The President’s Twitter account sent markets on a roller coaster ride, with a sharp drop at Tuesday’s close, only to be followed by a tangible pre-market bump. Aides on Capitol Hill similarly had no idea where, exactly, the President sits on stimulus at this moment. But all agree that actual substantive bipartisan negotiations, which were already in a tenuous place, are done for the moment.
Bottom line: The market, based on Wednesday morning, has no idea what it’s doing. The reality, contrary to Trump’s backtrack tweets, is that bipartisan stimulus talks are dead. There may be fits and starts of efforts to move piecemeal legislation in the next few weeks, but Democratic leaders have rejected that pathway repeatedly.
What it all means: For millions of unemployed or underemployed people, for small business owners barely hanging on, for airlines cutting tens of thousands of jobs, for a decimated service sector, federal help is not coming any time soon.
Days until the election: 27.
The Fed chairman
Trump’s move was all the more confounding given it came the same day as arguably the most powerful economic official in the world — the man who leads a central bank that is single-handedly more responsible for floating the US (and global) economy during the worst economic shock in a century — made clear more fiscal stimulus was just necessary, but a necessity.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Federal Reserve Chairman Jerome Powell said Tuesday. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth. By contrast, the risks of overdoing it seem, for now, to be smaller.”
Some important context here: Powell was actually conferenced into a call between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin last week, according to a person with direct knowledge of the call. The actual reason was to walk through potential changes to the Fed’s municipal loan facility, but it underscores that he’s been intimately involved in working with Treasury on the economic response and has spoken several times to Pelosi over the last several months. Pelosi has been leading negotiations for the Democrats, while Mnuchin has been the top negotiator for the administration.
It’s not just the public calls for more fiscal support — which are a rarity for a Fed Chair — that made the comments so noteworthy, but also the fact he’s been deeply engaged with the policymakers themselves behind the scenes.
Reality check
Pelosi and Mnuchin were still very apart in their ongoing talks and, particularly among congressional Republicans, there was extreme skepticism any deal would ever be reached.
The two sides were still roughly $400 billion apart on the topline, but perhaps far more importantly, the actual in-the-weeds details, even on pieces where there was broad agreement and understanding, simply weren’t getting nailed down, according to multiple people briefed on the talks.
Senate Majority Leader Mitch McConnell, in a conference call with Trump, Mnuchin and House GOP Leader Kevin McCarthy, warned the President that Pelosi could very well be stringing things along, according to people familiar with the call. He didn’t call on Trump to explicitly pull out of the deal, but made clear he had questions about its prospects.
That said, Tuesday was slated to be a big day for the talks, with Mnuchin and Pelosi trading paper the night prior and scheduled to talk in the afternoon to try and nail down more progress. Would it have worked? Again, skepticism was broad and deep.
But that doesn’t explain Trump taking to Twitter to kill the talks, unprompted and unilaterally.
“We went from ‘pox on both houses’ where we had plenty of grounds to pin this to Pelosi, to now this is all the President’s fault,” one GOP aide told CNN. “It’s nonsensical.”
The politics
Multiple GOP front-liners expressed displeasure at President’s decision to pull out of the talks, most notably Sen. Susan Collins of Maine.
“Waiting until after the election to reach an agreement on the next Covid-19 relief package is a huge mistake,” Collins said in a statement. “I have already been in touch with the Secretary of the Treasury, one of the chief negotiators, and with several of my Senate colleagues.”
And some Democrats, speaking candidly, acknowledged Trump gave their side a boost given talks were far from a final agreement. “It’s a gift. No question,” one Democratic official told CNN.
The piecemeal proposal
Trump, in two separate tweets, called for Congress to send him a bill comprised of $25 billion for airline payroll support and $135 billion in small business aid, and a separate bill that would direct a second round of stimulus checks to individuals.
Start with this baseline: Pelosi and Senate Democratic Leader Chuck Schumer have repeatedly rejected breaking up broader stimulus legislation into smaller pieces. This is strategic — they’re keenly aware doing so would put an end to the hopes of a broader agreement, one they have made clear is essential to actually addressing the economic and public health devastation caused by the pandemic.
This gets to the core divide that has been unbridgeable for months — the difference in how Democrats and Republicans see the scale and scope of the response that is necessary.
Move to this reality: The House is likely out of session until after Election Day. The Senate has essentially been put on ice due to a Covid-19 outbreak, with a planned return for (mostly) the sole purpose of confirming Supreme Court nominee Amy Coney Barrett.
Leaders made clear they can bring back members whenever they want, but if an agreement were reached, there would be significant objections from Republicans in both chambers.
This isn’t March, when the House and Senate almost unanimously passed the largest economic aid package in US history. Processing an agreement would take time — and McConnell made clear to Trump in a conference call Tuesday that his members were very reticent to go down the path of another major stimulus bill (something Senate Republicans have made clear publicly for months).
And this one: In fact, Senate Republican leaders considered moving stand-alone airline aid two weeks ago via unanimous consent, two people familiar with the effort tell CNN. Their own members objected, sinking it before it could get off the ground (no pun intended).
The Republican conference is also generally skeptical of another round of stimulus checks. Not everyone — but more than half, according to senators and aides.
Finish here: The President ended the only high-level bipartisan talks on Twitter. Mnuchin confirmed they were done a short while later in a brief call to Pelosi. Most Republicans were wary of a big deal to begin with, and many wanted no deal at all. Most Democrats would only accept a big deal, and were wary of moving too far off the $2.2 trillion bill the House passed last week. The election is in less than a month. All of these factors tell you everything you need to know about the prospects of any resuscitation of stimulus talks, piece-meal or otherwise.
So what happens now?
Given Trump’s tweet reversals, there will likely be surface-based efforts to give piecemeal bills a shot again, and one wild card here is the airline payroll support. Pelosi, in a statement last week, said if a broad deal fell apart she’d move a standalone bill. But Democrats tried that last week and were blocked by Republicans, so prospects for that pledge remain very uncertain.
With that in mind, a good barometer on the overall state of things is to listen to the two most powerful members of Congress.
“I think his view was that they were not going to produce a result and we need to concentrate on what’s achievable,” McConnell told CNN’s Manu Raju Tuesday afternoon of the Trump’s decision to end the talks. Trump made clear the focus needed to be on confirming Barrett to the Supreme Court — and that just so happens to align with McConnell’s top priority at the moment.
Pelosi, speaking at a 92nd Street Y event on Tuesday night, said Democrats have to “focus our attention on winning the election” now that Trump has withdrawn from coronavirus stimulus talks, CNN’s Haley Byrd reported.
“Let’s look forward,” she said, adding that “it’s most unfortunate” Trump pulled the plug and that she found out through the tweet and not beforehand.
“We will have a stimulus bill, and he won’t win the election,” she added, making clear action on the former would have to wait until after the results of the latter.
