Could Unused CARES Money for Federal Reserve Go Towards Immediate Stimulus?

Could Unused CARES Money for Federal Reserve Go Towards Immediate Stimulus?

( – Politicians and bureaucrats rarely give money back that government institutions don’t use. Throughout the decades, government agencies have overspent to protect their budgets. They’ve been known to pay $300 for a $15 hammer, and the stories go on and on. On November 19, Treasury Secretary Steven Mnuchin proposed redirecting nearly $454 million of unused CARES Act funds to help those hurt most by the surge in governor-induced shutdowns across America as COVID-19 cases grow.

In March, the money allocated by Congress to the Federal Reserve was designed to ensure credit was available for businesses to keep the economy from melting down. It worked, and for a lot cheaper than Congress knew it would. The Fed didn’t have to do much lending as small and large businesses, as well as state and local governments, had plenty of access to credit to help them get through the extreme shutdowns in the spring.

Mnuchin Wants Money to Help People and Small Businesses

Since August, Congress has been deadlocked and unable, or unwilling, to negotiate another COVID-19 relief package. Across the country, some states and municipalities are enforcing new lockdowns. As unemployment and small business closures grow, the Treasury Secretary recommends that the $454 million be transferred from the Federal Reserve to the Treasury Department.

That money could be used to help pay for a new COVID relief bill, payout some existing benefits, or reduce the deficit (which is an unlikely option). Mnuchin’s recommendation is to take the money and fund an extension of the federal government enhanced unemployment benefits and the Payment Protection Program (PPP) for insolvent small businesses.

Democrats Need to Be Onboard

For Mnuchin to initiate such an action, it would require one of two things. First, President Trump could sign an executive order. However, that is likely on shaky ground. Congress holds the purse strings and would likely sue to stop the president from acting without its blessing.

The second option involves Congress. House Speaker Nancy Pelosi (D-CA) would need to be on board and pass legislation that would allow the Treasury Secretary to act. To this point, she has been unwilling to budge in negotiations that would see a trillion or more dollars go to liberal special interests, and Republicans have no desire to add Democrat wishlist spending to the deficit.

The Fed spent only $28 billion of the $2 trillion allocated to it through the CARES Act. Of course, the Fed is objecting to Mnuchin’s proposal. However, the funds are expected to expire by law on December 31. The idea is straightforward and could have a short-term positive impact on struggling Americans.

In the days ahead, Congress and the President could start negotiations again during the lame-duck session to help hurting Americans.

A vaccine is on the way. It’s anticipated that the front-line health workers and first responders could begin getting a vaccination as early as the middle of December. By the end of March, it’s expected that most Americans may receive the vaccination, and by summer, life could start returning to normal.

Until then, Mnuchin’s idea could be a short-term solution to help people using money already allocated under the CARES Act. Perhaps Congress will agree?

Don Purdum, Independent Political Analyst

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