Sudden move makes stock market dive
US President Donald Trump has abruptly cut off stimulus negotiations with Democrats in Congress, ending any hope of economic relief for Americans struggling amid the coronavirus pandemic until after the election.
The stock market plummeted in response to the news. The Dow closed down 1.3 per cent, the S&P 500 dropped 1.4 per cent and the Nasdaq fell by 1.6 per cent.
That is partly because the President's announcement today came as such a surprise.
After months of stalled negotiations between House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin, there had actually been positive signs in recent days.
The pair resumed their talks last week, and both sides expressed optimism. During an appearance on Face The Nation, Ms Pelosi insisted they were "making progress".
"The talks have sped up in the last couple of days," Republican Senate Leader Mitch McConnell said on Friday.
"I think we're getting closer to an outcome."
On Saturday, The Washington Post reported White House officials had "expressed confidence" that the outline of a deal could be done by the middle of this week.
And Mr Trump himself was still demanding a deal as recently as Saturday, after he had been diagnosed with the coronavirus.
OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!— Donald J. Trump (@realDonaldTrump) October 3, 2020
Today, the President lost patience.
In a series of tweets, Mr Trump accused Ms Pelosi of "not negotiating in good faith" and announced that he had instructed Mr Mnuchin to cease negotiations until after the election on November 3.
"Nancy Pelosi is asking for $US2.4 Trillion to bail out poorly run, high crime Democrat States, money that is in no way related to COVID-19," Mr Trump said.
"We made a very generous offer of $1.6 Trillion and, as usual, she is not negotiating in good faith. I am rejecting their request, and looking to the future of our Country.
"I have instructed my 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.
"I have asked Senate Majority Leader Mitch McConnell not to delay, but to instead focus full-time on approving my outstanding nominee to the United States Supreme Court, Amy Coney Barrett.
"Our Economy is doing very well. The Stock Market is at record levels, JOBS and unemployment also coming back in record numbers. We are leading the World in Economic Recovery, and THE BEST IS YET TO COME!"
As always, all those capitalisations are Mr Trump's, not mine.
America's unemployment rate currently stands at 7.9 per cent, which is significantly better than the 14.7 per cent it reached at the height of the crisis.
But there are still almost 11 million fewer jobs now than there were in February, when the pandemic started to hit.
The most basic difference between the two sides has been the scope of the stimulus package. The Democrats have proposed new spending in the ballpark of $2.2 trillion, whereas the Trump administration wants a smaller package of around $1.6 trillion.
Either way, the idea is to replace the initial stimulus measures, totalling $3 trillion, that were passed early in the pandemic. Many of them, such as a $600-a-week payment to unemployed Americans, expired months ago.
In August, after talks between the Democrats and Republicans broke down, Mr Trump signed four executive orders to address the situation.
They were designed to help Americans survive economically by extending the unemployment benefits (at a reduced rate), deferring payroll taxes, delaying student loan payments and freezing evictions.
But those orders did not solve the problem, partly because their practical effects did not match Mr Trump's rhetoric, and partly because he lacked the power to actually implement them.
The US Constition gives Congress, not the President, control over federal spending.
Ms Pelosi reacted angrily to Mr Trump's announcement today. According to both Bloomberg News and CNN, she suggested the President was affected by his coronavirus medication during a phone call with other congressional Democrats.
"Trump's thinking might be affected by steroids he's taken to treat this coronavirus infection," she reportedly said.
In her official statement to the public, the Speaker was certainly scathing, but made no mention of Mr Trump's illness.
"Today, once again, President Trump showed his true colours, putting himself first at the expense of the country," Ms Pelosi said.
"Walking away from coronavirus talks demonstrates that President Trump is unwilling to crush the virus. He shows his contempt for science, his disdain for our heroes - in healthcare, first responders, sanitation, transportation, food workers, teachers, teachers, teachers and others."
Yes, she said teachers three times for some reason.
"He refuses to put money in workers' pockets unless his name is printed on the cheque," Ms Pelosi continued.
"Trump is wedded to his $150 billion tax cut for the wealthiest people in America, while he refuses to give real help to poor children, the unemployed and America's hardworking families.
"Clearly, the White House is in complete disarray."
Ms Pelosi cited comments from Jerome Powell, Chairman of the Federal Reserve (America's equivalent to our Reserve Bank), who called for greater fiscal stimulus earlier today.
"Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses," Mr Powell said.
"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. Even if policy actions ultimately prove to be greater than needed, they will not go to waste."
In the Times/Siena national poll just a couple of weeks ago, voters overwhelmingly supported a new $2 trillion dollar stimulus package by a 72-23 percent margin. It's just astonishing that a president trailing by 9 points is going to pass on this opportunity— Nate Cohn (@Nate_Cohn) October 6, 2020
The Republican Party's senior leaders in Congress defended Mr Trump's decision, and echoed his criticism of Ms Pelosi.
"I think his view was that they were not going to produce a result and we needed to concentrate on what's achievable," said Mr McConnell.
"Nancy Pelosi's all-or-nothing approach has derailed relief negotiations every single time. Today is no different," said House Minority Leader Kevin McCarthy.
Other Republicans were baffled.
Axios reporter Jonathan Swan quoted several unnamed Trump advisers, who told him they were "utterly perplexed" by the President's move.
"You have to try to be this politically inept. What is going on in the White House? Where is (Chief of Staff) Mark Meadows?" one of them asked.
"Waiting until after the election to reach an agreement on the next COVID-19 relief package is a huge mistake," said Senator Susan Collins.
"I disagree with the President. With lives at stake, we cannot afford to stop negotiations on a relief package," said Congressman John Katko.
"I strongly urge the President to rethink his move."
Originally published as Sudden move makes stock market dive
Wait, so Trump not only rejects stimulus funds that would probably have helped his re-election chances, but *also* does so in a way to make sure that he personally will take blame for it?— Nate Silver (@NateSilver538) October 6, 2020