Yesterday the stock market soared on the news of Trump’s improving health, and the thought that another round of robust fiscal stimulus would be forthcoming from Congress. Add to this accommodating monetary remarks from the Federal Reserve, and this morning it appeared the stock market would add on to yesterday’s decent gains—until President Trump abruptly pulled out of negotiations over COVID relief and new economic stimulus spending until after the election. The stock market quickly gave up their morning gains and plunged into negative territory. Among other things, this illustrates how much the stock market has become depending on the sugar rush of government stimulus, which may help explain why Wall Street campaign contributions are skewing to Biden over Trump by a five-to-one ratio.
Trump is right on the merits, of course. Speaker Pelosi’s “relief” bill is packed with a trillion dollars of booty for profligate blue states and key Democratic constituencies, and she no doubt thinks Trump had to give in because of the election. It is a raid on the treasury: maybe call it Pelosi’s “art of the steal.” Maybe Trump walking away from the table today is merely one of his “art of the deal” tactics, but I doubt Pelosi will knuckle under to it. With polls showing a Democratic edge across the board, and a compliant media that will follow Pelosi’s talking points, she might as well roll the dice on sweeping the election next month.
On the other hand, good for Trump for standing firm on Pelosi’s blowout spending package. Right now the conventional wisdom, which is sometimes not completely wrong, is that this is a major political blunder by Trump. But it does show he can hang tough in the face of political pressure. Maybe he can turn this to his advantage in the next debate and the rest of the campaign. Instead of following Truman and attacking a “do-nothing Congress,” he should attack a fiscally reckless Congress. Maybe Mitch McConnell can reach a deal with Pelosi, though I doubt she wants a deal at this point.