Why Donald Trump Dumped Stimulus Negotiations

Markets were stunned by President Donald Trump ‘s announcement on Twitter that the White House was pulling out of stimulus discussions with House Democrats on Tuesday — and several Trump advisers even told Axios’ Jonathan Swan they were perplexed by the “inept” decision, calling it a “gift” for House Speaker Nancy Pelosi. But it makes sense if you follow the logic of Trump’s economic advisers.

Where it stands: Trump has surrounded himself with die-hard acolytes of supply-side economics, like one-time pick for the Federal Reserve Stephen Moore, who argue that fiscal stimulus measures and increased benefits for unemployed Americans not only don’t help, but hurt the economy.

“We’re very worried about Trump doing a deal with Pelosi that would have very negative effects on the economy,”

Moore told Axios’ Alayna Treene in July. Moore predicted that if unemployment benefits from the CARES Act are extended,

“You’re not gonna have a jobs recovery in the fall. Not only is that bad for millions of Americans, but Donald Trump can’t win an election if we don’t have a good economy.”

Those advisers have been lobbying Treasury Secretary Steven Mnuchin, who’s leading negotiations for the White House, to focus exclusively on tax cuts and more deregulation to counter the downturn.

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Trump’s economic adviser Larry Kudlow is also a dyed-in-the-wool supply-sider and has been calling for payroll tax cuts while playing down the value of relief spending for months.

Other prominent conservatives have consistently hit the talking point that the recovery from the global financial crisis was the weakest since the Great Depression because of stimulus measures.

Such thinking ignores the low growth environment globally and the fact that President Obama and a Republican Congress followed the stimulus with fiscal austerity measures.

One level deeper: Americans have been growing concerned about the spiraling U.S. budget deficit and the national debt, which has surpassed U.S. GDP, while the U.S. debt-to-GDP ratio is on course to overtake even World War II levels.

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