Hopes for US stimulus are fading as Washington hits a dead end

Senior White House officials and Democrats in Congress have clashed over Donald Trump’s abrupt withdrawal from talks about a new economic relief package as hopes dwindled even in a limited financial stimulus package to help the United States recover.

Political tensions over US economic policy have been running for months, but have risen sharply this week after the president on Tuesday angrily abandoned negotiations on a new stimulus package that could have saved nearly $ 2 trillion to support the world’s largest economy.

Trump, who is infected with the Coronavirus and is second in opinion polls against Joe Biden before the November election, said he was ready to sign smaller aid legislation to send direct payments to individuals, but the prospects for getting limited aid were hanging over his behavior.

In an interview with ABC’s the view On Wednesday, Nancy Pelosi, the Democratic Speaker of the House of Representatives who was negotiating a potential deal with US Treasury Secretary Stephen Mnuchin, attacked Mr. Trump for “turning away” from the talks.

It also rejected his partial twist on more limited stimulation as a sign that he regrets making a political “fatal mistake”, which may have been the result of his medical treatment.

I think the president’s behavior has always been strange. Pelosi said the situation is very dangerous now because he knows the seriousness of the virus, but he is in denial that he was right from the start. ”“ I can never explain to you any logical and linear course of action on the part of the president. ”

Meanwhile, senior White House officials, including Mark Meadows, the chief of staff, and Larry Kudlow, director of the National Economic Council, have criticized the Democrats for negotiating in bad faith and not being sufficiently prepared to compromise.

Kudlow told CNBC that the president had abandoned the negotiations because Pelosi was “pressing him”, and he was not optimistic about the prospects for a limited deal. “Maybe these things are still low probability. I don’t want to judge anything, I don’t want to rule anything out.

Pelosi spoke again to Mnuchin on Wednesday about a separate bill that would provide $ 25 billion in aid to airlines to protect their workforce from mass layoffs.

But in a sign of the controversy surrounding the discussions, Drew Hamill, one of her senior aides, told Mr. Mnuchin that House Republicans have recently opposed similar legislation and the secretary should review this bill so they can have a “more informed conversation.”

The continuing stalemate in Washington means that negotiators are running out of time to reach an agreement to provide assistance to families and businesses before the election. Every day that passes without stimulus impedes the ability of the US economy to forge its way back from the depths of the epidemic. Recent economic data showed slowing job growth and massive income damage in addition to weak consumption.

Trump’s decision to cancel the stimulus talks until after the election could be a watershed moment for the US economy as fiscal stimulus expires and employment slows. Gregory Daco, chief economist at Oxford Economics, said that without faster job growth – which is unlikely at this point in the recovery – or increased financial assistance, households, businesses, local and local governments would be more vulnerable to a deteriorating health situation.

Fed officials have been particularly vocal in warning that the damage to the recovery will be significant in the absence of financial support.

Jay PowellThe Fed Chairman said on Tuesday that the economic recovery “will be stronger and move faster if monetary and fiscal policy continues to work in tandem to provide support for the economy until it is clearly out of danger.”

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The gradual approach to stimulus legislation has been rolled out by Republican lawmakers and the White House in recent months. Democrats, however, dismissed such efforts as totally inadequate.

In terms of the big package, Democrats were pushing for $ 2.2 trillion in new spending, while the Trump administration was poised to increase up to $ 1.6 trillion, with several Republican lawmakers on Capitol Hill saying this was excessive.

The biggest sticking point in the negotiations has been the Democrats’ demand for help from the cash-strapped state and local governments, without which they will have to make major budget cuts.