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President Donald Trump said Tuesday that he was withdrawing from economic relief talks until after the election, abruptly ordering Treasury Secretary Steven Mnuchin to stop negotiating with House Speaker Nancy Pelosi.
In a series of tweets posted less than 24 hours after he was released from the hospital, Trump accused Pelosi of failing to negotiate in good faith, after she rejected an opening bid from Mnuchin in their latest round of talks.
Trump is still dealing with his recent coronavirus diagnosis, but he has tried to dismiss the illness’s impact on him in the past two days.
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hard-working Americans and Small Business,” Trump wrote.
The pronouncement was so stunning that Pelosi told Democratic colleagues on a conference call that the president’s sudden change in position might be connected to the steroids he’s taking as he battles the coronavirus.
His tweets sent the stock market suddenly lower, as many businesses, households and investors had been hoping for a sudden jolt of fiscal stimulus amid signs the economy had lost momentum. The Dow Jones Industrial Average fell by about 330 points, or by 1.2%. The Nasdaq and S&P 500 also fell.
The pronouncement came just hours after Federal Reserve Chair Jerome H. Powell said in a speech that more economic stimulus was needed.
Barring another unexpected development, Trump’s declaration kills any near-term chance of new aid for millions of Americans who remain out work and at risk of eviction. Pelosi and Mnuchin ended up speaking shortly after Trump’s tweet. According to Pelosi’s spokesperson, Mnuchin informed Pelosi that the negotiations were over.
Trump’s decision even stunned a number of Republican congressional aides who had been hopeful that new aid could help stabilize the economy ahead of the election.
“It’s very strange, very strange. Didn’t you just tell us all we should do this urgently?” one GOP congressional aide said, speaking on condition of anonymity. “Why not offer something back instead [to Pelosi]? It’s a head-scratcher.”
The U.S. economy is facing new headwinds. It contracted sharply earlier this year because of the coronavirus pandemic, leading to massive layoffs and business closures.
The economy showed some signs of partial recovery in May and June, but businesses and households have continued to struggle as the virus continues to infect thousands of Americans each day. Trump has sought to play up the economy’s recovery, often touting partial or incomplete information. That continued Tuesday when he misstated the health of the U.S. economy during his string of tweets.
He wrote that “Our economy is doing very well. The stock market is at record levels. JOBS and unemployment...also coming back in record numbers.”
Even some of Trump’s top advisers have said the economy is not doing very well and that more assistance is needed. Further, the stock market is not at record levels, and it also doesn’t reflect the broader health of the economy. The unemployment rate has come down from its April peak of around 15%, but it is still at 8.4% and millions of Americans are struggling to pay their bills, afford food and find jobs. The U.S. economy has barely recovered half of the jobs lost in March and April, and Trump is set to be the first president in modern history to end his first term with a net loss of American jobs.
Trump said he instead had asked Senate Majority Leader Mitch McConnell, R-Ky., “not to delay, but to instead focus full time on approving my outstanding nominee to the United States Supreme Court, Amy Coney Barrett.”
Trump’s new shift is different from the position he took three days ago, which followed his first night in the hospital. That’s when he wrote on Twitter, “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!”
It was unclear what changed in his calculus in the intervening days.
Shortly before sending Tuesday’s tweets, Trump convened a conference call with McConnell, McCarthy and Mnuchin. The call was hastily arranged.
Even though several Republican senators have tested positive for COVID-19, McConnell is moving forward swiftly with Barrett’s nomination to get her confirmed before the election.
Pelosi and Mnuchin had been working on assembling a new relief bill somewhere between $1.6 trillion — which was Mnuchin’s opening offer — and $2.2 trillion, which was the size of a stimulus bill passed last week by House Democrats. Talks had been moving slowly but appeared to be progressing. Pelosi expressed optimism last week about reaching a deal, although many Republicans had been skeptical.
The Trump tweets landed while House Democrats were in the middle of a conference call. Pelosi had been updating them on the status of her talks with Mnuchin. She had been telling them that they remained divided on issues including state and local funding and coronavirus testing.
A few minutes after Trump tweeted that the talks were over, Pelosi told lawmakers on the call what the president had said and then quickly got off the call, according to people listening in.
“Clearly, the White House is in complete disarray,” Pelosi said in a statement she issued shortly thereafter.
She said that because of the White House’s move, “over time, household insolvencies and business bankruptcies will rise, harming the productive capacity of the economy and holding back wage growth.”
The spending package was supposed to send another round of $1,200 stimulus checks to millions of Americans, provide new unemployment benefits for the jobless, direct a new round of small-business aid, provide aid for the airline industry and a range of other measures.
Congress has not acted to pass economic or health care relief legislation since the spring, when lawmakers came together around four bipartisan bills totaling some $3 trillion in total spending, an unprecedented sum.
But many of the programs approved at that time, such as small-business relief and enhanced unemployment benefits, have since expired, in some cases months ago. In the past week, numerous companies announced plans for big layoffs.
The airline industry began furloughing more than 30,000 employees last week because government aid expired, and some surveys have found as many as 40% of restaurants will close within six months without additional aid. Tens of millions of Americans who have lost their jobs will receive no federal unemployment supplement absent an additional package with Congress, draining the U.S. consumer market and a key source of stimulus. Personal incomes already dropped in August as coronavirus relief approved this spring expired.
Powell issued a dire warning Tuesday about the potential consequences of Congress and the White House failing to pass an additional stimulus deal. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said.
Pelosi urged airlines to hold off on layoffs last week pending a deal, saying that an airline payroll support program would be extended either as part of an overall deal or a standalone bill. It’s unclear now whether there will be an attempt to move forward on that.
Bipartisan talks involving Pelosi, Mnuchin, White House chief of staff Mark Meadows and Senate Minority Leader Charles E. Schumer, D-N.Y., collapsed in early August and remained stalled for weeks, but last month Pelosi was coming under growing pressure from House Democratic moderates who wanted to pass more relief for their constituents ahead of the election.
She and Mnuchin restarted negotiations. But they always faced tough odds, with many congressional Republicans reluctant to agree to a deal anywhere near the size of what Mnuchin was proposing, even as Pelosi repeatedly criticized Mnuchin’s opening offer as too stingy.
Additionally, the Trump administration has been divided internally, with Mnuchin pushing hardest for a deal despite skepticism about it from other senior Trump officials.
Larry Kudlow, the president’s top economic adviser, has said for months that an additional stimulus deal would help bolster the economy but was not necessary for the recovery.
Shortly after Trump’s tweets, White House adviser Peter Navarro got into an argument with a host on Fox Business who tried pressing him on why the administration would let a deal fall through. Navarro pointed to executive actions Trump took in August, including on unemployment and evictions, that provided a measure of relief— but nowhere near what an actual piece of legislation could accomplish.
Despite the push from some within the White House and lawmakers from both parties to reach a deal, some conservative voices had urged Trump to reject a new spending package.
Art Laffer, a heterodox supply-side economist generally regarded as outside the economic mainstream, said he visited the White House about one week ago and expressed the view that Trump should not take a stimulus package. Stephen Moore, another outside economic adviser to the White House, has told White House officials that a stimulus package would do little to boost Trump’s political fortunes since it would not take effect until after the election.
“A relief deal really wont help the economy,” said Art Laffer, an economist who visited the White House a week ago to talk about the discussions. “The spending is not good for the economy. ... I can’t imagine Mnuchin and Pelosi agreeing on anything that’s really good.”