Trump stares down a ticking economic time bombJuly 17, 2020
It’s crunch time for the key issue President Donald Trump’s aides and advisers believe will determine his fate this November.
A stretch of critical decisions from mid-July until Labor Day will lay the foundation for what the U.S. economy will look like in October before voters make their final decisions. And White House officials are scrambling to prevent a dangerous pileup.
Governors must tame raging Covid-19 outbreaks across the South and West to avoid another lurch into a deeper recession. Whether cities and states reopen their schools on schedule will determine whether many of their parents can return to work. And congressional leaders are starting to debate a fourth economic rescue package to prop up a shaky recovery — while the president monitors cues from the stock market, one of his favorite barometers of success.
It’s a perilous mix of challenges for a president whose overall approval ratings are sinking — but who still regularly polls better on the economy than his Democratic opponent, former Vice President Joe Biden. A recent Wall Street Journal/NBC News poll showed 54 percent of voters approved of Trump’s handling of the economy — even as his approval rating dropped to 42 percent and he trailed Biden nationally by 11 percentage points.
“If the president wants the economy to be on an upward trajectory in early October with early voting, then getting the policy right in July and August is very important,” said Michael Strain, director of economic policy studies at the right-leaning American Enterprise Institute.
Trump’s aides and allies want to take advantage of the window as best they can, and they see the next six weeks as crucial to that effort.
They’re pressuring cities and states to find a way to reopen schools with full-time, in-person classes — even as major school districts from coast to coast announce plans to launch with a virtual school year. The president’s top economic aides are starting negotiations with lawmakers to push for a payroll tax cut and other measures that will get employers to keep up the hiring despite signs of economic trouble in some coronavirus hot spots.
The amount of money Congress decides to pump into the economy as part of the next aid package will have huge effects on unemployed Americans who have relied on expanded benefits in recent months, and on state and local governments struggling to stay afloat with their tax revenue tumbling.
Getting more schools in shape to open by Labor Day is perhaps most critical. “You can’t have an open economy and closed schools,” Strain said. “State and local policymakers seem to want to have both at the same time and that is just not an option. Workers can’t go to work in many cases if there are kids are at home. For those working at home with kids, they are working reduced schedules.”
Trump’s White House and campaign have leaned hard in recent days into the idea of reopening school, viewing it as a key campaign message to appeal to suburban women and stressed out parents — despite the wide range of views among teachers and health officials.
Administration officials recognize the president has few tools to force states and school districts under local control to reopen, apart from using the bully pulpit of the White House, according to interviews with half a dozen current and former administration officials and Republicans close to the White House.
Senior administration officials are exploring ways to incentivize states and cities to open by redirecting funds or giving extra cash to districts, or earmarking parts of the upcoming stimulus package for state and local aid to be spent on the associated costs of opening schools during a pandemic.
The White House’s Council of Economic Advisers circulated an internal brief last week that showed a year of forgone schooling leads to a 7 to 11 percent persistent drop in future earnings. The brief also explored how school closures have hurt single moms, who bore the burden of closed schools in the form of less job security and lower pay.
Some senior aides think the White House became invested in the school issue too late after focusing throughout the spring on reopening restaurants, bars and small businesses across states — when schools should have been their first priority.
Now school reopenings have morphed into one of the top talking points for the president and his aides — often treating the issue as distinct from the explosion of Covid-19 cases, the core driver of local officials’ concerns.
“The president has said unmistakably that he wants school to reopen,” White House press secretary Kayleigh McEnany said at a briefing Thursday. “When he says open, he means open and full, kids being able to attend each and every day at their school. The science should not stand in the way of this.”
McEnany said recent studies shows kids are less at risk of falling critically ill from Covid-19 when compared with the seasonal flu. Other health experts have warned publicly that no one yet fully understands the risk the virus presents to children since schools and day camps have largely been closed since March, when the pandemic was in its infancy in the U.S..
While that debate rages, an economic lifeline for millions of families will hang in the balance in the coming days — with expanded unemployment insurance benefits expiring in less than 10 days.
Some of Trump’s outside economic advisers, such as Stephen Moore of the Heritage Foundation, have urged the White House to end the current practice of giving unemployed Americans an additional $600 a week in jobless benefits on top of regular state jobless aid — seeing it as a disincentive to an economic rebound.
“You’ve got to take the $600 a week off the table and go back to the traditional unemployment system,” said Moore, who sent a memo to the White House this week outlining this advice. “You can’t keep paying people not to work.”
“The president’s reelection fate depends on getting this right and setting the stage for a strong recovery in the fall,” Moore added. “He will get reelected if the economy is recovering at a nice pace, but that is not certain right now.”
Trump in recent weeks has publicly aired ideas including more direct payments to taxpayers, liability protections for workers and businesses, infrastructure spending and targeted state and local aid for Covid-19 response efforts. The White House has said it hopes that tens of billions of dollars will be included in the next coronavirus aid package to ensure teachers can safely go back to work and students can return to school.
“We continue to see the challenges facing millions of Americans by shutting down the greatest economy in our history, but as the country opens the Trump Administration will prioritize pro-growth, economic policies and incentives that encourage businesses to reopen and move to safe re-employment — moving hardworking Americans from unemployment benefits to rising wages,” said Judd Deere, the White House deputy press secretary. “The President built the most inclusive economy in our history with low taxes, deregulation, reciprocal trade, and energy independence, which has given us a solid foundation for this Transition to Greatness, and he will do so again.”
Economic officials inside the administration are proud of the work they did on the CARES Act, a package of aid that is widely credited — along with the Federal Reserve’s extensive measures — of preventing an economic meltdown as the shutdowns began in March. The U.S. unemployment rate did not soar as high as some top officials had expected, and many aides across the administration feel frustrated the health officials have not acted with the same efficiency to control Covid-19, viewing the two as separate problems on different tracks.
Other aides inside the White House say the fate of the economy is closely intertwined with how well the U.S. is controlling the virus. To think otherwise is to ignore a global pandemic, these aides say — and handing off too much responsibility to states to solve it on their own will not work.
Trump’s political advisers still view the economy as the best message for the president this fall, since, before the virus, he presided over a historically low unemployment rate. They plan to build the campaign around that idea as often as possible to draw a contrast with Biden’s economic proposals.
“There is a stronger chance of recovery with Trump than with Biden,” said the Republican close to the campaign. “That message needs to be reinforced every day to make it the No. 1 thing on people’s minds. People instinctually do not blame him for the economy crashing. They blame the virus.”