US: Tax cuts to stimulate growth – ABN Amro

Following the passage of the USD 8.3bn package (0.04% of GDP) of practical measures to deal with the coronavirus spread, the focus for Congress has quickly shifted to economic rescue measures to help cushion the blow to incomes from reduced activity, strategists at ABN Amro brief.

Key quotes

“The White House’s opening gambit is a payroll tax cut and an expansion of paid sick leave to help ‘gig economy’ and other hourly wage earners who may have to self-quarantine.” 

“Despite the crisis, political considerations will surely play a role in shaping the final package, with president Trump likely to focus on growth stimulus measures (tax cuts), and Democrats focused on relief measures for those who will be hardest hit.” 

“It is possible that some more targeted measures might be implemented through executive orders, bypassing Congress, although such measures would not be on a sufficient scale to be stimulatory.”

“More classical stimulus measures (such as boosts to infrastructure spending) are likely to be left for a future fiscal package, when activity begins recovering again.”