U.S. Treasury Secretary Steven Mnuchin said while he is sensitive to concerns over increasing federal debt, it’s essential to spend money to rescue the economy as the fight against COVID-19 continues.
“The good news is interest rates are very low so the cost of carrying the debt to the American taxpayer is quite low,” Mnuchin told Fox Business Network on Wednesday (April 22). “This is a war, and we need to win this war and we need to spend what it takes to win the war. We are all sensitive to the economic impacts of putting on debt and that’s something that the president is reviewing with us very carefully.”
The Cato Institute, a Washington, D.C. public policy research organization, said the $24 trillion federal debt is expected to grow by $6 trillion as a result of money spent to assist taxpayers, businesses, states and hospitals.
“The crisis will also create lasting economic damage from the jump in debt as a result of higher federal spending and lower federal revenues,” the organization said on its blog Tuesday.
Cato disputes Mnuchin’s view that low interest rates will make the debt easier to swallow.
“Every dollar borrowed causes damage down the road from the resulting higher taxes extracted from the private sector,” Cato wrote. “Furthermore, interest rates may spike, which will increase federal borrowing costs as accumulated debt is rolled over.”
On Tuesday, the Senate passed an additional $484 billion for the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act). The House is expected to follow on Thursday. It includes more than $322 billion for the Small Business Administration’s Payment Protection Program (PPP) designed to assist small and medium-sized businesses (SMBs). The original CARES Act totaled more than $2 trillion in aid.
During the Fox interview, Mnuchin warned larger companies they could face investigation if they apply for small business coronavirus rescue money they are not qualified for.
“I think a lot of these big companies, it’s questionable whether they can make that certification, I think they should review it,” he said.