US economy

Trump calls for deal on new fiscal stimulus


US president Donald Trump has issued a call for negotiators to “work together” and complete a deal on new fiscal stimulus for the American economy a month before the November election.

The appeal was issued from Mr Trump’s Twitter account as the president was being treated for coronavirus at a military hospital in Maryland, in an effort to spur the talks on an economic relief package between his administration and congressional Democrats.

Steven Mnuchin, the US Treasury secretary, and Nancy Pelosi, the Democratic speaker of the House, are leading the negotiations and have been locked in intense conversations over the past few days.

Ms Pelosi suggested on Friday that the US president’s diagnosis, in highlighting the seriousness of the disease, might help create the conditions for a compromise.

“OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!,” Mr Trump tweeted on Saturday.

In an interview with CBS on Sunday morning, Ms Pelosi said she was “making progress” in the talks. But she declined to say if an agreement was any closer than it had been late last week, and suggested the outcome might hinge on whether the Trump administration offered more funds for testing and tracing.

“We want to see that they will agree on what we need to do to crush the virus so that we can open the economy and open our schools safely,” Ms Pelosi said. “We have to be serious about this.”

She repeated her appeal for airline executives to refrain for pressing ahead with thousands of jobs cuts on the grounds that “relief is on the way” and would be “retroactive”.

Congressional Democrats argue that the US economy needs large-scale government help to sustain struggling households, businesses and local governments, as the impact of $3tn in relief passed at the start of the pandemic fades.

In May, the Democratic-controlled House of Representatives passed a bill worth $3tn in additional fiscal support, and on Thursday they approved a pared-down version worth $2.2tn. But both were rejected as excessive by the White House and congressional Republicans.

Some White House advisers, including Larry Kudlow, the head of the National Economic Council, have argued that the US recovery is on a self-sufficient trajectory and no longer in need of more federal aid.

But other senior Trump administration officials, particularly Mr Mnuchin, have been making the case that some additional help is needed for the US economy to strengthen the recovery, which is suffering from a distinct slowdown in jobs growth heading into the fourth quarter.

Complicating the dynamic, congressional Republicans, particularly in the Senate, have balked at any additional spending above $1tn, leaving a large gap between them and the Democratic position.

Mr Trump has at times been ambiguous about the extent to which he wanted to compromise and strike a deal with Ms Pelosi, but had recently urged Republican lawmakers to accept higher numbers for a new round of stimulus.

The latest Trump administration proposal, submitted last week to Ms Pelosi, called for $1.6tn in additional relief. But the House speaker said it remained inadequate on several fronts, including the funding for jobless benefits, tax credits for poor families, state governments, and coronavirus testing and tracing.

If a deal is reached in the coming days, it would probably be cheered by officials at the Federal Reserve, including Jay Powell, the chair, who have warned that the recovery will be weaker and longer in the absence of new stimulus.

According to Politico, Mr Powell discussed aspects of the stimulus legislation in a private call with Mr Mnuchin and Ms Pelosi last week. The Fed, the Treasury and the speaker’s office did not respond to requests for comment on the conversation.

Business groups who have been lobbying for an agreement would also be relieved if a compromise were reached. But any deal could still face significant obstacles in being approved by the Republican-controlled Senate, given their doubts about a new relief package.

There could be logistical challenges as well. The Senate has now adjourned for any floor proceedings, including final votes, until October 19, after several Republican members of the upper chamber tested positive for coronavirus.

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