Economic relief talks screeched to a halt Tuesday as President Trump ordered Treasury Secretary Steven Mnuchin to stop negotiating with House Speaker Nancy Pelosi until after the election.
“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 hardworking Americans and Small Business,” Trump wrote.
Trump’s surprising announcement stood in stark contrast with recommendations from Federal Reserve Chair Jerome H. Powell, who had said in a speech hours earlier that more economic stimulus was needed to sustain the recovery.
Trump’s tweets sent the stock market lower, as many businesses, households and investors had been hoping for a jolt of fiscal stimulus amid signs the economy had lost momentum. The Dow Jones industrial average ended down 376 points, or 1.3 percent. The Nasdaq and S&P 500 also fell.
Trump is still dealing with his recent covid-19 diagnosis, but he has tried to dismiss the illness’s impact on him in the past two days.
Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their...— Donald J. Trump (@realDonaldTrump) October 6, 2020
Trump’s declaration appeared to kill any near-term chance of new aid for millions of Americans who remain out work and at risk of eviction. Pelosi and Mnuchin spoke shortly after Trump’s tweets, and Mnuchin informed Pelosi that the negotiations were indeed over, according to Pelosi’s spokesman.
Trump said he instead 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.”
McConnell, who spoke with Trump shortly before the president’s announcement, said he agreed with the decision.
“I think his view was that they were not going to produce a result and we needed to concentrate on what’s achievable,” the majority leader told reporters at the Capitol.
Trump’s pronouncement came after days of sustained if long-shot negotiations between Pelosi and Mnuchin. Pelosi later speculated to 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 covid-19.
“Believe me, there are people who thought, who think that steroids have an impact on your thinking,” she told Democrats, according to a person on the call, who spoke on the condition of anonymity to discuss the private comments. “So, I don’t know.”
The White House’s focus now appears to have shifted from the economic talks to solely pushing for the Supreme Court confirmation. Even though several Republican senators have tested positive for the novel coronavirus, McConnell is moving forward swiftly with Barrett’s nomination, trying to get her confirmed before the election.
Still, Trump’s move disappointed some members of his party who were hoping to be able to deliver new relief to their constituents.
“Waiting until after the election to reach an agreement on the next covid-19 relief package is a huge mistake,” Sen. Susan Collins (R-Maine), a moderate in a tough reelection race, said in a statement.
The U.S. economy is facing new head winds. It contracted sharply earlier this year because of the pandemic, leading to massive layoffs and business closures.
The economy showed signs of a partial recovery in May and June, but businesses and households have struggled 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.
“Our Economy is doing very well,” he wrote. "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 that the economy is not doing 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 about 15 percent, but it is still at 7.9 percent, and millions are struggling to pay their bills, afford food and find jobs. The United States has recovered barely half of the jobs lost in March and April.
Trump keeps shifting his position on how he plans to proceed.
Three days ago, during his first day in the hospital, he tweeted, “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!”
And then after he announced Tuesday that the talks were off and that the economy was great, he wrote another Twitter post in the evening that suggested he actually supported the idea of more spending.
Trump’s first set of tweets Tuesday came just after he and Mnuchin conferred with McConnell and House Minority Leader Kevin McCarthy (R-Calif.) on a conference call. McConnell and McCarthy have expressed skepticism about Republicans signing on to a giant new spending bill. During Tuesday’s call, McConnell suggested to Trump that Pelosi was stringing him along and no deal she cut with Mnuchin would command broad GOP support to pass in the Senate, according to two people with knowledge of the call who spoke on the condition of anonymity to discuss it.
Pelosi and Mnuchin had been working on assembling a relief bill of between $1.6 trillion — which was Mnuchin’s opening offer — and $2.2 trillion, the size of a stimulus bill passed last week by House Democrats. Talks had been moving slowly but appeared to be progressing. Pelosi last week expressed optimism 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, made her comment about a potential link with steroids 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 shortly afterward.
Because of the White House’s move, she said, “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, give the jobless new unemployment benefits, and provide a new round of small-business aid, help for the airline industry and a range of other measures.
Congress has not passed economic or health-care relief legislation since the spring, when lawmakers came together on four bipartisan bills totaling about $3 trillion, 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 last week began furloughing more than 30,000 employees because government aid expired, and some surveys have found that as many as 40 percent 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 from Congress, draining the U.S. consumer market and a key source of stimulus. Personal incomes already dropped in August as the spring relief 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 last week urged airlines to hold off on layoffs, saying an airline payroll support program would be extended either as part of an overall deal or a stand-alone bill. It’s unclear now whether there will be an attempt to move forward on that.
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 pressured by moderate House Democrats 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 his 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 officials.
Larry Kudlow, the president’s top economic adviser, has for months said an additional stimulus deal would help bolster the economy but was not necessary for the recovery.
Shortly after Trump’s tweets, White House trade adviser Peter Navarro got into an argument with Fox Business host who pressed 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 legislation could accomplish.
Despite the push from some within the White House and lawmakers from both parties, conservatives had urged Trump to reject a new spending package.
Art Laffer, a supply-side economist generally regarded as outside the economic mainstream, said he visited the White House about a week ago and expressed the view that Trump should not approve a stimulus package. Stephen Moore, another outside economic adviser, has told White House officials that a stimulus package would do little to boost Trump’s political fortunes because it would not show results until after the election.