Stimulus is the 'go word' for economies and markets: Investment strategist
The White House shifted tack on Thursday, signaling that the administration is again leaning toward a large-scale stimulus bill after House Speaker Nancy Pelosi pushed back on the idea of individual measures for parts of the economy hit by the Covid-19 crisis.
Treasury Secretary Steven Mnuchin told Pelosi in a 40-minute call that President Donald Trump wants agreement on a comprehensive stimulus package, according to Drew Hammill, a Pelosi spokesman.
Meanwhile, White House spokeswoman Alyssa Farah said, “we’ve made very clear we want a skinny package,” though she later clarified that position, telling reporters the administration is “open to going with something bigger.” She reiterated opposition to the $2.2 trillion plan from House Democrats.
Prospects for coming to an agreement have proved volatile since Trump pulled his negotiators out of talks on a comprehensive package on Tuesday.
Stocks, too, have proved volatile, with airline shares rising and falling on shifting indications of the potential for a separate aid package for the industry. The broader S&P 500 Index climbed for a second session Thursday, after a tumble Tuesday, when Trump pulled his negotiators from stimulus talks.
Pelosi sent a letter to House Democrats Friday morning casting further doubt on negotiations.
“The Administration does not share this priority of crushing the virus. The President does not have the capacity, leadership or plan for testing, tracing, and isolation that is needed,” Pelosi wrote. “Instead, Trump’s delay, denial, distortion of reality and disdain for science has exacted a deadly and preventable human toll.
Mnuchin and Pelosi held a follow-up call Thursday afternoon with House Small Business Committee Chairwoman Nydia Velasquez and Financial Services Committee Chairwoman Maxine Waters about small businesses and access to capital.
The negotiations are proceeding against a frenzied backdrop, with the president recuperating from Covid-19 and the final stretch of the election campaign under way. Pelosi and Trump publicly questioned each other’s ability to perform their jobs on Thursday.
The House speaker said earlier Thursday there could be no action on a stand-alone bill to aid airlines or any other sector of the economy without an agreement with the White House and Republicans on a broader stimulus package.
Pelosi said airline aid could move through Congress before a comprehensive deal is voted on -- but that would have to be advanced in the “context” of a broader bill. “I have made the case to my colleagues that this is a special case,” Pelosi said on Bloomberg TV.
“There is no stand-alone bill without a bigger bill,” she said. Pelosi has also said this week she is pressing for language that would limit Trump’s ability to divert virus testing and treatment funds to other projects.
“I’m always optimistic,” Pelosi said. “Maybe the president seeing the reaction to his walking away from the table is the opportunity that we have for them to come back to the table for us to get an agreement -- and the sooner the better.”
Trump changed course soon after his Tuesday tweet that ordered an end to talks until after he wins the election, blaming Pelosi for not negotiating in good faith. That move baffled Trump’s allies and created the political risk he’d be blamed entirely for the economic fallout. On Thursday, he told Fox Business that talks on a stimulus plan are now “starting to work out.”
Trump on Thursday claimed that multiple separate measures, including $1,200 individual checks, are on the table.
“We started talking again. And we’re talking about airlines and we’re talking about a bigger deal than airlines,” Trump said in the Fox Business interview. “We’re talking about a deal with $1,200 per person, we’re talking about other things.”
Speaking later in Kentucky, Senate Majority Leader Mitch McConnell said the two sides should continue to try to negotiate a deal, but there are “vast differences about how much we should spend.”
“The speaker insists on an outrageous amount of money” McConnell said, adding that there are members of his GOP majority that think enough has been done already. “Hopefully there will be a way forward soon.”
The comments marked a shift for McConnell, who earlier this week said he supported Trump’s decision to call off talks.
The Democratic plan calls for $2.2 trillion in spending, while Mnuchin has offered $1.6 trillion. The administration’s figure is higher than what many Senate Republicans have said they could support.
Even if there were a breakthrough in Pelosi’s talks with Mnuchin, negotiations among House Democrats and the Senate’s calendar make it unlikely that a comprehensive stimulus package or a stand-alone bill to help airlines -- which are already hemorrhaging tens of thousands of jobs -- will reach the president’s desk before the end of October.
While a measure could pass quickly if no lawmaker in either chamber objects, that’s unlikely to happen. Two Republican senators, Pat Toomey and Mike Lee, said in a statement Thursday that they oppose a bailout for the airline industry without some protections for taxpayers and the ability to make changes to the legislation.
Without additional aid, American Airlines Group Inc. will cut more flights in addition to jobs, said Chief Executive Officer Doug Parker. The carrier began implementing 19,000 layoffs last week.
“There will absolutely be discontinuation of service to small communities and there will be much less service to larger communities,” Parker said Thursday in an interview with CNBC.
--With assistance from Saleha Mohsin, Josh Wingrove, Billy House, Cecile Gutscher, Claire Ballentine, David Westin, Steven T. Dennis and Jordan Fabian.
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