck Protection Program was a key piece of the government's economic aid program responding to the pandemic. The nation's small businesses received a gut punch in the spring as huge swaths of the economy were shut down, millions lost jobs and consumers curtailed spending.

Economists generally credit the small business program with helping prevent the job market meltdown from becoming worse.

The program was overseen by the Treasury Department. Because the SBA only audited loans exceeding $2 million, about 99% of the awards received little or no oversight, the investigators said. The agency approved hundreds of loan applications that were missing key identifying information about the borrower, according to the report.

Mnuchin said in his testimony Tuesday that loans of $2 million or less may also be audited, though it would not be automatic.

Spokespersons for Treasury and the SBA didn't immediately respond to requests for comment on the report.

The loans are forgivable if businesses use the money to keep employees on the payroll or rehire workers who have been laid off.

The investigation also found that over 600 loans, totaling $96 million, went to companies that were excluded from doing business with the government because of previous violations. And more than 350 loans, worth $195 million, were awarded to government contractors with "significant performance and integrity issues," the report said.

In addition, the investigators said they found red flags — such as mismatched addresses — for $2.98 billion in loans to 11,000 businesses from comparing a federal database on government awards with information on companies' PPP applications.