The announcement sent markets into a frenzy, with observers noting that the president had done little to revive his floundering reelection chances by taking responsibility for ending negotiations.
A day after leaving Walter Reed Medical Center where he was treated for COVID-19, President Donald Trump has sent a series of mixed messages regarding a potential second stimulus package, suggesting he may wait until after the election to provide much-needed relief.
The president’s announcement characteristically came via a tweet on October 6 in which Trump stated he had instructed his “representatives to stop negotiating” with Democrats for a second stimulus package.
The announcement sent markets into a frenzy, with observers noting that the president had done little to revive his floundering reelection chances by taking responsibility for ending negotiations.
In the deluge of tweets that would follow the initial announcement, however, uncertainty prevailed over what negotiations were precisely being called off. President Trump also appeared to walk back his initial announcement ending stimulus talks, even as White House officials confirmed to members of the press that talks were indeed over.
With just under a month till November’s election and with millions already casting their ballots in states across the country, delaying stimulus further could, as government officials have themselves warned, drastically undermine America’s recovery from the coronavirus pandemic.
Trump’s Twitter announcement came as negotiations for a new round of coronavirus economic stimulus were ongoing.
At the beginning of October, House Democrats had passed a US$2.2 trillion stimulus plan, which aimed to provide aid for families, schools, restaurants, businesses and airline workers.
The plan represented significant movement on the Democrats’ part from their initial US$3 trillion plan passed in May that was not taken up for a vote in the Republican-controlled Senate. The October plan cuts out some US$1.2 trillion, but Republicans in Congress have held out for more cuts to be made for the next stimulus package to gain their approval.
Republicans have long called for a plan below US$2 trillion, with Treasury Secretary Steven Mnuchin reportedly suggesting a US$1.6 trillion plan to House Speaker Nancy Pelosi.
Democrats are not alone in suggesting higher spending is needed for an effective stimulus.
In comments before the National Association for Business Economics, Federal Reserve Chair Jerome Powell has argued that it would be better to have too much stimulus, as opposed to too little.
Too little stimulus, Powell argued, “would lead to a weak recovery,” damaging the financial standing of households and businesses, “harming the productive capacity of the economy and holding back wage growth.”
In contrast, the Federal Reserve Chair claimed, “the risks of overdoing” stimulus “seem, for now, to be smaller.”
Though the unemployment rate in the United States has dropped from its highs of 14.7% in April to around 7.9% at the end of September, Powell warned that “there is still a long way to go” and that the lack of stimulus may see another rise in joblessness and overall growth slow.
Cautioning Republican lawmakers, whose reluctance to allow a big stimulus package is predicated on concerns over the debt and deficit, Powell also argued that “this is not the time to give priority to those concerns” and that recovery from the pandemic must come first.
Only a few hours after Powell’s comments, however, the state of stimulus negotiations had been upended entirely.
Taking to Twitter, President Trump wrote that he instructed his “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.”
Instead, Trump wrote, Senate Republicans should focus on approving his Supreme Court nominee to replace the late Ruth Bader Ginsburg, “proven conservative” Amy Coney Barrett.
Trump also appeared to suggest that stimulus was not needed, writing that the US is “leading the World in Economic Recovery, and THE BEST IS YET TO COME!”
The president’s message that negotiations for a new stimulus package were over came as a shock to rivals and allies alike. Treasury Secretary Mnuchin and Speaker of the House Nancy Pelosi had been due to meet for continued negotiations before the president’s intervention.
The president’s suggestion that no new stimulus is needed, or that it can at least wait until after the election, may also be shortsighted.
Data has shown that an additional 948,000 American workers will lose their jobs in the travel and tourism industry without further stimulus, which would be in addition to the 3.5 million jobs already lost. Other businesses, such as restaurants, are also struggling heavily to make ends meet, with many establishments expecting to close in a few months’ time without further aid.
State and local governments are also facing huge budgetary issues, with as many as four million public-sector jobs employed by state and local governments facing cuts as governments around the country face pressure to balance budgets and reduce spending.
President Trump’s Democratic challenger, former Vice President Joe Biden, was quick to scorn the abrupt Twitter announcement.
“Make no mistake: if you are out of work, if your business is closed, if your child’s school is shut down, if you are seeing layoffs in your community, Donald Trump decided today that none of that – none of it – matters to him.”
Markets joined politicians in their reactions to Trump’s comments. The S&P 500, Dow Jones Industrial Average and Nasdaq composite all turned negative as a result of the announcement.
With his announcement, the president didn’t just stun observers and markets alike but may have also further harmed his reelection chances.
Trump’s polling numbers in the wake of the first presidential debate in September and his subsequent hospitalization with COVID-19 have been very negative, with 538’s national polling average (a more conservative reading of polling data) placing Biden nearly 10 points ahead of him nationally.
State polling averages also show Trump behind in the key states of Pennsylvania, Florida, Wisconsin and Arizona. Trump is also neck-and-neck with his Democratic challenger in North Carolina and Ohio, states he must hold onto for any hope of reelection.
As commentators pointed out in the wake of Trump’s announcement, voters are overwhelmingly in favor of a new stimulus plan, even one over US$2 trillion. Delivering this through a bipartisan agreement with Democrats would have provided President Trump with positive press to help rescue his campaign efforts.
Matt Gorman, a former spokesman for the House Republican campaign operation, argued that Trump’s announcement ending stimulus negotiations “left no doubt about who owns this, for better or worse.”
Yet even after his announcement that negotiations were off, a point which was reaffirmed by White House Chief of Staff Mark Meadows, the president continues to tweet conflicting messages, perhaps recognizing the damage caused by the initial announcement.
Trump has tweeted in agreement with Fed Chair Powell’s argument that it would be better to “overdo” stimulus than to have too little, hours after calling for an end to negotiations.
Trump has also stated he is waiting for Speaker of the House Nancy Pelosi to send a “Stand Alone Bill for Stimulus Checks” which he is “ready to sign right now.”
In another contradictory statement, President Trump claimed on The Rush Limbaugh Show that he “would like to see a bigger stimulus package frankly than either the Democrats or Republicans are offering.”
Regardless of what Trump truly wants, Senate Majority Leader Mitch McConnell has stated that another coronavirus stimulus deal is “unlikely in the next three weeks” before the election.
Top Senate Republicans have also reportedly continued to block calls for a higher spending package, according to Politico.
It is uncertain why the president ended stimulus talks to begin with and if these reversals are simply a recognition of the harm done by having ended negotiations. However, he has spoken in the past about the importance of a good businessman knowing “when to walk away from the table.”
In the current climate, however, the uncertainty hanging over stimulus negotiations sees jobs, the fate of the US’ continued economic recovery and even Trump’s reelection prospects all on the line.
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