Trump’s Shift on Stimulus Leaves Republicans Skeptical, Divided

(Bloomberg) -- President Donald Trump’s embrace of a bigger stimulus package then previously backed by the administration has left Republicans skeptical and Democrats holding out for more.

Trump urged GOP lawmakers to go for a bigger coronavirus stimulus, saying he liked “the larger numbers” in a compromise $1.5 trillion stimulus plan from a bipartisan group of House lawmakers.

“I agree with a lot of it,” Trump said of that proposal at a White House briefing.

But that’s well above the $1.1 trillion the White House previously backed and much higher than the $650 billion Senate Republicans more recently proposed. And it remains shy of the $2.2 trillion favored by House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer, who reiterated their demand Thursday.

“This used to be the White House versus Pelosi up until about now -- now the president’s coming in and saying we can maybe go to $1.5 trillion,” Senate Finance Chairman Chuck Grassley said Thursday in a Bloomberg TV interview. “He better be careful of that because I don’t think that will get through the United States Senate.”

Senator John Thune of South Dakota, the No. 2 GOP leader in the chamber, said pushing past $1 trillion “is a threshold at which you start losing Republican support.” His colleague Ron Johnson of Wisconsin underlined that last Thursday’s $650 billion bill, was the right size. That legislation was blocked by Democrats who called it insufficient.

The Republican rifts drew focus away from infighting on the Democratic side, with Pelosi rejecting moves within her caucus to vote on something smaller than the $3.4 trillion initiative the House backed in May. She said at a briefing with Schumer Thursday that “we have come down a trillion dollars,” from that bill. “And the needs have only grown.”

As the parties struggle to keep a united front, the impasse between the main negotiators remains. While Pelosi and Treasury Secretary Steven Mnuchin conferred on Wednesday on a vital stopgap spending bill to keep the government open past the Oct. 1 start of a new fiscal year, they didn’t discuss stimulus.

White House Chief of Staff Mark Meadows told reporters Thursday that “there are no planned discussions with the speaker or with leader Schumer” at this point, and that if Pelosi sticks with a $2.2 trillion demand, stimulus won’t get enacted before the election.

At the same time, evidence is emerging about the danger of fiscal-stimulus withdrawal. U.S. retail sales growth slowed much more than expected in August, after supplementary unemployment benefits enacted in March ran out.

Powell’s View

“My sense is that more fiscal support is likely to be needed,” Federal Reserve Chair Jerome Powell said in a Wednesday briefing after the central bank reinforced expectations to keep interest rates near zero for years to come. He cited the 11 million Americans still out of work because of the coronavirus, struggling small businesses and declining revenue among state and local authorities.

With the short timeline for action before the Nov. 3 election, the coming days will prove critical in determining whether the White House’s fresh call for a bigger package breaks the deadlock.

Republicans are split between fiscal hawks reluctant to provide the economy with much more relief and swing-district moderates whose constituents are demanding Covid-19 aid. Trump, whose flagging re-election campaign against Joe Biden needs a jolt of good news, has fewer qualms about the $3.3 trillion budget deficit.

Meadows signaled newfound flexibility on what’s been a key sticking point in his and Mnuchin’s talks with Pelosi and Schumer: Aid to state and local governments. The administration had painted the Democrats’ demand for $915 billion as a sop to poorly run blue states, and had put forward a much smaller $150 billion.

The bipartisan 50-member House group, known as the Problem Solvers, included about $500 billion in their compromise proposal. Meadows said that while that’s more than the White House estimates states have lost in revenue because of the pandemic, the administration could accept a figure in the $250 billion-$300 billion range.

How many congressional Republicans might get on board with a notably bigger plan than the $1 trillion the White House previously backed -- which failed to gain traction in the Senate -- is unclear.

Comments Wednesday showed disagreement:

• House Republican leader Kevin McCarthy said, “We’d have to see what’s in it, but I think it’s difficult.”
• Johnson said, “The president has his opinion. We have ours.”
• Senator John Kennedy of Louisiana said, “If a bill is chock full of spending porn as Speaker Pelosi’s bill is, I’m not going to vote for it.”
• Senator Roy Blunt of Missouri said, “I think there is a deal to be had here,” while adding, “the window probably closes around the end of this month.”
• Senator John Cornyn of Texas said he hoped Trump endorsing the Problem Solvers proposal “will persuade Speaker Pelosi to move off the dime.”
• House GOP conference chair Liz Cheney of Wyoming said, “I would be hesitant to make a commitment about a level that is that high,” and emphasized instead the importance of reopening the economy.
• The top House Ways and Means Committee Republican, Kevin Brady of Texas, said that it was “not perfect, but helped create momentum.”

The two leaders of the Problem Solvers group, New York Republican Tom Reed and Josh Gottheimer a New Jersey Democrat, issued a statement saying that they were “thrilled to hear of developments” suggesting a potential step toward fresh negotiations.

Pelosi and Schumer welcomed Trump’s endorsement of a larger stimulus and some Democrats said the president had validated the strategy of holding fast on a bigger bill.

“It sounds like it’s working pretty well,” Pennsylvania Democrat Mary Gay Scanlon said.

Representative David Cicilline of Rhode Island, a member of House Democratic leadership, said he was “cautiously optimistic,” adding that the administration is “realizing the consequences of not acting.

©2020 Bloomberg L.P.