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US President Donald Trump abruptly interrupted talks with Congressional Democrats about a new fiscal stimulus package until after next month’s presidential election.
The move, announced by Trump on Twitter on Tuesday, triggered an immediate sell-off in US equity markets as economists warned that a lack of government support could jeopardize America’s recovery from the coronavirus pandemic.
Unless the decision is reversed, it means that many American households, including those affected by unemployment, and businesses, from restaurants to airlines to hotels, could face financial difficulties in the coming weeks and months.
The intervention of the president of the United States came a day after he returned to the White House from a three-day stay in a military hospital in Maryland where he received treatment for coronavirus.
Over the course of the weekend, Trump had called for a deal, as Steven Mnuchin, the Secretary of the Treasury, and Nancy Pelosi, the Democratic speaker of the House of Representatives, had tried to narrow the differences between the parties, but without success.
On Tuesday, after joining a call with senior Republican officials and lawmakers who have long been skeptical about a large spending package, the US president halted negotiations.
In his tweet, Trump emphasized that the biggest stumbling block in the negotiations was the Democratic demand for aid to liquidity-strapped state and local governments, without which they will have to push through aggressive budget cuts. Overall, Pelosi has proposed a new round of stimulus worth $ 2.4 trillion, while the White House has offered $ 1.6 trillion, leaving a large gap between the parties.
“Nancy Pelosi is asking for $ 2.4 trillion to bail out badly run and high crime Democratic states – money that is in no way related to COVID-19. We made a very generous offer of $ 1.6 trillion and, as usual, she is not negotiating in good faith, ”Trump wrote.
“I am rejecting your. . . 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 working Americans and small businesses. ”
In lieu of more stimulus to the U.S. economy, Trump said he wanted Mitch McConnell, the Republican Majority Leader in the U.S. Senate, to focus on securing confirmation before the Supreme Court of Amy Coney Barrett, Justice Conservative who nominated to replace the late Liberal Justice Ruth Bader Ginsburg.
The likely end to talks on additional fiscal stimulus came just hours after Federal Reserve Chairman Jay Powell warned in a speech that “too little” fiscal support could create “unnecessary hardship” in the economy, highlighting the importance of the matter to the US central bank.
“The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work together to support the economy until it is clearly out of the woods,” Powell said, adding that it would be “tragic” if it exacerbated the “Existing disparities” in the US economy.
Economic officials around the world may also be concerned about the impact of a stunted US recovery on the global economy.
Also on Tuesday, Kristalina Georgieva, the managing director of the IMF, warned against a “premature withdrawal” of government support. “Where the pandemic persists, it is critical to sustain life throughout the economy, for businesses and workers, such as tax deferrals, credit guarantees, cash transfers and wage subsidies,” she said.
While Congress and the White House were able to agree to a $ 3 trillion stimulus to the economy early in the pandemic in March and April, negotiations in a second round have been much more difficult. Democrats first passed legislation in the House of Representatives in May to send another $ 3 trillion in fiscal support to the economy, but Republicans quickly rejected it as excessive.
In recent months, Republican leaders tried to push their own smaller stimulus packages, but failed to gain traction on Capitol Hill either. While some Trump administration officials, like Mnuchin, continued to argue that a deal was needed, others, including Mark Meadows, the chief of staff, have been much more reluctant to move in the direction of the Democrats.
The S&P 500 closed 1.4 percent lower, after previously trading higher, and Treasury yields fell as investors sought the relative safety of government debt.
“Today, once again, President Trump showed his true colors: putting himself first at the expense of the country, with the full complicity of the Republican congressmen,” Pelosi said in a statement after Trump’s tweets.
“He shows his contempt for science, his disdain for our heroes – in health, first responders, sanitation, transportation, food workers, teachers, teachers, teachers and others – and refuses to put money in workers’ pockets, unless have your name printed on the check, “he added.
