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White House divisions sow confusion about strategy on stimulus next steps

Navarro seeks $2 trillion package, but other administration officials appear scattered on how to proceed

White House economic official Peter Navarro said the president wants a $2 trillion economic package, but other administration officials are skeptical. (Andrew Harnik/AP)

Last Friday, senior White House official Peter Navarro said in a mostly overlooked television interview that President Trump wanted the next congressional stimulus package to cost more than $2 trillion and include big measures designed to boost domestic manufacturing.

It appeared to be a sharp departure from what other White House officials were considering, and as word got around during the weekend, congressional Republicans and other Trump administration officials tried to brush the Fox Business appearance aside.

“Navarro speaks for Navarro,” one senior administration official said. Another senior administration official added: “Peter went rogue.” The officials spoke on the condition of anonymity to frankly discuss internal dynamics.

But in an interview, Navarro said Trump officials who oppose these policies should not work for the president.

“If there is anybody in this administration who is opposed to ‘Buy American’ or strengthening the domestic manufacturing base, they are in the wrong administration,” he said.

The startled reaction to Navarro’s recent comments by his peers highlight the widening White House fissures over how to handle the fragile economic recovery this summer.

A number of advisers want to reconsider the tremendous amount of spending that they are pumping into the economy, but they face growing demands from economists and Federal Reserve Chair Jerome H. Powell to spend more to prop up the economy. President Trump and his senior economic advisers have said they want to pass additional stimulus legislation, but jockeying over that package has intensified as ideological rivals within the administration vie to shape it.

Navarro’s push comes at a time when Treasury Secretary Steven Mnuchin, who has led the administration’s negotiations with Congress, faces challenges from Republicans on Capitol Hill and inside the administration. A number of GOP lawmakers want Vice President Pence or Chief of Staff Mark Meadows to assume a bigger role in the dealmaking process, according to three people aware of dynamics who spoke on the condition of anonymity to discuss internal matters.

The lawmakers have complained that the spending bills Mnuchin has brokered with House Speaker Nancy Pelosi (D-Calif.) have been too generous to Democrats and allowed spending and other policy changes that run counter to GOP priorities.

The differing White House agendas have increasingly spilled into public as administration officials have contradicted one another about how to deal with new economic stimulus bills. At this point, there is not a concrete White House proposal, in part because different economic advisers keep floating different — and at times contrasting — ideas.

The economy is showing signs of recovering from the depths of April’s retrenchment, but the swift rebound is a result in part from the massive government support authorized by Congress and the Federal Reserve. Some of it has already been spent or will soon expire. Left unsettled are the administration’s positions on a wide range of critical policy questions facing the national economic recovery going forward.

The White House has not reached a final decision on whether it supports an infrastructure package; aid to state and local governments; another round of $1,200 stimulus checks; delaying the tax filing deadline beyond July 15; and a fix to the coming expiration of additional unemployment benefits, among other issues. Although it is clear Trump is eager to pass a payroll tax cut, a cut to taxes on capital gains, and deductions for the restaurant and entertainment industries, the administration has not formulated a concrete proposal, and these ideas have largely been dismissed by congressional lawmakers.

The dealmaker’s dealmaker: Mnuchin steps in as Trump’s negotiator, but president’s doubts linger with economy in crisis

The White House was not able to confirm the accuracy of Navarro’s claim that the administration is seeking a $2 trillion stimulus.

“Under the President’s leadership, the greatest comeback in American history has already begun as evidenced by the May jobs numbers and the recent surge in retail confidence,” White House spokesman Judd Deere said in a statement. “President Trump’s policies of lower taxes, deregulation, reciprocal trade, and energy independence built a booming economy once and they will do so again.”

Budget experts say it is unusual for White House officials to split on priorities for a major legislative package, especially at a time of national crisis. Many economists say the White House risks imperiling the economy by taking too long to strike a deal with Congress.

“It is very hard for Congress to figure out this administration’s priorities. Is today about Mnuchin’s agenda? Navarro’s? The president’s? Somebody else’s? The way they’re doing this is completely different than any way it’s been done before,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who served as an adviser to Sen. John McCain (R-Ariz.).

Top White House advisers, unlike their boss, increasingly worry stimulus spending is costing too much

Personalities play a role in the administration’s divisions. Mnuchin has throughout the pandemic cut large bipartisan deals with Democrats that conservative Republicans, including some in the White House, have only begrudgingly accepted. Some conservatives in the administration have grown uneasy with the size and scope of the nearly $3 trillion spending spree and sought to undercut Mnuchin’s role going forward.

At a private meeting on Capitol Hill in recent weeks, senior GOP senators asked Pence to have a bigger role in the next round of negotiations with congressional Democrats, viewing him as less likely than Mnuchin to agree to concessions, said two people who were aware of the meeting and spoke on the condition of anonymity to describe the private discussions.

Several leading conservative activists said they are also pushing for Meadows, a former leader of the anti-spending House Freedom Caucus, to exert a larger influence in negotiations. Meadows assumed his current role at the tail end of the negotiations about the $2.2 trillion Cares Act and had few opportunities to directly shape the legislation. Both Pence and Meadows have deeper ties to the conservative establishment than Mnuchin, a former Wall Street banker.

White House acting budget director Russell Vought and former White House acting chief of staff Mick Mulvaney have also floated measures to include plans in the next stimulus that would force long-term reductions in the deficit, although those efforts are probably a non-starter among congressional Democrats.

Senior Trump officials are also vying to have Pence or Meadows take on a bigger role in the next phase of negotiations, one person familiar with internal dynamics said. Trump has effusively praised Mnuchin in public and given him substantial leeway over negotiations with Congress, but has at times privately expressed concern that his treasury secretary would give in to whatever Pelosi asked for or “give away the store on the ‘green stuff,’ ” The Post previously reported.

“Another bill through Congress right now would be a disaster, and that’s what I’ve told the president,” former senator Jim DeMint (R-S.C.), who served as the president of the conservative Heritage Foundation, said at an event this week in a warning against additional deficit spending. “A lot of the people around [Trump] — that we trust — are telling him the same thing.”

The debate among conservatives over the deficit comes as numerous former U.S. economic officials urge the administration to swiftly approve trillions more in spending. On Tuesday, former Federal Reserve chairs Ben Bernanke and Janet L. Yellen joined more than 100 economists in urging Congress to act quickly to avert an unemployment rate of more than 11 percent by the end of the year.

“The economy is just now beginning to recover. It’s a critical phase and I think that support would be well-placed at this time,” Powell, the Fed chair, told Congress on Wednesday.

White House officials have said they will pass another stimulus package, but appear in no rush to do so. Administration officials say the next bill is not likely to pass until late July. Larry Kudlow, director of the White House National Economic Council, has celebrated the stock market and predicted a “strong” V-shaped recovery because of the relaxation of public health restrictions, dismissing calls to extend emergency unemployment benefits that will expire next month.

The president has also boasted about a rapid economic recovery despite projections by the Federal Reserve and Congressional Budget Office that unemployment could remain close to or above 10 percent through the rest of the year.

“People will have their job back that they might’ve lost. They’ll be making even more money than they did before,” Trump said Tuesday at an event on policing.

A number of economists say the recovery could ultimately be determined by choices made by federal lawmakers in coming weeks. The biggest decision probably will be over the $600-per-week increase in unemployment benefits Congress approved in March, which has extended additional aid to more than 30 million Americans. These benefits are set to expire in late July, which many economists warn could drain the economy of a vital stimulus.

Kudlow has warned that the benefit discourages workers from returning to the labor market, telling reporters earlier this month: “I know that pretty much no one is happy with the $600-plus up.”

It’s not clear whether his view is universally shared within the administration’s economic team. Although opening the door to a fix, Mnuchin appeared to suggest to congressional lawmakers that the work disincentive is not a significant issue. “People want their jobs,” he said. “We will have a significant amount of unemployment, and we’re going to have to look at doing something there.”

Yet another voice in the mix is Navarro, the administration’s leading China hawk, who has added a layer of confusion to the White House’s stimulus priorities. Although he represents a break from traditional GOP economic policy, he has the president’s ear and has proved effective at directly influencing White House policy through his influence with Trump.

White House aides torn over trade hawk’s proposal as President Trump weighs action on China

Navarro is pushing for the next stimulus package to include measures designed to encourage American production of medical supplies, such as pharmaceuticals and protective equipment, as well as industries such as high-tech shipbuilding and microelectronics. Navarro said in the interview that promoting domestic manufacturing has been a pillar of Trump’s message since his 2016 presidential campaign and that lawmakers have a unique opportunity to bring back American manufacturing jobs amid the pandemic.

“The president is very interested in something on the order of at least $2 trillion, with the bulk of that focused on bringing home our manufacturing base,” Navarro said Friday. He later tweeted: “Phase 4 = $2 trillion = Buy American, Hire American, Bring Manufacturing jobs and Pharma home!”

Most congressional Republicans do not support Navarro’s efforts to push companies to bring their supply chains from China back to the United States, said Brian Riedl, a policy analyst at the libertarian-leaning Manhattan Institute and a former aide to Sen. Rob Portman (R-Ohio). Navarro’s efforts have also typically been viewed skeptically by other senior administration officials, such as Mnuchin and Jared Kushner, the president’s son-in-law.

“Navarro is using the stimulus debate to sneak in protectionist trade policies unlikely to pass on Capitol Hill,” said Riedl, who remains in contact with numerous congressional Republican offices. “And the $2 trillion price tag is an absolute non-starter with congressional Republicans.”

At an Oval Office meeting in late May, for instance, Senate Majority Leader Mitch McConnell (R-Ky.) told Trump that the next stimulus package should cost at most $1 trillion, said one person with knowledge of the meeting who spoke on the condition of anonymity to describe private conversations. (The meeting was first reported by Axios.) Two senior administration officials, speaking on the condition of anonymity on Tuesday to describe internal dynamics, said the administration is more likely to support the $1 trillion figure. House Democrats, meanwhile, have called for a package in excess of $3 trillion.

Asked whether the administration stands behind his call for a $2 trillion package, Navarro said “haggling over a number” is less important than using the next stimulus package to “address pressing structural issues” in the American economy.