You are using an older browser version. Please use a supported version for the best MSN experience.

Trump Halts Covid-19 Relief Aid Talks Until After Election

The Wall Street Journal. logo The Wall Street Journal. 10/7/2020 Kristina Peterson, Andrew Duehren, Nick Timiraos
a large building © Stefani Reynolds/Bloomberg News

WASHINGTON—President Trump pulled the plug on bipartisan coronavirus relief talks, putting off efforts to get more aid to struggling households and businesses at least until after Election Day, an abrupt move that jolted Wall Street and surprised lawmakers of both parties.

“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill,” Mr. Trump wrote Tuesday on Twitter.

Mr. Trump’s tweet appeared to end, at least for now, a long-running effort between House Speaker Nancy Pelosi (D., Calif.) and Treasury Secretary Steven Mnuchin to reach an agreement on another trillion-dollar-plus coronavirus relief deal.

It also marks another development in the home stretch of the 2020 campaign, on top of a contentious Supreme Court nomination and Mr. Trump’s recent hospitalization with Covid-19.

The call to end talks came hours after Federal Reserve Chairman Jerome Powell warned of dire economic consequences if Congress and the White House don’t provide additional support to households and businesses disrupted by the pandemic. Stocks immediately turned lower on Mr. Trump’s tweets after trading higher earlier in the day. The S&P 500 ended the session down 1.4%.

“Walking away from coronavirus talks demonstrates that President Trump is unwilling to crush the virus,” Mrs. Pelosi said of his decision to end talks.

The two sides had been edging closer, after the House passed a $2.2 trillion bill last week, down from its earlier $3.5 trillion package. Mr. Mnuchin had proposed a $1.6 trillion offer last week in response. The two sides remained at odds over how much state and local aid to include in an agreement, a source of disagreements for months, as well as other issues, aides said.

Mr. Trump and other Republicans have characterized that push for state and local aid as an effort to bail out Democratic-led states. Mr. Trump reiterated that sentiment in his tweet on Tuesday.

The president said on Twitter he had instructed Senate Majority Leader Mitch McConnell (R., Ky.) to focus on confirming Supreme Court nominee Amy Coney Barrett, whose Judiciary Committee hearings start Monday.

Mr. Mnuchin became the main GOP negotiator after he and Mrs. Pelosi successfully struck prior aid deals this year. Mr. McConnell, who has been in regular contact with Mr. Mnuchin, said he agreed with Mr. Trump’s decision.

“I think his view was that they were not going to produce a result, and that we needed to concentrate on what’s achievable,” he said.

Recent economic data have shown the pace of the recovery slowing without additional fiscal support. Monthly job gains and job postings have cooled, and more layoffs are becoming permanent. Household income fell at the end of summer because of a drop in federal supplements to jobless benefits, and consumer spending is also growing more slowly.

Despite a rebound in global trade, the U.S. in August posted its largest monthly trade deficit in more than a decade as imports rose more than exports, the Commerce Department said Tuesday.

Mr. Trump’s decision to take direct responsibility for ending the negotiations just weeks before the election puzzled congressional aides from both parties, as it would make it harder for Republicans to blame Mrs. Pelosi for the impasse. Democrats said the move made clear to voters that Republicans were blocking further aid.

“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…matters to him,” Democratic presidential nominee Joe Biden said Tuesday.

The latest Wall Street Journal/NBC News national poll showed Mr. Biden’s lead over Mr. Trump widened to 14 percentage points.

Mr. Trump had spoken earlier Tuesday with Mr. McConnell, Mr. Mnuchin and House Minority Leader Kevin McCarthy (R., Calif.), aides said. During that call, Mr. McConnell told Mr. Trump that any deal reached by Mrs. Pelosi and Mr. Mnuchin would have a hard time passing the GOP-controlled Senate, according to a person familiar with the call.

However, Messrs. McConnell and McCarthy didn’t urge him to immediately shut down the talks, according to people familiar with the discussion.

Mr. Trump’s announcement took Mrs. Pelosi by surprise, aides said. She was on a call with House Democrats when Mr. Trump tweeted, and she later commented on the impact that taking steroids can have on patients, according to people on the call, a reference to Mr. Trump’s medical treatment since being diagnosed with Covid-19 last week.

Mrs. Pelosi had spoken earlier Tuesday with Mr. Mnuchin and the two had been set to speak again later. In a brief call Tuesday afternoon, Mr. Mnuchin confirmed that Mr. Trump had called off the talks and Mrs. Pelosi expressed her disappointment, her spokesman said on Twitter.

Some GOP lawmakers have long opposed paying for a fifth virus-relief package after Congress approved about $3 trillion in aid this spring. Conservative groups recently had called on lawmakers to reject any new deal. But other Republicans, including senators facing competitive re-election races, had pushed for another aid package.

“Waiting until after the election to reach an agreement on the next Covid-19 relief package is a huge mistake,” said Sen. Susan Collins of Maine, a Republican facing a tight contest this fall. Ms. Collins said she and several Senate colleagues had already been in touch with Mr. Mnuchin.

Senate Republicans had attempted a package with about $650 billion in spending, offset by $350 billion in repurposed funds, which Democrats blocked as inadequate.

Sen. Bill Cassidy (R., La.), who has for months pushed for Congress to send state and local governments more aid, said Republicans already faced political headwinds this year. “The Senate majority is obviously at best 50-50,” Mr. Cassidy said. “Whether or not this is what is the cause, I don’t know,” referring to the lack of a new aid package.

Mr. Trump’s announcement also makes it less likely airlines will quickly bring back the tens of thousands of workers they cut last week. Airlines including United Airlines Holdings Inc. and American Airlines Group Inc. went ahead with over 32,000 furloughs as they had planned but said they would bring workers back if Congress swiftly reached a deal that included another $25 billion to pay worker salaries through the end of March. An attempt to quickly pass legislation focused solely on airlines fell apart Friday.

In his comments Tuesday, Mr. Powell made his strongest remarks to date on the need for economic aid. “At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship,” he said to a virtual conference of private-sector economists Tuesday.

Later Tuesday, Mr. Trump signaled agreement with Mr. Powell.

Mr. Powell, who is generally well regarded by lawmakers in both parties, has continually urged Congress to approve additional spending measures since April.

“He’s become a broken record,” said Diane Swonk, chief economist at accounting firm Grant Thornton, referring to Mr. Powell. “There is nothing all that new in the message, but the urgency is getting greater.”

Mr. Powell on Tuesday applauded the $3 trillion in spending and other measures Congress approved earlier this year. This response was “truly extraordinary” and the “most innovative” since the Great Depression, Mr. Powell said. “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 cut its benchmark rate to near zero in March, purchased unprecedented amounts of government securities and offered to lend directly to businesses, cities and states to keep markets functioning.

Mr. Trump’s decision to stop talks “doesn’t mean the economy is going off a cliff,” said Julia Coronado, president and founder of research firm Macro Policy Perspectives. “The risk is that we’re going to have a grinding recovery.”

Even if Mr. Trump is re-elected, it is likely Democrats would retain control of the House and Republicans would still need to work with Mrs. Pelosi to reach another agreement.

“It just seems unfathomable to me that you would just literally shut down negotiations,” said William Hoagland, senior vice president of the Bipartisan Policy Center and a former congressional budget aide for Republicans. “There may be blame to go around on all sides, but I don’t see how this benefits him politically,” he added.

Write to Kristina Peterson at kristina.peterson@wsj.com, Andrew Duehren at andrew.duehren@wsj.com and Nick Timiraos at nick.timiraos@wsj.com

AdChoices
AdChoices

More from The Wall Street Journal

The Wall Street Journal.
The Wall Street Journal.
image beaconimage beaconimage beacon