Trump Holds America Hostage With Stalled Covid Relief

(Bloomberg Opinion) -- This is what the collapse of a federal effort to aid workers, states, cities and businesses battered by the Covid-19 pandemic sounds like, via a series of presidential tweets:

“Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars 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,” President Donald Trump allowed on Tuesday afternoon. “I have asked @senatemajldr 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.”

Trump revisited his thesis later in the evening: “Crazy Nancy Pelosi and the Radical Left Democrats were just playing ‘games’ with the desperately needed Workers Stimulus Payments. They just wanted to take care of Democrat failed, high crime, Cities and States. They were never in it to help the workers, and they never will be!”

Ransom notes, while better written, sound an awful lot like that as well. And that’s a shame, because America’s economy and workers need a very big helping hand, right now — and shouldn’t be held hostage to political gridlock or personal whims. That much should be clear after Federal Reserve Chair Jerome Powell all but pleaded with Congress earlier on Tuesday to promptly pass a robust relief package during a conference call with economists.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said. “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.”

Racial and wealth disparities in the U.S. economy will only continue to grow without a relief package, Powell said, an outcome he described as “tragic.”

Negotiations for a federal relief package shouldn’t have wound up in a dead end, especially in light of the struggles that average and low-income Americans are suffering through. The unemployment rate now stands at 7.9%, well below the historic highs of April, but still the highest it’s been in eight years. About 25 million people are still relying on jobless benefits to get by.

Perhaps most troubling, the job market is losing steam at a precipitous rate. After adding close to 5 million workers in June, the number of new, non-farm jobs has declined sharply ever since. The U.S. added just 661,000 new jobs last month, roughly 200,000 short of economists’ consensus estimate. That’s a problem not only for workers but for the broader U.S. economy because consumer spending accounts for about 70% of output. Obviously, workers can’t spend what they don’t make.

After much haggling, Democrats and Republicans have narrowed their differences over a relief bill, though they remain sizeable – particularly around how much federal aid should be delivered to workers, states and local governments.

Democrats want a $2.2 trillion package as a follow-up to the $7 trillion bailout Congress and the Federal Reserve put together in the spring. Republicans initially came in lower with a $1 trillion plan but have since raised that offer to $1.6 trillion.

The Republican plan calls for giving workers an extra $400 a week in unemployment insurance; the Democrats’ plan would provide for an extra $600 a week (the same amount the Cares Act extended before the benefits ran out in July). Republicans say they are willing to give state and local governments $250 billion in federal aid, up from an earlier $150 billion offer — but still far less than the $1 trillion Democrats originally sought. Democrats now want about $436 billion for state and local governments. As we have argued before, we think that aid needs to be much more ambitious than either of the parties are considering.

Negotiations became so precipitous because Republicans let the clock run over the summer without offering a counterproposal to a relief bill Democrats put in place five months ago. Republicans have a strong incentive to get a bill passed: It would shore up their standing with working-class voters in pivotal swing states heading into the November elections.

Alas.

Trump, according to the Washington Post, pulled the plug Tuesday after Senate Majority Leader Mitch McConnell convinced him that House Speaker Nancy Pelosi “was stringing him along.” McConnell told Trump that “no deal she cut” with Treasury Secretary Steven Mnuchin would “command broad GOP support to pass in the Senate.”

A surefire way to get Trump to act out is to tell him someone thinks they have the upper hand. Trump is also still struggling with a serious Covid-19 infection and has a cascade of medications coursing through his body – including a steroid, dexamethasone, with known side effects that include euphoria, mood swings, headaches and possible “psychotic manifestations,” according to medical warnings that come with the drug.

None of this recommends Trump as someone who should be playing a pivotal role right now in negotiating one of the most significant federal relief efforts in U.S. history. It’s not even clear he has a fixed view of how important the talks are. After pulling the plug on the negotiations, he had this to say on Twitter about Powell’s belief that the economy urgently needed federal assistance: “True!”

Yet here we are. Nonsense is trampling common sense.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.

Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.

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