In a surprise announcement late Monday evening, President Trump said he is working on an economic relief package intended to help those who have been hurt by the coronavirus outbreak.
Trump briefly mentioned a possible payroll tax cut, before saying the relief would be “substantial” and “a really big number.”
Trump said he is meeting today with Republicans in the House and Senate to discuss the possibility of suspending payroll taxes, which is paid by both employers and employees to fund Social Security.
Suspending the tax would boost the size of worker’s paychecks, something Trump has suggested before as a way to boost the economy.
Secretary of Treasury Steve Mnuchin says if the payroll tax is suspended, it will be a temporary move intended to last only a few months until the coronavirus has passed.
“The economy will be in very good shape a year from now. This is about providing proper tools of liquidity to go through the next few months.”
As part of Trump’s plan that we should learn more about this afternoon, the President also mentioned “working on loans for small businesses” and working to help the airlines, cruise lines and hotel industries as they have been hit hard by the coronavirus fears.
He added “We’re going to be working with companies, small companies, large companies, so that they don’t get penalized for something that’s not their fault. It’s not our country’s fault. This is something that we were thrown into.”
The news comes on the same day the stock market had its worst trading session since 2008 and it’s 19th worst day ever, with the Dow Jones Industrial Average plunging more than 2,000 points to close down 7.79% on coronavirus fears and plummeting oil prices.
Trump has consistently focused on the stock market as a barometer for his success as a president, so announcing this relief plan after a historically bad day for the markets doesn’t come as much of a surprise.
At the close of the market Monday, the Dow Jones Industrial Average is down 19% from the all-time high of 29,551 on February 12, less than one month ago. The bull market that started on March 9, 2009 would officially come to an end if the markets drop 20% from their all-time high.
Trump’s announcement sent futures higher, indicating the markets should open trading this morning 1,000 points higher than Monday’s close.
Even if Trump can get a relief plan passed, it’s uncertain if it will be enough to convince buyers to step back into a bull market that is on shaky ground entering its 11th year.
The coronavirus outbreak is widely expected to worsen over the coming weeks and months, and the energy market is reeling from last weekend’s fallout between Saudi Arabia and Russia.
And according to JPMorgan, historically “a market sell-off of this magnitude typically implies a 65% to 75% chance of recession in the next 12 months.”