Trump Pulls The Trigger, Signs Orders On Jobless Benefits, Payroll Taxes

Donald Trump moved ahead Saturday with executive action aimed at preserving a handful of key fiscal support mechanisms after negotiations on a new virus relief package collapsed, leaving tens of millions of Americans in economic limbo.

Although discussions between Nancy Pelosi, Chuck Schumer, and Steve Mnuchin will presumably continue, Trump moved unilaterally just hours after a Friday evening address during which he blamed Democrats for the stalemate.

Just as the president suggested, the orders include a payroll tax break, the extension of federal unemployment assistance (at a reduced rate of $400/week), an eviction moratorium, and student loan relief.

“Nancy Pelosi and Chuck Schumer have decided to hold this assistance hostage”, he said, speaking from his golf club in Bedminster. “Hopefully we can do something with them at a later date”.

Almost immediately, Trump turned the press conference into a campaign speech. “[Joe] Biden is totally controlled now by the Bernie Sanders left-wing of the party”, he remarked, veering off-script.

The president then ran through a laundry list of grievances, accusing Democrats of trying to “steal the election” with “fraud”. Trump also decried what he characterized as “massive taxpayer bailouts of badly-run states”.

He then railed against mail-in ballots, repeatedly insisting that Democrats’ relief bill is in part a Trojan horse aimed at undermining election integrity. He used a derisive nickname for Schumer, before claiming that “Sleepy Joe wants to rip [my] wall down”.

Eventually, Trump steered his remarks back to the matter at hand, saying he would sign an order on a payroll tax holiday. The president half-promised to forgive some payroll taxes if he wins the election.

As noted above, Trump is angling to extend the federal unemployment supplement by $400/week, consistent with Mnuchin’s compromise proposal to Pelosi. The federal government will cover 75% of the extra federal unemployment benefit, he said.

There is still some ambiguity around his authority in that regard, and some will doubtlessly accuse The White House of attempting to commandeer congressional power of the purse.

How this will go over with markets is anyone’s guess. Traders (not to mention the unemployed) are desperately looking for some finality, at least on the size and duration of the unemployment supplement. Without that extra weekly “income”, the rebound in consumer spending will almost surely go into reverse.

Critics have suggested Trump’s orders are little more than a publicity stunt, although to the extent they can be implemented, executive action might allay some fears that the economy is poised to careen off a perilous fiscal cliff.

Whatever you want to say about Trump’s decision, it does represent a gamble of sorts. It’s not immediately clear what effect the orders will have on the fraught talks and it’s at least possible that both sides will be incentivized to dig in with the proverbial can kicked. Democrats may challenge the orders in court, something Trump sought to downplay on Friday and Saturday.

“The running assumption has been that a stimulus deal of around $1.5 trillion would become law in August, which remains the market base case [but] the tail risks have increased in both directions”, AxiCorp’s Stephen Innes said over the weekend.

While jobless claims fell more than expected last week (green in the figure below), more than 30 million Americans were still claiming some form of benefits as of mid-July.

The last three jobs reports beat analyst estimates, something the president has been keen to emphasize at every possible opportunity, going so far as to post a celebratory tweet Friday, featuring a Photoshopped poster to commemorate the July numbers.

Still, the labor market is 13 million jobs shy of pre-pandemic levels.

You could suggest that Democrats will be more inclined to move towards the GOP position if Pelosi believes Trump can score points with the electorate for taking “bold” action when lawmakers failed to deliver. That’s surely how The White House will frame things.

On the other hand, the only real, long-term solution is a bipartisan agreement enshrined in legislation. It won’t be lost on all voters that Mnuchin and Mark Meadows were negotiating on behalf of Trump, who refused to engage directly with the Democratic leadership.

Additionally, it doesn’t say much for the president’s “legendary” dealmaking prowess that his representatives failed to reach an agreement during what might fairly be described as one of the most critical negotiations in modern political history. That’s not to say Mnuchin should have necessarily acquiesced to every, single Democratic demand, but if Pelosi felt confident enough to make $2.4 trillion her final offer, she clearly did not believe Trump had much leverage.

Rounding out a hodgepodge of promises, some concrete, some totally nebulous, Trump on Saturday said he’s still considering a capital gains tax cut and is also looking at cutting income taxes for some Americans.

“They might very well come back and negotiate”, Trump said, of Democrats.

Asked if the orders will “get tied up in the courts”, Trump admitted it was possible, but said challenges “wouldn’t be [politically] popular”.


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6 thoughts on “Trump Pulls The Trigger, Signs Orders On Jobless Benefits, Payroll Taxes

  1. How will it go over with traders? Like anyone cares about anything other than price mo and VaR. they may care it takes us a step closer to Turkey but if they don’t act and the computers don’t care it doesn’t matter. Few will stake their careers on rational analysis. Those days are in the past (until the machines sell then everyone will “care”).

  2. Payroll tax holiday…so the people that are still secure in their jobs get a lump sum bill for the taxes in December instead of having it taken out of every check. How does that help anyone? As someone living in Florida I also find it hard to get excited about Trump pilfering $44 Billion from the FEMA Emergency disaster fund to pay for unemployment benefits, especially heading into what is expected to be, and already shaping up as, one of the busiest hurricane seasons on record.

    1. I just imagine the scenario where right before the election he reminds people if the don’t vote for him and GOP candidates then they’ll have to repay all that money they already spent.

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