Trump crushes stimulus talks, endangering U.S. economy, 26 mn on unemployment | Daily News


 

Trump crushes stimulus talks, endangering U.S. economy, 26 mn on unemployment

President Trump takes off his mask at the White House after he returned home from receiving treatments for covid-19. (Jabin Botsford/The Washington Post)
President Trump takes off his mask at the White House after he returned home from receiving treatments for covid-19. (Jabin Botsford/The Washington Post)

President Trump’s surprise move Tuesday to shut down all negotiations on another big relief package until after the Nov. 3 election threatens to stall the U.S. economic recovery — or even trigger a backslide.

Many economists and business leaders were quick to dub the move disheartening and irresponsible. The stock market immediately sold off on the news, with the Dow Jones industrial average ending the day 376 points down. Companies from airlines to energy firms to restaurants have warned in recent days that they will have to undertake massive layoffs without more government aid. At least 75,000 layoffs were announced by major corporations at the end of last week alone, and Boeing has sharply pulled back its forecasts for airplane sales for years.

In short, the U.S. economy is about half-recovered, meaning there is still a long way to go. For weeks, economists and business leaders have warned that the next phase of the recovery will probably be harder and that it would be a huge mistake for politicians to think their job is done.

Even some right-leaning economists were calling for stimulus.

“If there isn’t more stimulus, the recovery is in danger of collapsing. It’s that simple,” said Peter Morici, an economist and emeritus business professor at the University of Maryland who has argued in favor of Trump’s reelection. “Waiting until after the election is waiting too long."

There’s growing concern among economists about a dangerous downward spiral. As businesses cut more jobs, people have less money to spend, which means they buy less at stores, restaurants and other companies, putting those businesses and workers at risk.

Trump has tried to portray this recovery as a rapid bounce back — a “super V” shape — but there’s growing fear it could turn into more of a "W"-shape, with a second dip if layoffs and business closures escalate in the coming weeks.

“Corporations were holding off on laying off employees in the hopes of further stimulus. With this afternoon’s news, I expect that we will see businesses capitulate and begin to announce large scale layoffs," said Peter Atwater, an adjunct lecturer in economics at the College of William & Mary.

This new wave of layoffs will add more to the ranks of the 26 million Americans who were already receiving unemployment compensation. Many unemployed say they no longer have enough money to pay rent, car payments or utility bills, or even buy food. The average unemployment payment fell from $900 a week to just over $300 at the end of July, a sharp reduction that makes it hard for many families to financially survive. As these people stop paying renting and car payments, it hurts landlords, firms and banks waiting for the money.

Mere hours before Trump’s tweet, Federal Reserve Chair Jerome H. Powell urged Congress to act quickly and go big on more aid. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said at an event hosted by the National Association for Business Economics.

These fears are growing as the United States remains unable to contain the deadly coronavirus. More than two dozen states have reported increasing cases in recent days. As cases rise, people typically stay home and curtail spending. Rose and Sparrow Salon, a hair salon in Washington, has seen a pickup in cancellations as people get spooked about venturing out, said owner Amie Adkins. Trump tweeted that “the Stock Market is at record levels, JOBS and unemployment also coming back in record numbers,” but the reality is only about half of the jobs lost in the spring, during the initial spike of the public health crisis, have returned. Economists have warned for weeks that jobs that have returned are the low-hanging fruit and that getting the rest of the jobs back will be more difficult, much like running the second half of a marathon.

Treasury Secretary Steven Mnuchin told Congress during a recent hearing that another round of stimulus was needed for small businesses and the unemployed.

“We should act quickly because they need the support now,” Mnuchin told the Senate Banking, Housing and Urban Affairs Committee on Sept. 24. "They don’t need the support next year.”

www.washingtonpost.com