Donald Trump has given up on passing another virus relief bill.
Or, if you like euphemisms, let’s just say the White House is no longer inclined to “take the lead” on negotiations.
That’s according to a pair of sources who spoke to Bloomberg, whose Saleha Moshin says Mitch McConnell is now in the driver’s seat.
If you’re wondering how that’s any different from the situation that’s persisted since late July, when key fiscal support measures included in the last stimulus bill began to lapse, the answer is that it’s not — any different that is.
McConnell has always been de facto in charge of the discussions, although you wouldn’t have known it from scanning the headlines. To let the media tell it, the clumsy waltz between Nancy Pelosi and Steve Mnuchin was what mattered, and every step closer the two came to closing the gap on key sticking points was met with cheers from the market and purportedly meaningful analysis from journalists.
The most ridiculous part of that three-month charade wasn’t the two sides’ inability to get a deal done in the interest of rushing relief to millions of Americans, tens of thousands of small businesses, and dozens of desperate state and local governments. That was tragic, but wholly predictable given pre-election jostling. The absurd part was that everyone pretended the prospective compromise bill between House Democrats and the White House ever had a chance of becoming law.
Since July, it’s been abundantly clear that McConnell could marshal support for, at best, a ~$750 billion package of targeted measures, and even that figure was wildly optimistic. Some GOP senators steadfastly refused to countenance any further spending at all, or, to the extent they were willing to begrudgingly acquiesce, proposals revolved around stingy allotments with contingencies and/or authorizing the release of unspent money that was already approved.
To this day, I’m still not entirely sure why anyone ever believed that Trump (or anyone else for that matter) was capable of cajoling Senate Republicans all the way up from the $500 billion they showed a willingness to spend in September, to $2.2 trillion. That gap simply wasn’t bridgeable.
Fast forward to the lame duck session and Moshin reports that Trump “is stepping back from negotiations and leaving it to… McConnell to revive long-stalled talks with Pelosi.”
If you’re shaking your head or just chuckling at the sheer futility inherent in the notion that McConnell and Pelosi will be able to find common ground, you’ll be forgiven.
There is no chance (none) that McConnell, who will retain the majority assuming the Georgia runoffs aren’t a disaster in January, is going to inexplicably decide to come up from $500 billion to $2 trillion. The English language is not a sufficient tool when it comes to describing how ridiculous that notion is.
If you don’t believe me, just ask Mitch, who on Thursday said he’s not interested in “dramatically” larger stimulus. Relief, McConnell insisted, should be “about” the amount that was put on the floor in September and October — so, around $500 billion.
Do note that for all the different permutations of the compromise deal Pelosi and Mnuchin tried to hammer out, McConnell’s offer has never changed. Not one bit. And it’s not likely to change now given that the odds are squarely in favor of Republicans holding the Senate.
Bloomberg’s Moshin goes on to note the obvious, which is that Trump is far too preoccupied with trying to overturn the results of the presidential election than he is with marshaling support in the GOP for more virus relief. “Trump had committed to pursuing a large-scale stimulus after the election, even saying he would approve a $2 trillion bill, but has since focused on attempting to overturn President-elect Joe Biden’s victories in battleground states,” she writes.
That is risky, to say the least, but not for Trump. He doesn’t need the stimulus, after all. You might, but he doesn’t, and neither does his family. So, he’s going to do what’s in his interests, which in this case means filing lawsuits all across the country (funded in part by donations, of course).
The optics around this are not great, to say the least. But it’s hardly surprising. Did anyone seriously believe that Trump, if he lost the election, would work with lawmakers (Democrats or Republicans) to pass a stimulus bill on his way out the door? If you were buying that, then I’ve got a business plan for a Trump-branded casino I’d like to discuss with you. (I’ll just need a few hundred million and we’ll be off and running!)
Speaking to reporters, McConnell predictably cited the improvement in the economy as evidence that big spending isn’t necessary. “The level at which the economy is improving further underscores that we need to do something at about the amount that we put on the floor in September and October,” he mused. Commenting on Democrats’ push for a bigger package, Mitch said “that’s not a place I think we’re willing to go.”
Appreciated, but “broke” isn’t “a place” 10 million Americans were “willing to go” either, and yet here we are, with the labor market still about that far from being healed (figure below).
For what it’s worth (which is a lot considering he’s all that stands between whatever the balance is on your retirement portfolio and a much lower number), Jerome Powell doesn’t agree with this rather flippant approach to fiscal stimulus.
Speaking during a virtual panel discussion with Christine Lagarde and Andrew Bailey on Thursday, Powell emphasized that the unchecked spread of the virus is a real challenge for the US economy.
“We do see the economy continuing on a solid path of recovery, but the main risk we see to that is clearly the further spread of the disease here in the United States,” Powell said.
Yes, “clearly.” And forgive me, but “clearly” the outgoing administration has given up on that too. How else would you describe the figure below?
There’s seemingly no effort at all from the White House to contain the spread. In fact, Trump adviser Corey Lewandowski tested positive just yesterday, media reports indicated. If you’re keeping track at home, that’s Mark Meadows, Ben Carson, Corey Lewandowski, and, naturally, David Bossie, the man advising the president on his election-related legal challenges, all in the space of the last week.
Commenting further on Thursday, Powell said “my sense is that we will need to do more, and Congress may need to do more as well on fiscal policy.”
Chuck Grassley, who is mostly sane as far as GOP lawmakers go, said there’s been no discussion between McConnell and Pelosi. “McConnell is not going to rely on Mnuchin any more to do the dealing,” Grassley remarked. “I think he is intending to take it over and to try to get something going and get it done.”
Don’t hold your breath.
Looking forward to your discussions of “how well” our elected representatives are doing on determining the next FY budget for the USA!
Does anyone else think this is starting to set up a lot like 4Q18? Back then, Powell had some ammo he could use; now, not so much. And with Trump going full autocrat and congressional Republicans lining up to lick his tasseled loafers, it could be a long winter for a lot of people, including investors.
Well, you got to give a break to Trump ; despite all the polls, he got within spitting distance of pulling off another 2016… and he thought that was close enough to get the SCOTUS to hand him the election, as payback for packing the court with right wing jackasses.
And now he discovers that the GOP is kinda willing to support him in litigating stuff but not nearly willing enough to pull off a coup and his legal cases can’t magically be decided by his SCOTUS that doesn’t seem in any hurry to pay him back on his investment.
He’s living in a world full of disappointments right now. Though… his packing of the military with loyal nutters is… interesting/worrisome.
Ok. So, a natural, follow-on question is when is the market going to start pricing in no new stimulus. (WAG: early January.)
We had no ideas, at least none that I’m aware of, that seemed credible, what McConnell wanted with the passage of the $500B. (I heard some mutterings. But, honestly have no idea what he stood for. Nothing is my guess.)
Say it’s, and I’m just speculating, it’s bailouts for oil refineries, the cruise industry, and some regulations, like blanket immunity for meat processors from COVID-related lawsuits. But no aid for state and local governments. Say the only common ground is additional funding for foods stamps, additional unemployment, and tents. Meager, yes. It would help people but would not buoy the financial economy.
The first-derivative of that cases line is increasing in steepness. An inflection point could be weeks away, heaven forbid. Point is, cases are about a three-week lagging indicator for deaths and the line is still steepening. Current path is we go into January with no path for stimulus, impacts on businesses relating to COVID, weakening employment, and a burned out medical system that receives aid from Médecins Sans Frontières.
In the meantime, let’s hope for the melt up going into year end. Profit taking by the 31st. Come January, the fintwits and the social-media financial echo chamber could be talking a double dip recession.
Our financial system runs on credit and spending. Credit has to grow at a rate greater than nominal GDP for our financial economy to remain buoyant, for our economy not to crash into a deflationary spiral. If credit and spending don’t expand sufficiently, it’s a set up for a melt down, and many trillions of everything Fed. Think zero rates and equities ETF purchases in addition to the usual suspects.
Austerity during what I’ll call a “depression,” and, obviously, people with bigger than me would beg to differ, is a questionable economic policy.
People with bigger “brains” than me. See, proves my weakness…I don’t even have the wherewithal to think of the word “brains” in real time to even be able to use it in a sentence.
Methinks…… Trump admits loss, realizes the stimulus may have given him the election, wants everyone to get a check from Uncle Donald one last time and do the old F-me,F-you Mitch. Also if economy improves this spring he will be able to take credit. But taking the blame for an extra 200,000 dead on his watch…….
Now that there is no election, I am guessing there will be some piecemeal bills passed. One commentator here discussed how much would get going- it is as much about which areas the stimulus money got spent as well how much. Pelosi and Schumer would probably take less if it was largely spent on their constituents (unemployed, lower income, state and local governements, public health) vs. Republican priorities (small business, large business, liability forgiveness, checks for individuals, specific industry aid). Best guess is somewhere between Pelois/Schumer- McConnel in terms of what and for whom. We could see bills out of the Congress in the lame duck that would be ~1-1.5 trillion split amongst the various constituents. Would not bet the ranch on it though.
My question is: how much/little of a stimulus deal makes for a sustained market increase and how much/little is enough to keep the economy afloat?
The virus is hitting red states as hard as any blue state right now, GOP lawmakers will start feeling pressure from their home states to aid local and state governments, might be the only path towards a stimulus bill during the lame duck session.
Come to think of it…I don’t remember Trump ever having bragged about how well the swamp draining is going after 4 years of his administration.