stimulus legislation

Trump to Pelosi: I’ll Help GOP Governors If You Cut Taxes on Rich

Photo: Doug Mills/Pool via Bloomberg/Getty Images

More than 36 million Americans have lost their jobs since March. Unemployment in the United States is now (almost certainly) above 20 percent. The Republican chairman of the Federal Reserve says that further stimulus spending is required to avert “long-term economic damage” and hasten the onset of recovery. Across the country, GOP governors are calling on Congress to approve (at least) $500 billion in fiscal aid to states, warning that in the absence of such support, they will be forced to make draconian cutbacks to public investment and employment, thereby deepening the recession. All historical evidence suggests that if the economy is not rebounding strongly by Election Day, undecided voters will swing against the incumbent president and his party.

Yet Donald Trump and the congressional GOP have apparently convinced themselves that enacting any further stimulus somehow qualifies as a gift to Democrats, and including aid to states in such a stimulus would constitute an act of historic generosity. Or at least the White House believes that it can convince Nancy Pelosi to believe such absurdities.

Last week, the Trump administration announced that it had no interest in passing another coronavirus relief package this month. After all, Congress had already pumped roughly $3 trillion into the coffers of corporations, small businesses, and households, White House economic adviser Larry Kudlow reasoned. And now that states were beginning to reopen their economies, it wasn’t clear that any further federal largesse would be needed.

It’s hard to say whether this argument was offered in earnest, or merely as a negotiating tactic. Either way, it is indicative of the GOP’s ideological delusions. All available evidence — both domestic and international — suggests that you cannot restore economic normality in the middle of an uncontained pandemic by revoking formal shutdown orders. As long as people know that eating in a restaurant means accepting a heightened risk of contracting a deadly virus, demand for dining out will remain at a fraction of what it was four months ago.

The same can be said for air travel, retail shopping, and a whole host of other consumer goods and services. And fewer flights and commuters means tepid demand for the fossil fuels that power the economies of red petro-states. Meanwhile, even when the public-health threat posed by the coronavirus is fully eliminated, Americans are unlikely to resume their old consumption patterns — both because the trauma of the present economic shock is all-but certain to increase savings rates, and because many households and firms will need to devote a higher share of income to their accumulated private debts (assuming the federal government does not step in and enact a debt jubilee). The private sector is not going to heal itself, and the longer congressional Republicans delay in dispensing further aid, the less likely a preelection recovery becomes. Even as a tactical pretense, the GOP’s stalling on new stimulus is indicative of either self-delusion or a privileging of conservative orthodoxy over political self-interest (which arguably amounts to the same thing).

Regardless, now that last week’s (bizarre) market rally has begun to fade, Republicans seem ready to concede the necessity of congressional action. But the White House still doesn’t seem to understand that, electorally, it needs stimulus much more than Democrats do. In fact, according to a new report from the Washington Post, the president believes that he is in a position to offer Nancy Pelosi a tiny fraction of her desired fiscal aid to states — a policy objective endorsed by just about every GOP governor in the country — in exchange for regressive tax cuts and liability reforms that just about every Democrat in Congress opposes:

White House officials have privately signaled that they are willing to provide tens of billions of dollars in relief to states as part of a bipartisan deal with Democrats in the coming weeks, despite President Trump’s reluctance and strong opposition from conservative groups, according to seven people familiar with the internal deliberations who were granted anonymity to discuss the matter.


Although that position is likely to anger some Republicans, who have warned that Democrats want “blue state bailouts,” many White House officials now believe that providing new funding to states to deal with challenges related to the coronavirus will be necessary if they want to secure their own priorities, such as tax breaks and liability protections for businesses, the people said …

Two White House officials said they have made it clear to business leaders and conservative allies in recent days that Trump is “not willing to provide a blank check” to states, but is “open” to negotiating whether he can win concessions from Democrats on taxes in exchange for an influx of cash — and they have told conservative leaders that they will make sure any new cash is directed only toward problems sparked by the pandemic. An unveiling of the White House’s tax proposals is expected in the coming days.

House Democrats’ latest coronavirus relief bill allocates nearly $1 trillion in fiscal aid to states and cities. As already mentioned, Republican governors have suggested that at least $500 billion in such aid is warranted. It’s insane that “not forcing states to slash jobs and public services in the middle of a historic economic crisis for literally no reason” is considered an exclusively Democratic objective. But even if it made sense to describe aid to states as a concession to liberals, offering them “tens of billions” in many-strings-attached funding would be a joke. By contrast, the concessions the White House is demanding — a capital gains tax cut for the Americans least harmed by the present crisis, and legal immunity for employers who operate unsafe workplaces — are not only wholly partisan demands, but ones exceptionally distasteful to the Democratic Party’s left wing. Trump’s proposal is analogous to Pelosi offering to support a small increase in aid to small businesses in exchange for a federal repeal of right-to-work laws and a pathway to citizenship for the undocumented.

In my view, Democrats should be prepared to make some distasteful concessions to Trump if doing so allows them to secure $1 trillion in unconditional aid to states, the indefinite extension of enhanced unemployment benefits, hazard pay for front-line workers, monthly cash support for households, and other measures that would dramatically soften the economic blows that are coming. But Democrats can’t let the GOP’s delusions become contagious. Pelosi must understand that her party has all the leverage here. If Congress does nothing — and enhanced unemployment benefits expire in July, while state governments liquidate their rainy-day funds — millions of ordinary Americans will suffer; but so will Donald Trump’s campaign. Politically, Democrats don’t need any kind of deal, let alone a wildly unbalanced one. If the president would rather seek reelection in a historic depression than make workers and cities whole, Pelosi should grant him that concession.

Trump: I’ll Help GOP Governors If Dems Cut Taxes on Rich