“We are going a different way!”, Donald Trump declared, after more than a week of contentious negotiations aimed at striking a bipartisan deal on the next virus relief package finally collapsed on Friday.
Although Steve Mnuchin was able to find common ground with Nancy Pelosi and Chuck Schumer on some issues, disagreements remained on key elements and The White House and Democrats remained miles apart on the final price tag headed into the weekend. Pelosi offered to meet Mnuchin halfway at $2.4 trillion, a figure the Treasury secretary called a “non-starter”.
The July jobs report suggested the US labor market continued to recover last month, but many economists and analysts worry it’s just a matter of time before the economy rolls over now that a $600/week federal unemployment supplement has lapsed, along with eviction moratoriums and a hodgepodge of other key fiscal support measures credited with rescuing tens of millions of Americans from financial oblivion over the last several months.
“Pelosi and Schumer only interested in Bailout Money for poorly run Democrat cities and states”, Trump said, in an irritated Friday afternoon tweet. “Want one trillion dollars. No interest”.
Earlier this week, the president teased the possibility of resorting to executive orders to extend benefits, forestall evictions, and even impose a payroll tax holiday by decree. It wasn’t clear what authority he had to make good on those promises, and Democrats may have called his bluff.
Mark Meadows said Friday Trump was likely to take some manner of action “over the weekend”. “This is not a perfect answer”, he conceded. “But it is all that we can do, and all the president can do, within the confines of his executive power”.
As of Friday evening, it appeared as though the White House was still trying to discern exactly what those “confines” are. Sources suggested Trump would look to extend the federal unemployment top-up at a rate of $400/week, even as no one could say, definitively, where the funding would come from.
“My administration continues to work in good faith with Democrats”, Trump said, addressing the public in televised remarks from Bedminster. “Tragically, Nancy Pelosi and Chuck Schumer… insist on radical left-wing policies that have nothing to do with the China virus”.
“[I will] act under my authority as president to get Americans the relief they need”, he continued, before suggesting he may mandate a payroll tax holiday to the end of the year, and possibly longer.
He provided some vague assurances on unemployment benefits, saying enhanced assistance could be extended through December. Trump also said student loan payments would be deferred and interest forgiven until further notice. The eviction moratorium would also be extended.
He praised the last three jobs reports for beating market estimates. He did not mention that the labor market is still 13 million jobs from pre-pandemic levels.
Trump also suggested African Americans have thrived in the months since the lockdowns. In reality, the gap between the African American unemployment rate and the rate for white Americans rose again in July.
On the virus, the president said “it’s disappearing”. “It’s going to disappear”, he added, for emphasis. As of Friday, the death toll in the US was nearly 161,000. “China allowed [it] to infect the world”, he insisted.
Ultimately, the president stopped short of saying any action would be taken immediately. An aide later confirmed as much, but said Trump is ready to act if necessary.
Although there’s still quite a bit of ambiguity, it sounds as though both sides will continue to liaise over the weekend in an effort to bridge a chasm that is at least $1 trillion wide.
Labor secretary Eugene Scalia told Fox that executive orders were possible if there’s still no deal by the end of the weekend.
Markets have generally traded on the assumption that the talks won’t fall apart completely and that, in the extremely unlikely event they do collapse for good, Trump will manage to cobble together a legal plan for keeping key pillars of the existing fiscal support regime in place.
It would be advisable for someone to provide a measure of clarity on all of this before markets open on Sunday evening.
Looks like we are headed into an ultimate test of some of Kelton’s theories here… I for one never believed the hype about how being a reserve currency is an entitlement to print all you want and spend all you can with no consequences…. Smarter minds than mine disagree…LOL
George- I too, worry about the current print and handout strategy-
The US is likely facing medium to longer term high level of unemployment because, as Fauci said on Friday- the chance of getting a highly effective ( defined as 98%) vaccine is slim. Furthermore, he said scientists looking for 60-70% effective and he would settle for 50% effective.
Hard to believe services, travel, entertainment, eating out will come roaring back if we still have a 30-50% chance of getting covid– even with a vaccine.
Therefore, print and hand out (a short term strategy) will have to be replaced with a long term strategy of print, hand out and get something from that which benefits the country.
The list of possible benefits will be long and politicians will have a lot to argue about. How about pay unemployed to learn to code, fix roads, repair/build infrastructure? I guess that first, we have to wait to see how effective the vaccine is before the US government can determine if the short term fix works or if they need something longer term.
Trillions at risk.
Yeah but we are going to get pre-existing condition coverage and I hear an exec order of air to breathe. So there!!!!
Assuming both sides come together on a deal, what are chances this just becomes a sell the news event? After all, markets just grinder higher all week on very light volume during faltering negotiations.
I agree with that idea. Also quite interested in the up-tic in real yields. The combo could be deadly. Oh by the way, why is Congress even meeting. August is holiday month. One can only laud and praise such dedicated servants to the Republic in this time of need.