The Relief Deal Blowup: What are Pelosi and Trump Thinking?

There’s not much doubt that the economy, down more than 10 million jobs since the start of the Covid pandemic, desperately needs more stimulus: The recovery has been stalling since the last Covid relief bill started running out. And presidents tend to get the political credit or blame for the state of the economy, especially when they boast about it as much as Trump has.

Nevertheless, the Democratic-controlled House, which impeached Trump in December, passed a relief package in May that would have pumped $3 trillion more into Trump’s economy and even empowered the president to send additional $1,200 stimulus checks to voters. When Republicans insisted that $3 trillion was too generous, House Speaker Nancy Pelosi, who recently said Trump is so terrifying that he’s giving her sleepless nights, went back, cut out hundreds of millions of dollars and had her caucus pass a $2.2 trillion compromise that also could have given Trump a bipartisan victory before the election.

Republicans have still said no. The White House negotiating position before Tuesday was that Trump wouldn’t accept anything larger than $1.6 trillion—and it’s never been clear whether Senate Republicans would be willing or able to pass any new stimulus at all. In any case, Trump now seems to have killed off efforts by his own negotiators to get at least some help to laid-off workers and struggling small businesses before the election, although he promised on Twitter to pass “a major Stimulus Bill” after he wins.

What in the name of zero-sum politics is going on? The economic knock on Trump is that he governs mainly to pump up the Dow, but in this case Wall Street is clamoring for more stimulus. Federal Reserve Chairman Jerome Powell is practically begging Congress to prop up the recovery, and double-dip recessions aren’t usually advantageous for incumbent presidents. But the negotiations, which were in trouble because Republicans refused to pour as much cash into the Trump economy as Democrats wanted, have now been scuttled by Trump himself.

The president’s abrupt rejection of a potential campaign lifeline seems like such a self-own that Pelosi questioned publicly—and some Republicans speculated privately—that the drugs he’s taking to fight Covid-19 have impaired his judgment. He did seem to backtrack a bit afterward, tweeting out calls for aid to struggling airlines and small businesses in a way that looked suspiciously like an attempted negotiation, so perhaps the most generous interpretation of his strategy is that he thinks he’s still at the bargaining table, and the chaos approach has worked for him in the past.

While the president’s erratic gyrations have been the hardest to explain, nobody in Washington seems to be making a ton of political sense. Republicans have said they’re concerned another massive short-term stimulus bill would cause the deficit to spiral out of control. But they’ve already signed on to five Covid relief bills worth $3.6 trillion, and their concern about fiscal responsibility, to put it mildly, has not been apparent throughout the Trump era. Democrats say they’re concerned victims of the Covid economy will suffer if they don’t pass another massive stimulus. But if Trump’s reelection would be as calamitous as they say, and the Republican half-loaves as inadequate as they say, it’s not clear why they haven’t just held firm on their original plan, hoping to get a full loaf for those victims and the economy in a Joe Biden administration.

It certainly isn’t unusual to see Washington paralyzed by partisan strife. It’s just odd to see the partisanship so apparently detached from electoral self-interest.

Let’s start with what’s driving the Democrats, because it’s been hard to square their consistent push for maximum stimulus with their supposedly single-minded determination to defeat Trump.

One possibility, floated by Pelosi’s critics on the left and right as well as some of her perplexed fans, is that the Democratic stimulus push has been a head fake, that Trump fell into Pelosi’s trap, that she wanted to create the appearance of Democrats trying to help people but never really intended to do a deal that could help reelect Trump. There’s one problem with this Machiavellian analysis of Pelosi’s motive: She’s already agreed to five deals that have helped Trump avoid a full-blown economic meltdown on his watch.

Pelosi did privately describe the $3 trillion HEROES Act that the House passed in May as a “messaging bill,” but by all indications she saw it as the opening bid in another negotiation. Senate Republicans could have put political pressure on Pelosi to compromise by passing their own alternative, but they didn’t do that, and Pelosi ended up compromising anyway, passing a scaled-back $2.2 trillion version of the HEROES Act last week.

Pelosi genuinely enjoys cutting deals, especially deals that involve spending money, and there’s simply no evidence that, as the left-wing populist Krystal Ball claimed on Twitter, she “decided she would rather not have anything for millions of Americans than give Trump any sort of win.” Pelosi did use her leverage to try to pressure Republicans to spend more money than they wanted, especially on aid to cash-strapped cities and states, but she didn’t play extreme hardball. For example, she didn’t demand universal mail-in voting or other election safeguards that Republicans oppose in exchange for boosting the Trump economy, and she hasn’t insisted on “automatic stabilizers” that would prevent Republicans from cutting off the flow of stimulus in 2021 if Biden wins the election.

The Occam’s Razor explanation is that Pelosi truly wants to go big on stimulus. Most Democrats like government stimulus, and Biden’s economists are concerned that if Congress doesn’t go big now, he might inherit a depression if he wins. Democratic insiders point out that Pelosi has also faced intense pressure from unions and other progressive constituencies to go big, especially on state and local aid designed to prevent layoffs of public employees.

At the same time, she’s been lobbied hard by moderates in her caucus, especially the ones representing districts Trump won in 2016, to cut some kind of stimulus deal, even if it isn’t so big, so that voters won’t punish them for obstructionism. Democratic aides say that even Pelosi’s deputy, Majority Whip Steny Hoyer, has argued internally that politically, a modest stimulus would be better than no stimulus for vulnerable Democrats.

Of course, when the shoe was on the other foot, Republicans had no qualms about obstructing President Barack Obama’s efforts to provide any economic stimulus during the Great Recession. And they paid no price for their almost unanimous opposition to Obama’s Recovery Act in the minority in 2009, taking back the House in a landslide in 2010. But the Democratic Party is America’s pro-government party, and it simply seems more skittish about obstructing the gears of government, especially since it does control the gears of the House. Trump has continued to bash Democrats as obstructionists despite their cooperation on five bipartisan bills—and he didn’t even invite them to his bill-signing ceremonies—but Pelosi seems to believe the attacks would have more explosive power if Democrats give them oxygen.

Whether or not that calculation is correct, it does seem to be a genuine calculation.

“Democrats cannot disabuse themselves of the idea that they need to be seen as governing, even when Republicans are in power,” says Adam Jentleson, a strategist for former Senate Majority Leader Harry Reid and author of a forthcoming book about the filibuster. “I’m not talking about the ethics or morality, but as a political matter, they’re completely wrong.”

It’s not clear whether Democrats will get any political credit for trying to push for a relief bill, or whether they would have suffered politically if they hadn’t. Trump’s public meltdown certainly seems to have clarified that they’re not the obstacle to relief. But several Democrats said that, as corny as it sounds, it’s impossible to analyze their political strategy without talking about morality, because their party simply isn’t built to support a walk-away strategy that would have punished millions of struggling Americans even if it punished Trump as well.

As former Obama speechwriter Jon Favreau argues: “Democrats are cursed with the responsibility gene.” The Covid relief from the spring has helped prevent a total economic collapse, but unemployment benefits and small-business assistance already began expiring this summer—and Democrats believe that if Biden wins, there’s zero chance that Trump and the Republican-controlled Senate would provide any additional relief after the election.

“That means six months of people getting totally screwed,” one Democratic Senate aide said. “Think of how many small businesses would fail. We just can’t be OK with that.”

Perhaps the key moment in the past several months of fruitless stimulus negotiations came in early August. Pelosi thought the campaign-obsessed White House would be eager to cut a deal after a $600-a-week bonus for unemployment workers expired, and she offered to split the difference between the $3.4 trillion HEROES Act and the $1 trillion proposal floated by Republicans. But Trump decided that he didn’t need to cut a deal with the Democrats.

Instead, Trump decided that he could solve the problem himself, or at least make it look like he was solving the problem himself. At an event at his golf club in New Jersey, he signed an executive order and three memoranda that he claimed would extend unemployment benefits, provide a payroll tax holiday, stop evictions and suspend student loan payments. These actions, the president said, would “take care of pretty much this entire situation.”

They did not. The unemployment provision, for example, extended benefits at only $400 a week, and only if states made contributions that ultimately never materialized. The payroll tax holiday turned out to be almost entirely bogus, and exposed Trump to charges that he was destabilizing Social Security. But at the time, the president got a few days of nice press, the market responded favorably, and the stimulus conversation in Washington faded. No economic problems were fixed, but Trump seemed to believe that his political problem had been fixed.

“The president thought that was, like, checkmate,” says one Washington Republican.

There is a line of thinking that America has entered a kind of postmodern political era where the appearance of governing is just as politically powerful as actual governing, because most Americans now live in partisan spin bubbles that insulate them from the facts on the ground. Trump certainly dismisses any inconvenient news as fake news, and politically, it might not matter to his base whether the economy is actually doing great, because Fox News and conservative talk radio will faithfully echo his claims that it’s doing great.

Still, some Republican operatives are baffled why Trump hasn’t just cut a deal with Pelosi that would let him send checks to grateful voters, boost the economy before the election and reinforce his initial Art of the Deal persona as a businessman who gets things done. He’s never shown any concern about the deficit before; it had doubled even before Covid, thanks to his tax cuts and military spending increases, and it’s now at a record high.

“In politics, whoever wants to spend the most money usually wins,” says the veteran Republican lobbyist and strategist Ed Rogers. “I don’t know why Republicans haven’t caved.”

One possible reason is that some Republicans are ideologically committed to the idea that economic stimulus simply doesn’t work, even as a short-term sugar high.

This is a fringe position; surveys of economists showed almost unanimous support for the notion that the 2009 Recovery Act created millions of jobs and helped end the Great Recession. It’s hard to see how giving money to laid-off workers and helping cities and states avoid laying off more workers wouldn’t provide short-term relief, whether or not they’re wise long-term policies. But some of Trump’s top aides seem to embrace some version of that fringe position, including his top economic adviser, the fervent supply-sider Larry Kudlow, and his chief of staff, Mark Meadows, who used to try to blow up stimulus negotiations as head of the right-wing House Freedom Caucus, but now has been conducting stimulus negotiations for Trump.

In the Senate, Rand Paul of Kentucky and Ted Cruz of Texas have been vocal opponents of any additional new deal, suggesting it would blow up the debt without helping the economy. And even some Republicans who acknowledge the power of public-sector spending during a private-sector downturn want to fight Pelosi on aid to cities and states; economists consider it one of the most effective forms of stimulus, but Republicans consider it a bailout for Democratic public-sector unions.

It’s been telling that the Republican senators most focused on the November election—including Susan Collins of Maine, Cory Gardner of Colorado and John Cornyn of Texas, who are up for reelection, and Todd Young of Indiana, who runs the Senate GOP’s campaign arm—are seen as proponents of cutting a stimulus deal. Overall, though, the Republican Conference seems largely unenthusiastic, and Senate Majority Leader Mitch McConnell, who never likes issues that can divide his caucus, has been cagey about what kind of stimulus, if any, might pass the Senate.

“I don’t know what they’re thinking,” says another Senate Democratic aide. “Some of them honestly believe stimulus is communism. Some of them probably think Biden’s gonna win, so screw him. It seems so obvious that something should happen, but nothing’s happening.”

Ever since the pandemic began, it’s been clear that the prospect of a depression on Trump’s watch gave Pelosi and the Democrats extraordinary leverage. They chose to use that leverage to pump extraordinary amounts of stimulus into the economy in the spring, to provide most of it to ordinary families and public health measures, and to put some constraints on Republican plans to bail out big corporations with no strings attached. They did not insist on controversial election safeguards or enough state aid to avoid budget crises around the nation, but they figured they could use their leverage to insist on that in the next bill.

But the first five stimulus bills were so effective at putting money in people’s pockets and averting another shantytown depression like the 1930s that there’s no longer as great a sense of urgency for a sixth bill. Those first five bills were also supposed to be temporary relief packages that would tide people over until the pandemic was under control; since it’s still not under control, there’s a growing sense that more stimulus would just pour more water into a leaky boat. And now the president has thrown a grenade into the negotiations, even though some Republicans believe his campaign will absorb the brunt of the explosion.

Tomorrow, of course, he could blow up the narrative again. He might decide that the rational move for his campaign is to help Pelosi force trillions of dollars in stimulus down Republican throats. But nothing about 2020 seems particularly rational.