Trump Kills Stimulus Talks In Dramatic About-Face. Says Negotiations To Resume ‘After I Win’

Trump Kills Stimulus Talks In Dramatic About-Face. Says Negotiations To Resume ‘After I Win’

On Saturday, during the first day of a short visit to Walter Reed following his COVID-19 diagnosis, Donald Trump opened his Twitter app and implored lawmakers to strike a bipartisan deal on another virus relief package.

The nation, Trump said, in all-caps, “wants and needs stimulus”. “Work together and get it done”, he exhorted.

To briefly recapitulate, there are two stumbling blocks to a deal. The first is the gap between Steve Mnuchin’s $1.62 trillion offer and Nancy Pelosi’s $2.2 trillion, slimmed down HEROES Act. The second is Mitch McConnell’s inability to marshal GOP support in the Senate for anything beyond ~$650 billion in additional spending.

The divide between Mnuchin and Pelosi can be bridged. McConnell, on the other hand, likely cannot be swayed.

On Tuesday afternoon, less than 24 hours after returning to The White House, Trump, in an apparent rage, declared the stimulus talks dead.

“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”, he said, kicking off a multi-tweet tirade. Here is the rest:

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 request, and looking to the future of our Country. 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. I have asked Mitch McConnell not to delay, but to instead focus full time on approving my outstanding nominee to the United States Supreme Court, Amy Coney Barrett. Our Economy is doing very well. The Stock Market is at record levels, JOBS and unemployment also coming back in record numbers. We are leading the World in Economic Recovery, and THE BEST IS YET TO COME!

US equities plunged. The dollar surged. And Treasurys rallied.

Trump, who is still on steroids, has just signed pink slips for thousands of airline workers and who knows how many other Americans. Many employers were holding out hope for another virus relief bill in the near-term. For small businesses, relief can’t come soon enough. Waiting another month could be a death sentence.

To call this ill-advised would be to understate the case. Trump has now asserted, without equivocation, that the economy is fine and can do without additional spending despite having said the opposite on Saturday while hospitalized with the same virus that plunged the economy into the worst downturn since the Depression just one quarter ago.

The president’s tweets come just hours after Jerome Powell again emphasized the necessity of more fiscal help for struggling Americans.

“The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods”, the Fed chair said, during remarks to the National Association for Business Economics. He then warned that without additional relief spending, the economy is at risk of succumbing to “typical recessionary dynamics, as weakness feeds on weakness”.

Incomes fell more than expected in August when supplemental federal unemployment benefits expired, and spending slowed, albeit not as much as expected.

Whatever Trump’s strategy is (assuming he has one), you can expect it to be called into question by analysts. It’s not clear why the president would want to deliberately push equities lower and imperil the recovery just weeks ahead of the vote.

Of course, the last pre-election jobs report is already on the books, so no subsequent weakness will make the headlines before Americans cast their ballots. Additionally, the third quarter GDP print is guaranteed to show a massive rebound. Trump likely knows most voters won’t understand that the bounce is the mechanical result of the Q2 plunge.

Whatever the case, doubling down on a strategy that at least in part entails betting that voters are excited about Amy Coney Barrett is risky, especially considering the ceremony for her nomination is now widely seen as the mini-super-spreader event which infected multiple GOP senators as well as the first lady and Trump’s press secretary.

As far as the economy goes, the structural damage is piling up (see examples here). And when it comes to Trump’s boast that “The Stock Market is at record levels”, I would remind you that equity ownership is concentrated in the hands of a relative few.

The fact is, the vast majority of Americans don’t care much about stocks precisely because they don’t own many shares. The bottom 50% likely doesn’t care at all. What stocks do or don’t do is irrelevant for them (figure below) unless the proximate cause of a given rally or selloff has broader ramifications for the economy and thereby for their own economic well-being.

While voters may indeed believe that a healthy stock market is indicative of American economic prowess and thereby be prone to expressing higher levels of optimism when headlines tout records on Wall Street, comparisons between, for example, employee compensation and the market cap of US stocks, can be misleading as discussed in “These Markets Are Nihilists, Donny“.

Speaking Tuesday, Powell warned that without more stimulus, “household insolvencies and business bankruptcies [could] rise, harming the productive capacity of the economy, and holding back wage growth”.

“The risks of overdoing it seem, for now, to be smaller” compared to those associated with too much stimulus, he went on to remark.

Needless to say, the risk of doing nothing at all is quite high, something Pelosi underscored.

“Walking away from coronavirus talks demonstrates that President Trump is unwilling to crush the virus”, Pelosi said in a statement on Tuesday afternoon.

“Clearly, the White House is in complete disarray”, she added, before invoking Powell. “Sadly, they are rejecting the urgent warnings of the Fed Chairman today, that ‘Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses'”.

Later, during a virtually non-stop string of tweets and retweets spanning at least four hours, Trump called on Congress to immediately approve airline stimulus and additional funding for the Paycheck Protection Program.


24 thoughts on “Trump Kills Stimulus Talks In Dramatic About-Face. Says Negotiations To Resume ‘After I Win’

    1. I was wondering that too. It’s the drugs talking. I don’t see how this is a winning strategy for Trump in the election. Maybe he is just looking for popularity with his most committed base, as illogical as that seems to be.

  1. just like in 2016, he appears to be doing things that most others would consider as ways to NOT get elected. they couldve passed stimulus and he could have taken credit for ‘working across the aisle to help americans’; or ‘we needed this now, and after im elected it’ll be even better!”; and then further embellished any detail he wanted.

    ned davis research shows that when the stock mkt declines by more than 2% from end of second convention to election day, the incumbent rarely wins. also incumbents are 0 for 6 in election years with a recession and/or 20% mkt decline.

    but then if he loses, he knows he faces the DA in NY for tax fraud—if reelected he could postpone that further.

  2. Trump has no plan and reacts in the moment. There is no long or even short term plan. His time horizon is the next 24-48 hour news cycle and depends on his mood. This is the type of things the founding fathers feared- which is why we supposedly have checks and balances. Assuming a Democratic sweep, you can bet things like tariffs and appropriation powers of the president will be reviewed for possible adjustment/curtailement. There will be a bill requiring disclosure of income taxes too- and I would also guess that the Hatch Act will be stengthened more. I would not be surprised to see the relationship of the Department of Justice to the executive be distanced too. The guess is that Presidential power will be curtailed if there is a sweep.

  3. Could be 1) Trump deciding to stop trying for a stimulus bill, 2) Trump trying to get the best PR from McConnell’s decision, 3) a brinksmanship sort of negotiation strategy, or 4) irrationality from a man who should be hospitalized. Or a combination. Seems unhelpful to his re-election campaign, which raises the possibility that McConnell/Senate Republicans have given up on Trump’s re-election and somehow think that sabotaging the top of the ticket won’t hurt their own re-election campaigns.

  4. Or maybe the GOP as a whole has recognized they have no chance in November so are doing their best to tank the economy so hard so that it remains bad for the next two years, thereby improving their chances in’22 and ‘24?

    1. That’s the thought I had. A president confident in his reelection would dangle Barrett out as a reason for his base to be excited about voting for him, and a pre election stimulus package would boost the start of his second term. A president who thinks he’s going to lose will purposely sink the economy of the next guy and make sure that his legacy is in place before he’s voted out. His actions belie his words.

  5. This is the raging, transactional, desperate Trump. Basically to his thinking, re-elect me and get that much needed stimulus. It’s a thinly disguised threat. Given how unlikely it is he will be re-elected, at this point, I venture to say no stimulus until January 20, assuming Dems take back the Senate and eliminate the filibuster.

    Remember, everything Trump does is about Trump and all that matters to Trump, at the moment, is his re-election.

  6. It’s always difficult to tell what might be going on in his mind. But I think he wants voters to read this as a threat. Something like this: Vote for me, and I’ll pass a stimulus bill “immediately” after the election. So the economy will start to turn around in one month. If I don’t win (and am unable to steal the election), I’ll do nothing. Even with Biden coming in January, there will not be a stimulus package for four months, and that will tank the economy in ways that will last far longer.

  7. I would like to hear a bit more about the democrats hand in this failure or is totally a republican screw up. It seems to me there are 2 groups involved here neither of which seem to be working very hard for a resolution. Personally i don’t like Trump but i also don’t like reading fake news on CNN (the same goes for Fox from the opposite position). It seems to me there must be blame on both sides (even if Trump deserves the lions share).

    1. I will grant that for the last few months, it has seemed that all that Pelosi and the Dems have needed to do is … exactly nothing. No deal and nothing for trump to latch on to. Just “keep trying” and make sure that in the end the other guys wouldn’t make the necessary deal, thus helping to get trump tossed. Dems could even rationalize this with the notion that, even though many would suffer between now and Jan because of their “do exactly nothing” strategy, the sad lot of citizens would be more effectively alleviated after a Dem sweep. There’s simply nothing more important than dumping trump.

      1. With plenty of takers on the GOP side. Why give more money to black & brown people? Most will not vote GOP. And the new white/southern/rural GOP base will be happy to forgo some short-term help to help make certain that “those people” keep getting less than them. (Until cuts to Medicare force them to bring Old Aunt Tilly back home from the nursing home.)

        It’s a win-win!

    2. Dem side is pretty simple. House started 3-ish months ago at $3TR, came down to $2.2TR. Initially resisted piecemeal bills for different industries, in past week were willing to do one for airlines. Initially wanted money earmarked for mail voting and remote school, but haven’t heard anything about that for months.

      Rep side is more complicated. Senate didn’t consider anything until recently, as McConnell said wasn’t sure more stimulus was needed. Then McConnell initially started talking about $0.5TR. Republicans were stuck there while Meadow was handling it for WH, I think H pointed out that Meadows has historically been an obstructionist not a dealmaker. Mnuchin took the reins back he got to $1.6TR but Senate Republicans were variously at $0.5TR to $1.0TR and McConnell was conspicuously silent.

      What should have happened is for all concerned to agree to something with a price tag that was ambiguous enough that Repubs could call it <$2.0TR and Dems could call it >$2.0TR – easy enough to do. Or, do a main bill comfortably below $2.0TR plus some industry-specific bills (airlines, small businesses, schools, etc) to get it above $2.0TR. Point being, both sides could declare victory to their bases, since the bases consume different media it hardly matters if their stories agree.

      This has been botched like everything else the Trump administration does. Trump has huge power in the Republican party, with so many Republican Senators in tough campaigns he had a lot of leverage, but he can’t focus on one thing for more than a couple of days. One moment he’s urging a big package with his name on the checks, the next moment he’s moved on to something else. He really hasn’t been in the driver’s seat, and it seems like McConnell is driving to a different destination.

  8. While it maybe steroid induced mood lability, and of course Trump is still transactional and desperate; there may be some advantage for him. First, the Republican Senato cannot seem to come to consensus and Pelosi is playing hardball, so that he likely can’t make it happen. Given that, 1) he blames the Democrats along standard anti-democrat lines: Dems holding out for bail outs of their evil democrat socialist states; 2) he touts his supreme court pick; 3) he praises his economy; and 4) he holds out the big payout if elected. This is typical Trump. I try not to underestimate the animosity towards Dems, “socialism”, abortion, Pelosi, Fiscal irresponsibility, etc.

  9. Trump appears to have thrown in the towel on winning the election. That in no way means that he has given up on a second presidential term.

    From this point, it is highly likely that Trump will utilize Barr’s masterplan to dispute election results with the Supreme Court deciding on the matter. Which is why Amy Coney Barrett’s confirmation ‘before’ the election is of such importance.

  10. CORRECTION: A B-school classmate who happens to be an MD corrected me. ROID RAGE is a reaction to a different kind of steroid.

    The president’s med has different side-effects

    1. Actually Dexamethasone (aka decadron) is used in ~6 mg doses for hospitalized patients which is equivalent to ~40 mg of Prednisone (what people are more commonly prescribed) and which can commonly induce mood problems (depression, mild manic symptoms, anxiety) as well as measurably diminished declarative memory. It is true the ROID RAGE is typically associated with anabolic steriods (such as dianabol) which are used (often in excess) by body builders, but Dexamethasone can have striking effects too.

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