'Companies didn’t create this, they weren’t mismanaged... This was created by a virus:' Rep. Kevin McCarthy

Stocks drop drastically after unemployment hits 4.4%. House Minority Leader (R) California Rep. Kevin McCarthy addresses the latest job cuts numbers during the COVID-19 outbreak.

Video Transcript

- Starting today is the government's paycheck protection program. This will allow businesses with fewer than 500 employees to get 100% federally guaranteed loans for eight weeks. If they're used to then pay employees, or rent or utilities, for that matter, that debt will be forgiven. To join us now to talk about this, as well as the other measures that Congress is taking and may yet take to help people during this pandemic, we're joined by representative Kevin McCarthy, Republican of California, and House Minority Leader. Congressman, thank you so much for joining us.

This is obviously a huge effort on the part of the government. It is up to banks, in many cases, to administer this. And we've been hearing sort of uneven reports about banks that are ready and banks that are not. And I just wonder, from your perspective, what can Congress do to sort of help with the bureaucracy of this, if anything? Because it seems as though, you know, anything this large, it's perhaps inevitable that it's going to be tricky to pull off.

KEVIN MCCARTHY: Well, thank you for having me, for one, and let's get to your question. The first thing you want to look at, it is better that government goes through banks, because most small businesses have a relationship with their banks. So it'll be faster. Think for one moment, we're less than a week away from passing and signing this bill, and already today more than $800 million have gone out to small businesses. Let's walk through what it is, and let's get to the answering of your question.

What the part of the CARES Act that this does $350 billion goes to small businesses, which is defined by 500 employees or fewer. And what it will do is a number of these businesses have been shut down because government has asked us to close in to protect ourselves from this virus. So we provide you a guaranteed loan, meaning the SBA backs it up, you go to your bank. It's a two-page form you fill out. We take an average from your last year or 2 and 1/2 times your expenses for two months.

In this, if you take this money in this loan and you pay your rent, you pay your utilities, and your play-- pay your employees, that portion of it is forgiven. It's no longer a loan. That part is a grant. So if you have laid somebody off, you can bring them back on. The idea here is to keep people employed, to keep small businesses up and running, get through the next two months, get past this virus, and our economy comes back strong. That's the idea. And this'll probably be very, very popular, as we're finding out right now.

There will be some glitches. I just got off the phone. I talked to Secretary Mnuchin twice today. I just did a conference call with all the Republican members across, and had Secretary Mnuchin on. What I'm doing, I'm taking any bank that has a problem getting into that portal, we're working it through individually.

But you already have $800 million in a few short hours. It's beginning to work well. It goes to all small businesses 500 or fewer employees. And I would encourage anyone that meets that criteria to apply because you can actually pay your employees, pay your rent, and pay your utilities. And that part is not a loan, that's a grant.

ADAM SHAPIRO: Leader, it's good to see you again. Adam Shapiro here. I saw you this morning when you said, we're trying to make for help is provided. But we have a banker who's already said that expectations were unrealistically set, and we had Joe Brusuelas, a very respected economist, who said even more is going to have to be done. $350 billion is a huge amount of money, but is it enough?

KEVIN MCCARTHY: Well, as you know, the overall bill is more than $2 trillion, because we do a number of things. If I walk through the bill very quickly, the first is $140 billion to our hospitals. We want to make sure competing-- defeating this virus, OK? We didn't ask for it, we didn't invite it, but it is here. We're going to fight it, and we're going to win it together. So you've got $140 billion to the hospitals. They have a liquidity issue, too, but they also for their personal protection equipment, what everybody refers to as PPEs, making sure they have that supply, as well, along with the ventilators.

We then go into a section that we provide directly to individuals. They will get a check of $1,200 per person if you're making $75,000 or less. It starts weaning down less. When it gets up to 99,000, it breaks off. You get $500 per child when you go through there. So you'll get a direct check to-- from government, keep you moving.

If you are unemployed, we do unemployment insurance. Normally, you have to wait a week. Federal government picks up that first week. When you go to unemployment, we extended it another 13 weeks. The federal government also added another $600 per week above what the state pays you, because we want people to be paying their rent, paying their mortgages, and others.

But one of the big issues that we'd like to do is keep people employed. We watched, in the last two weeks, 10 million people get laid off. That's an unbelievable number, a number we have not seen in our lifetime. So what this does as a small business allows you to hire that person back. Now, what we also do for a larger business-- that means 500 employees or more-- we have more than $500 billion. And that part gets leveraged also with the Fed buying paper and others.

But what we do there is the government guarantees your loan, so you get a low interest, but we do something what's called a retention tax credit, where the government could actually be paying up to 50% of your employee for the next two months. So maybe you cut back on time. We can pay for the other time. What we're trying to do, if you laid somebody off, get them back into the workforce, get through the next two months.

And if it comes a time that we see this $350 billion is being used properly, accounting and hoping in this small business, we can always come back and appropriate more. The first thing you want to have happen is you want to make sure the data is there and it's working properly. And as we see right now, it is working. Yeah, there's going to be a few glitches as you start off, but to get 800 million out in a few short hours, that is something very needed inside the economy. I imagine we'll be over a couple billion just today for small businesses.

JESSICA SMITH: Hi, Leader McCarthy. Jessica Smith here. I wanted to follow up on that. You said that you could come back for more. I know you've been hesitant to embrace the infrastructure package as part of phase four, but we heard from Speaker Pelosi this morning, seeming to suggest that they might be able to wait on infrastructure and just to do more emergency measures. If phase four is going to be more direct payments, more of that expanded unemployment insurance, can you get behind that?

KEVIN MCCARTHY: Well, when I look at it, I want to make sure whatever we do is targeted and is helpful. We have passed three bills. First we did our supplemental, more than $8 billion. We did-- then we did our next bill that talked about paying for testing, that provided for family leave in the process, had government paying for small business with those individuals that were let off. Now we came back with another $2 trillion. Think for one moment, those were just signed into law. Those need to be implemented.

And then once those are implemented, we can see from data and others places that are working, places that are not. And then we can adjust and we can adapt and we can solve those. But the idea to write a fourth bill right now when you have not implemented the others-- and I've got to give Secretary Mnuchin a lot of credit. He said he would get this small business part out by this Friday. I thought it was unheard of. He put preliminary guidelines and regs out. He listened to the banks and the small business, came back, reformed that.

And as of last night, around midnight today, he had a form out. Two pages, that's all it took to fill out. Next week, the independent contractors. This goes into non-profits, as well. We have expanded this much further than anyone has seen before. So what you want to do is make sure it's implemented properly. The unemployment insurance going through the states, the added resources we gave to the states.

In the bill before, we increased what is called an FMAP. An FMAP is the federal share of payment when it comes to Medicaid. We increased that by 6.2% for the states, as well. I think the things that we have done are very large, something we've never seen in government before. Let's make sure that's implemented correctly, and then let's take whatever data we need to deal with the problem, target that area, and solve it.

RICK NEWMAN: Representative McCarthy, it's Rick Newman here. Many economists say the best stimulus plan is containing and defeating the virus, which would-- which requires massive testing, more than one per person, population sampling, and things like that. I mean, and some are calling for sort of a moonshot program just to get the testing widespread, you know, get an antibody test, and obviously, then develop a vaccine. Is there a role for Congress in speeding up our ability to test and do things like that?

KEVIN MCCARTHY: There is, but there's really a role when you look at a question such as that. Let's go back to the beginning. Everyone will tell you, had China been honest and open with us, 95% of what's happening in the world today would not be happening. So we could have contained this inside China itself. Think of the other challenges that we had before from Ebola and others, and how we were able to contain that, which is much more deadly, Ebola, if someone was to receive that or get that.

But what they happened there, our scientists, our researchers, our very best weren't allowed inside. Now we're finding what the World Health Organization was telling us back in January, that this wasn't contagious, couldn't pass to one another. And now we're looking today where we are. All that information from China, one, they kept it, they lied about it, and they didn't allow us in. Every--

RICK NEWMAN: What do we do now, though?

KEVIN MCCARTHY: Huh?

RICK NEWMAN: What do we do now, though, given all that?

KEVIN MCCARTHY: That's a very good question. What do we do now is exactly what we are doing. The ingenuity, the inspiration, the intensity of what America is able to accomplish. What we really are seeing the FDA relax, allowing people to try. Something that Congress has passed a little bit ago before this has actually prepared us for the right to try. The right to try allows you a drug that's in testing. If you are in a certain position from a health place, you could try it.

So what we're finding today, it took us more than two years before we're in a clinical one testing of a vaccine after SARS. We are already there in a clinical one testing, that the vaccine is now being placed in human individuals in Washington and other parts across this country. Johnson & Johnson has advanced $1 billion because they're feeling what's coming back is so positive that they want to be prepared to already have enough vaccine to go across the world, because what we're finding is the coronavirus could come back to us. If summer, like if it dealt other influenzas that maybe it goes down during warmer months, but come back in cold, are we going to be able to be prepared.

We're watching Abbott come forward with a new test, not about days, but within minutes that could actually tell you where you are. I agree with your original part of this question, we need more testing. And what we're finding every day, the ingenuity of America and the companies and what we have, this is where the FDA becomes into a very critical part.

And I think what they're doing now is very smart, opening it up further. We will find where we are from a science position, from combating this coronavirus one month from now so much stronger than we are today, because every day we learn something more. And when we come back on this-- on your show again a year from now, we'll talk about those successes. But right now is the critical time, and I agree with you, but I think the actions being taken are smart and are appropriate. But we need to be willing to adapt every single day with more information and more science that we get from this virus.

ADAM SHAPIRO: Mr. Leader, I am curious, I want to get back to some of the bailouts and grants that are being done, specifically with the airlines. I heard you this morning, you were being questioned about why more wasn't required of the airlines to keep 750,000 people employed. You made the case that, look, this was about keeping people on the job. We can go back and fix things.

Will you push the effort in Congress to require the airlines to work better with the American people and with Congress, for instance tracking people in pandemics? They're reluctant to do that. So will that be something Congress will do going forward, now that we're going to give the airlines so much money?

KEVIN MCCARTHY: I believe Congress should be. And we were requesting it beforehand. I mean, the one thing is we sit back and we look, and when I look back through the last five years, and when I was Majority Leader, we really focused on increasing the funding for NIH and CDC. Increased it by more than 40% almost [INAUDIBLE]. We actually created the Infectious Disease Rapid Response Fund. But you never saw something like coronavirus with the Chinese not telling us the truth. With Ebola, we were able to combat that, but we created our own little FEMA for it.

When it comes to an airline, an airline is a business, but it's also an essential business. You think about the travel, you think about security, the movement of what you would need to do for troops, others. All that entails. What we provided was resources like any other business in America where we would secure a loan from them. But if they want to go through, we want to make sure employees stay on, critical. So just like we're doing from small business, we're putting money through the employer to the employee. Now, they can't use it for anything else.

But the other things we request, they can't buy a stock buyback. We learned that through the financial crisis, the things that [INAUDIBLE] there. It's not for their shareholders. This is to keep employees on through this time period, just what we're doing with small business, as well. So when we get back, if you watch, 94% of all travelers have dropped off. How do they stay in business, which is essential where we go? We're going to give them that liquidity of a bridge.

We're going to make them borrow some of it. But also, they have a responsibility as we combat, just as every American does, if they have coronavirus or not, they need to shelter away. We need social distancing, as well. And I think that they have a responsibility as we go forward assisting them in this manner to actually apply with and give us the information that we need, as well.

JESSICA SMITH: I just wanted to follow up on one last question here. We've heard many Democratic lawmakers calling the Trump administration to have a special enrollment period for people seeking coverage under the ACA. If that is not something that the Trump administration can do, what are the other ways to make it easier for people to get coverage and to get the care they would need?

KEVIN MCCARTHY: Well, one of the first things you would look at is that's why you want to keep people employed. A lot of people get their health insurance directly from their employer. So that's why you're seeing us continuing to pay, just like you saw with the airlines, just like you saw with the big business and small business. The second part we want to do to is people are getting direct checks and unemployment insurance, as well. We have a COBRA pickup.

But a lot of this will also come through Medicaid and others. So you watch the action we took before we even entered the CARES Act, where we increased the FMAP, the highest that we've ever done before, by 6.2%. That goes directly to states. Then you watched us put in another $150 billion just to state governments, because this goes in any shortfall they're having when it comes to health and others. You watched us just put in another $140 billion directly to hospitals. OK? So what we're able to do is take the resources right now, apply it where they need it.

Hopefully we'll be able to combat this virus in the next couple months. Our science will help to actually help us defeat it, and get our economy moving back through and keeping people employed, even though that they're home, keeping them paid so they're making the payment to their home, to their apartments, so we don't create a financial crisis on the other end. Because we all need to remember, this is different than the crisis we are in before.

The companies didn't create this. They weren't mismanaged. They didn't do something wrong on their leveraging. This was created by a virus. So we were sitting in the strongest economy we've ever been before. There is a liquidity problem for people. There is a health care problem for people. Let's target those two, get through this, and come back stronger and better prepared for this ever to happen-- if this could ever rise again in any other form.

- Kevin McCarthy, House Minority Leader, thank you so much for joining us with your perspective. Appreciate it.

KEVIN MCCARTHY: Thank you very much for having me. I appreciate it.