WASHINGTON – The United States has just suffered its worst economic quarter in almost 75 years. Its recovery from the depths of a pandemic-induced recession has stalled, as coronavirus deaths are rising again across the country. President Trump has what appears to be a last chance to strike a deal with Congress to ensure the hardest-hit workers and businesses don’t collapse before the November election.
He has shown little interest in taking it.
Instead of pushing for a comprehensive plan that can win the support of Democrats and Republicans, Trump has embraced high-value items that Senate Republicans did not want and would do little to help millions of struggling workers and businesses.
That included a payroll tax cut and an expanded tax exemption for business lunches, along with $ 1.75 billion to rebuild the FBI’s headquarters in Washington. He mocked efforts to find a compromise with Democratic leaders in a comprehensive economic bailout package, declaring Wednesday that “we really don’t care” about various possible parts of it.
Trump and his aides waited until the 11th hour to involve Democrats in the expiration of unemployment benefits that have been a lifeline for millions of workers, and Democratic leaders have rejected his last-minute proposal to temporarily extend them. During the past week, the president publicly called for stimulus measures that were not included in the $ 1 trillion proposal that his administration and Senate Republicans presented Monday, such as continuing a national moratorium on evictions.
The president’s focus on negotiations over another round of federal stimulus for the struggling economy has confused economists, lobbyists, and lawmakers, who say they are baffled by Trump’s apparent lack of urgency to finalize another bailout package that he can enact. .
The economic rebound that Trump boasts of has still stalled as virus cases hit records and states re-impose blockades. Data from the Labor Department released on Thursday showed that new unemployment claims had increased for the second consecutive week, and that the number of continuing claims was also increasing. On Wednesday, Federal Reserve Chairman Jerome H. Powell warned that the nascent recovery that was underway in May and June was wearing thin.
A wide range of polls show that Trump’s leadership over presumptive Democratic presidential candidate Joseph R. Biden Jr. on economic issues has evaporated in recent months. Congress is scheduled to go to recess in less than two weeks, with little chance of major legislation from then until the election.
Strategists say there is a potential compromise between Democrats and the White House, most likely in the range of a $ 2 trillion package, before Congress falls for its summer recess. They don’t understand why Trump would refuse to make a deal and risk seeing Americans lose their homes and businesses as November approaches.
The president’s strategy for helping the economy “is difficult to decipher,” said Michael R. Strain, an economist at the conservative American Enterprise Institute who urged Congress to provide more aid to affected individuals, businesses and state and local governments. “It seems to me that there is no clear strategy to support the economy right now from the White House.”
Mr. Trump added, “He’s just misunderstanding how bad the economy is and how hard workers and families are at the moment.”
Some members of Trump’s inner circle, along with his allies in the Senate, have urged the president to oppose a comprehensive new spending bill, including some of the provisions included in the Republican Senate proposal submitted Monday. . Economists Arthur B. Laffer and Stephen Moore, who informally report to Trump, have told him to focus on a payroll tax cut for workers and businesses, a move few Republicans support and that economists say would do little to help the 30 million. Americans without work.
Democrats in Congress say they are surprised to find themselves in a position to pressure Trump and his party to accept a stimulus spending plan, given the importance of the economy to his presidency and the problems he faces. Democrats say the package of proposals they insist on, including extra money to test and prevent the spread of the virus, extensions of supplemental unemployment benefits, and more help for small businesses, states, and local governments, could actually help Trump to gain a second term, lifting the economy and helping to control the pandemic.
But the president has stood firm in his belief that the virus will soon subside and continues to portray the economic slowdown as a failure. During comments at the White House on Thursday, he said a return “will not take long, based on everything we are seeing.”
When asked this week in North Carolina if he was concerned about the state of the recovery, Mr. Trump replied: “I don’t think so. I think the recovery has been very strong. We have set record numbers of work. “
Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee, said the president’s optimistic predictions would not help the millions of Americans without jobs.
“Donald Trump thought he could just happily talk about the things that people talk about in their kitchens and living rooms, which is how to beat the virus and how to fix the economy,” he said.
When the Commerce Department reported that the economy contracted in the second quarter at its fastest pace since the immediate aftermath of World War II, Trump’s re-election campaign responded with a press release promoting the job increase in May. and June and attacked Biden for his financial record as vice president.
Outside economists are much less optimistic than the president about the trajectory of the economy. Ian Shepherdson of Pantheon Macroeconomics wrote in a research note on Thursday that “we would not be at all surprised” to see little job growth or a drop in the unemployment rate in August or September, given current trends in the economy. Forecasters at TD Securities recently cut their growth forecasts for the third quarter and warned that growth by the end of the year “will depend significantly on Covid developments.”
Powell, chairman of the Fed, said on Wednesday that stimulus spending approved so far had been crucial in keeping “people in their homes and businesses in business,” but cautioned that more support would be needed given that “large numbers of people “would have difficulties to regain employment in the coming months.
Delays in the negotiations have already led the country to a “precipice” of benefits: the expiration of the additional $ 600 per week that unemployed workers received under the economic rescue package that Trump signed in March expires on Friday. Many economists warn that the sudden decline in the purchasing power of millions of Americans will only worsen the current slowdown.
The expanded unemployment benefit is “an incredibly important part of our household consumption base in the United States right now,” said Kathryn Anne Edwards, an economist at the RAND Corporation. “It is keeping consumption, it is keeping people in their homes.”
Administration officials tried Thursday to sell Democrats on a short-term extension of those benefits, while negotiations on a broader deal continue. Democratic leaders said they wanted a longer-term deal.
Senate Republicans have begun to downplay Mr. Trump’s role in accelerating the recovery with more federal spending.
“A strategy for the economy?” asked Senator Todd Young, Republican of Indiana. “This is not how economies work. He is not the Wizard of Oz, you can print this, I hope you will, he is not the Wizard of Oz, who controls the economy. Growth is created by innovators and entrepreneurs and grassroots workers, based on supply and demand. “
“I think he is doing what he can,” added Young, “so that the economy can open up again.”
Emily Cochrane contributed reporting.
