(Bloomberg) -- President Donald Trump stunned campaign advisers and allies in Congress by single-handedly torpedoing any chance of a fresh coronavirus stimulus, saddling himself with the blame for any more layoffs and market losses in the final weeks before the election.
With the president already trailing badly in polls as he recovers from Covid-19, his decision to publicly scuttle talks toward a bill in excess of $1 trillion puzzled allies, who had accused House Speaker Nancy Pelosi and Democrats for overreaching in negotiations.
Unless he backtracks, Trump’s decision ensures that Americans won’t receive stimulus checks before Election Day or an extension of at least $400 a week in enhanced unemployment benefits. Any stimulus measure would have also included billions for coronavirus testing and contact tracing, vaccine distribution, and financial assistance for the U.S. Postal Service ahead of Election Day.
Lawmakers had intended to provide aid for specific industries including restaurants, live entertainment venues and airlines, as well as rental, mortgage, and food assistance for ordinary Americans impacted by the virus.
Late Tuesday night, Trump issued a separate call for Congress to immediately approve $25 billion to help the airlines and another $135 billion for small businesses, but a piecemeal approach has been largely rejected by Democrats. His plea came as part of a late-night frenzy of tweets where Trump took aim at Democrats and accused them of trying to sabotage his presidency.
Trump terminated stimulus talks less than 24 hours after he returned home after three nights at Walter Reed National Military Medical Center with questions still swirling about his condition. People familiar with his thinking said Trump has been eager to return to the Oval Office, even while several more close aides tested positive for Covid on Tuesday.
The president’s stimulus decision was likely driven by a hard political reality. Down by double digits to former Vice President Joe Biden, he lacks the political capital to bridge the gap between Democrats’ demands for a bill in excess of $2 trillion and Senate Republicans who don’t want to spend even half as much.
‘After I Win’
The president hinted at the dilemma, saying he would return to negotiations “immediately after I win” the election.
But he risks deep economic damage before the polls close, with airlines and other pandemic-stricken industries threatening to imminently lay off thousands of people, small businesses closing in droves and schools struggling to safely return students to classrooms.
Corporate America Condemns Trump Move to Halt Stimulus Talks
Trump called off the talks hours after Federal Reserve Chair Jerome Powell during a virtual conference urged additional fiscal support to avoid what he said could become a “tragic” fallout for the U.S. economy. Fed chairs typically don’t comment on fiscal policy but Powell has repeatedly urged Congress to ignore the ballooning federal deficit and inject more money into the economy.
Senator Susan Collins of Maine, one of the most vulnerable incumbent Republicans, said in a statement that it was “a huge mistake” to wait until after the election.
Biden unloaded on Trump. “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,” he said in a statement.
One Republican congressional official said it was unclear what Trump sought to achieve. Another one expressed hope the move was a negotiating ploy, noting there’s still three weeks before the election for a deal to come together.
“He perceives it as a position of strength but I think many would argue it could be a miscalculation,” said Matt Gorman, a former spokesman for the House Republican campaign operation.
Trump has long expressed frustration with House Democrats’ insistence that an aid bill include billions of dollars for financially beleaguered states, many of them with Democratic leadership. Pulling out of talks also allowed him to portray himself as driving business in the capital following his coronavirus diagnosis -- and at least for a time, may distract from questions about his health and the widening coronavirus outbreak within the White House.
Taking the Blame
But by ending the talks himself, Trump forfeited the chance to cast blame for the failure on anybody else.
“Trump is certainly not one for subtlety and he’s left no doubt about who owns this, for better or worse,” Gorman said.
The decision was reminiscent of how the president reacted when pressured by top Democrats over legislation to avert a government shutdown in 2019 during a televised meeting in the Oval Office. During the discussion, Trump said he would be “proud” to shut the government down over his demand for money to build a border wall and that he would “take the mantle” of blame.
Trump’s’ display on Tuesday immediately undercut Republican leverage, with polls showing voters blaming the president and GOP lawmakers for the shutdown.
Pelosi said Trump’s pullout from talks demonstrated the White House “is in complete disarray.”
“He shows his contempt for science, his disdain for our heroes — in health care, first responders, sanitation, transportation, food workers, teachers, teachers, teachers and others — and he refuses to put money in workers’ pockets, unless his name is printed on the check,” Pelosi said.
On a phone call with other Democrats, the California lawmaker suggested the steroid regimen the president is taking to combat coronavirus could explain his behavior.
Unnerved Markets
One of the president’s favorite barometers for political success -- stock markets -- underscored the risk of his strategy. The benchmark S&P 500 slumped 1.4% after Trump tweeted his comments late in the trading session, erasing a gain of as much as 0.7%. The Dow Jones Industrial Average and Nasdaq Composite indexes also turned negative.
U.S. Economy’s Recovery Gets Harder as Trump Halts Aid Talks
And the break comes as the president is showing new vulnerability on economic issues. In a CNN poll of likely voters released earlier Tuesday, Biden led Trump 50% to 48% on who would better handle the economy, marking a significant erosion for the president on what had been his signature issue.
In May, the CNN poll found that 54% of registered voters gave Trump the upper hand on the issue, versus just 42% for Biden.
Some of the president’s conservative allies -- including Heritage Foundation researcher Stephen Moore, who has consulted with Trump on the talks -- applauded the news.
“It’s crazy that they’re going to spend all this money on all these programs that will have very little stimulative effect on the economy,” Moore said.
‘Weak Recovery’
Many economists agree that the more than $2 trillion relief bill Trump signed into law in the spring helped to significantly allay economic pain across the country. Powell warned earlier Tuesday that “too little support” from the government “would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
The political impact for vulnerable Republican lawmakers most likely to support a deal -- not to mention for the president himself -- may be swift and tangible.
Just days ago, American Airlines (NASDAQ:AAL) Group Inc. and United Airlines Holdings (NASDAQ:UAL) Inc. said they would start laying off 32,000 workers, blaming expiring government aid, the latest in a drumbeat of mass job cuts. Walt Disney (NYSE:DIS) Co. is slashing 28,000 workers while Allstate Corp (NYSE:ALL)., the fourth-largest car insurer in the U.S., announced it will cut 3,800 jobs, roughly 8% of its workforce.
Despite efforts by the Trump administration and Republican allies to promote a bounce-back from the economic collapse the coronavirus precipitated in April, weekly layoffs consistently remain far above pre-Covid records. In September, the U.S. was still down 10.7 million jobs from February, a bigger loss in payrolls than the 8.7 million deficit when employment hit bottom during the 2008-2009 recession.
Americans’ incomes fell by 2.7% in August, the steepest drop in three months, as supplemental insurance benefits from the first round of Covid stimulus expired, threatening to sap consumer spending.
“The economy has been moving more or less sideways since mid-summer,” Mark Zandi, chief economist for Moody’s Analytics, said in a recent note to clients. With prospects fading for more federal relief, “odds that the recovery will come undone are rising.”
Voters historically have put heavy blame on incumbent presidents and their party allies for a poor economy. The last two incumbents to lose re-election, Jimmy Carter in 1980 and George H.W. Bush in 1992, both were ousted following recessions. The 7.9% unemployment rate in September is higher than at the time of either of their losses.
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