US President Donald Trump. Picture: REUTERS/ERIN SCOTT
US President Donald Trump. Picture: REUTERS/ERIN SCOTT

Washington — President Donald Trump told his negotiators to stop talks with Democratic leaders on a fiscal stimulus package, hours after Federal Reserve chair Jerome Powell’s strongest call yet for greater spending to shore up the economic recovery.

“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,” Trump said Tuesday in a tweet.

Stocks tumbled after Trump’s posting called an end to months of hard-fought negotiations between the administration and Congress. Democrats had most recently pushed a $2.2-trillion package that failed to garner Republican support in the House, while the White House had endorsed $1.6-trillion.

The S&P 500 Index was down about 0.8% in New York, after having risen earlier in the day in the wake of Powell’s mounting pressure on policymakers to act.

“Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” Powell told a virtual conference hosted by the National Association for Business Economics. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”

House Speaker Nancy Pelosi said in a statement after Trump’s tweet that “clearly, the White House is in complete disarray”.  “Walking away from coronavirus talks demonstrates that President Trump is unwilling to crush the virus, as is required by the Heroes Act,” she said, referring to the Democrats’ bill.

The speaker had invoked Powell earlier on Tuesday in urging Republicans to endorse a bigger package. She and Treasury Secretary Steven Mnuchin, who had sat down in person for negotiations last week for the first time since August, had been expected to hold another discussion by phone Tuesday afternoon.

Pelosi remarked to Democratic legislators on a call that Trump’s thinking might be affected by steroids he took to treat his coronavirus infection.

A day after returning to the White House from the hospital, Trump conferred by telephone with Senate majority leader Mitch McConnell and House Republican leader Kevin McCarthy, along with Mnuchin, before his tweets put an end to talks for now.

Pelosi earlier told her Democratic colleagues that she and Mnuchin disagreed on assistance to state and local authorities, spending to address the coronavirus and getting aid to ordinary Americans remain, according to a House official.

Trump has disparaged Democrats’ push for almost $1-trillion in assistance to state and local authorities as a handout to poorly run, mainly Democratic states.

Even so, the Fed chief in his remarks Tuesday highlighted that analysis after the Great Recession a decade ago showed that tight budgets at the state and local level had held back the economic recovery.

“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,” Trump said in his tweets on Tuesday. “We made a very generous offer of $1.6-trillion  and, as usual, she is not negotiating in good faith.”

McConnell has been clear publicly that Senate Republicans were not interested in a bill with a $2.2-trillion price tag, and also opposed a bailout for state and local governments. His caucus favoured a bill offering $650bn in aid last month that was blocked by Democrats as insufficient.

The consequences of the withdrawal of federal fiscal support are tangible and immediate. American Airlines  and United Airlines   said they would start laying off 32,000 workers, blaming expiring government aid, the latest in a drumbeat of mass job cuts. Walt Disney   is slashing 28,000 workers while Allstate, the fourth-largest car insurer in the US, announced it will cut 3,800 jobs, roughly 8% of its workforce.

• The US military's joint chiefs of staff have almost entirely gone into self-quarantine after the Coast Guard's second-highest ranking officer tested positive for the novel coronavirus following a meeting at the Pentagon last week, US officials said on Tuesday.

US defence officials, speaking on condition of anonymity, stressed that the military's top brass — with the exception of the Coast Guard vice-commandant, Adm Charles Ray — had all tested negative so far and were still carrying out their duties.

Bloomberg

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