Dow Rockets Higher On Plan For $1 Trillion in Economic Stimulus

The Dow Jones Industrial Average rallied more than 1,000 points yesterday after it was announced that President Trump was looking into a plan to implement a $1 trillion stimulus plan to help the economy battle back against the coronavirus.

The Dow closed up 5.2% and the S&P 500 and Nasdaq closed 6% and 6.23% higher.

This comes just one day after the third-worst day ever in Dow history, with the index falling a staggering 2,997 points, or 12.9%.

According to reports, the Trump administration is considering a plan that includes payments being sent directly to Americans.

This lines up with an earlier comment from Treasury Secretary Steve Mnuchin, when he told reporters that the government is considering sending checks directly to Americans in the next two weeks. 

“Americans need cash now” he added.

Mnuchin also said that the plan would allow corporations to defer tax payments up to $10 million and individuals can defer up to $1 million in tax payments to the IRS, and that President Trump has approved the deferral of $300 billion in tax payments to the IRS.

This new plan would replace the previously discussed idea of eliminating payroll taxes for both employers and employees as a way to get money into American’s hands via larger paychecks.

At least one former Federal Reserve employee says the $1 trillion proposal simply isn’t enough.

Claudia Sahm, who was the principal economist at the Fed from 2015-17, puts it bluntly:

“They need to go big, and they need to go now. I don’t want to see anything less than $1.5 trillion,” she said Tuesday.

She also says the recession started this month, and it “looks like a very serious one,” that could be “twice as deep” as the Great Recession.

“We can’t stop this recession, but we can buffer as much as possible and what we really gain is on the other side of the recession — the recovery,” she added.

Whatever the final dollar amount of the stimulus plan ends up being, it’s clear that the money will help millions of Americans who are struggling financially during the coronavirus outbreak. 

With bars, restaurants, movie theaters and other businesses closing for the indefinite future, tens of millions of workers are out of a job and simply can’t earn an income to pay their living expenses, car payment, student loans, etc.

The very real fear is that an extended closure could mean many of those businesses never reopen, and those workers become unemployed.

Treasury Secretary Mnuchin alluded to this, warning Republican senators that without proactive measures like the $1 trillion stimulus plan to help the economy, we could soon see unemployment rates of 20% and “economic ramifications that are worse than the 2008 financial crisis.” 

To put that into perspective, a 20% unemployment rate would be double what the country experienced during the Great Recession and the highest since the Great Depression. It would mean roughly 32 million Americans would be out of a job.