Mnuchin: Now is not the time to worry about deficits

Treasury Secretary Steven Mnuchin on Monday said the country should not be focused on deficits as it struggles under the economic weight of the COVID-19 pandemic.

“Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet,” Mnuchin said in a CNBC interview. 

The deficit has been a central issue of concern for Republican negotiators on a stalled COVID-19 relief bill.

While Democrats pushed an expansive, $3 trillion package, Republican negotiators — including Mnuchin and fiscally hawkish White House chief of staff Mark Meadows — balked, pushing for a $1 trillion package. Meadows, in particular, has been seen as adamant about limiting the size of the bill.

The federal deficit is on track to reach an unprecedented $3.3 trillion when the fiscal year closes out at the end of the month, driven in large part by the COVID-19 response.

Senate Majority Leader Mitch McConnell (R-Ky.) eventually moved to advance a "skinny" relief bill with $600 billion in spending after saying earlier bills would lose the support of significant numbers of Republicans. Democrats blocked the bill from advancing.

Mnuchin credited the large stimulus and extraordinary measures by the Federal Reserve for helping the economy survive the shock of the pandemic.

“I think both the monetary policy working with fiscal policy and what we were able to get done in an unprecedented way with Congress is the reason the economy is doing better,” he said.

Mnuchin's comments are in line with Federal Reserve Chairman Jerome Powell's comments urging Congress to "go big" in its response, though Powell has not weighed in on precisely how much the federal government should be spending. 

The deadlock, however, has led to a situation where key benefits that expired in July, including expanded unemployment and a small business loans program, have not been renewed. Congress appears unlikely to strike a deal ahead of November's elections.