WASHINGTON — Treasury Secretary Steven Mnuchin told lawmakers on Tuesday that the economy was recovering from the pandemic-induced recession but said “more work” was needed in certain areas, suggesting that the administration may be willing to agree on a stimulus package as large as $1.5 trillion.
“Whether it is $1 trillion or $1.5 trillion, again, let’s not get caught on a number,” Mr. Mnuchin told the House Select Subcommittee on the Coronavirus Crisis. “Let’s move forward on a bipartisan basis now. I do not think the right outcome is zero. Nobody does.”
The testimony, combined with renewed stimulus discussions among Republican lawmakers, highlighted divisions over how big of an economic package is needed as the pandemic continues to hurt businesses and keeps millions of people out of work.
Mr. Mnuchin reiterated his support for at least some version of two of Democrats’ top priorities in negotiations: enhanced benefits for the unemployed and additional money for revenue-constrained state and local governments, albeit at lower levels than Democrats support. But Senate Republicans appeared to be coalescing around a scaled-back stimulus plan that they could vote on as soon as next week but will not win Democrat support.
With a price tag of $500 billion to $700 billion, the Senate proposal would reinstate lapsed federal unemployment benefits at $300 per week — half their previous level — and allocate $105 billion for schools and funds for testing and the Postal Service, according to Republican aides familiar with the discussions. It would also grant new liability protections to employers.
But rather than moving closer to what Democrats or the White House have signaled they want, the proposal is a step backward. The administration indicated support for a $1 trillion package floated by Senate Republican leadership, while Democrats have most recently pressed for at least $2.2 trillion.
Senator John Barrasso of Wyoming, the No. 3 Republican in the Senate, told reporters on Tuesday that party leaders had set a goal of beginning debate on the measure next week, when lawmakers return from summer recess, and senior party aides said they expected all but one or two Republican senators to support it.
“We have a focused, targeted solution that we hope that the House would pass,” Mr. Barrasso said.
There is little chance of that happening. Democrats, who control the House, pushed a $3.4 trillion stimulus measure through that chamber in May, including an extension of the full $600 weekly federal jobless payment. They have since been willing to cut down the cost, with Speaker Nancy Pelosi of California saying last week that she would accept $2.2 trillion. Mr. Mnuchin’s comments on Tuesday appeared to up the White House ante on how much it would accept, but it still falls short of what Democrats have embraced.
Mr. Mnuchin said on Tuesday that lawmakers should not worry about the “top line” amount and instead quickly address the areas that need help.
“We need support quickly, and if we need to do more we can come back,” Mr. Mnuchin said.
But after Mr. Mnuchin and Ms. Pelosi spoke for 36 minutes by phone later Tuesday afternoon, the speaker said there continued to be between Democrats and the White House “serious differences understanding the gravity of the situation that America’s working families are facing.”
In a statement, Ms. Pelosi said she was open to compromise, but she detailed a list of pointed questions she had put to Mr. Mnuchin about the White House’s “defiance of science” and aversion to spending at the levels Democrats argue are necessary — suggesting she saw no reason to move further toward its position.
“Does the White House think that America’s working families are not worth the investment needed to defeat the virus and the accompanying economic crisis?” she said. “Or would they rather spend the money another way?”
While the Treasury secretary called on Congress to act, the chairman of the select subcommittee, Representative James E. Clyburn, Democrat of South Carolina, scolded Mr. Mnuchin for the administration’s handling of the pandemic and the recession and said the White House needed to find ways to help workers and businesses.
“Today’s hearing is a call to action,” Mr. Clyburn said in his opening remarks. “The most important step we can take to fix the economy in the long term is to get the pandemic under control. But American families are hurting now, and there are urgent steps the administration must take to prevent our nation’s economic crisis from becoming a catastrophe.”
Mr. Clyburn challenged Mr. Mnuchin on President Trump’s claims that the economy was “roaring back,” saying unemployment remained high and millions were still out of work.
Mr. Mnuchin acknowledged many workers had been sidelined and certain industries continued to struggle. But he said things were far better than many had expected in March, when the virus began to shutter large parts of the economy.
“Relative to shutting off the entire economy and relative to people thinking we would have 40 million unemployed, we are doing great,” he said.
Republicans used their early remarks in the hearing to push a false narrative that the persistence of high unemployment in the economy was largely the fault of Democratic governors who had imposed restrictions on economic activity.
Asked by Representative Jim Jordan, Republican of Ohio, whether Democratic governors were to blame for the crisis, Mr. Mnuchin said that “I believe there’s no question that the reason we have unemployment is that certain states are not opening up and that there are issues.”
“Obviously,” he added, “some of that has to be balanced with the medical issues appropriately.”
Mr. Mnuchin at several points suggested that lawmakers should pass a new round of small business assistance targeted to companies that have experienced steep revenue losses during the crisis. He said lawmakers should be open to a piecemeal approach to get assistance to people and companies that need it immediately, including small businesses.
Any additional small business lending is likely to come with significant strings. Democratic lawmakers criticized Mr. Mnuchin’s handling of the existing effort, the Paycheck Protection Program, saying much of the money had gone to businesses that did not need or deserve funds.
The subcommittee, in a preliminary analysis of the $660 billion program released by Democrats, found that $1 billion in loans went to companies that received more than one loan, in violation of the program’s rules. Nearly $100 million went to companies “ineligible to receive P.P.P. funds because they have been debarred or suspended from doing business with the federal government.” The Small Business Administration and the Justice Department have been investigating numerous allegations of fraud in the program, which has so far made about five million loans.
While lawmakers continue to haggle over another package, economists are warning that more needs to be done quickly to avoid long-term economic scarring.
On Tuesday, Lael Brainard, a Federal Reserve governor, said the U.S. economy remained at risk as the coronavirus pandemic wears on — and support from Congress and the White House was crucial to cushioning the blow.
“The economy continues to face considerable uncertainty associated with the vagaries of the Covid-19 pandemic, and risks are tilted to the downside,” Ms. Brainard said in remarks prepared for delivery at a Brookings Institution event on Tuesday. “As was true in the first phase of the crisis, fiscal support will remain essential to sustaining many families and businesses.”
Jeanna Smialek contributed reporting.