FILE PHOTO: People who lost their jobs wait in line to file for unemployment following an outbreak of the coronavirus disease (COVID-19), at an Arkansas Workforce Center in Fayetteville, Arkansas, U.S. April 6, 2020. REUTERS/Nick Oxford/File Photo
US economy lost a record 20.5 million jobs in April
02:24 - Source: CNN Business
Washington CNN  — 

To staffers inside the White House, it was clear by mid-April the “big bang” economic revival once predicted by President Donald Trump wasn’t in the cards. By April 23, they decided to do something about it.

That day during his televised coronavirus briefing, Trump had made his much-maligned suggestion that injections of disinfectant could somehow treat coronavirus. Aides deemed the episode a disaster that could not be repeated. Instead of hours-long sessions flanked by doctors like Anthony Fauci and Deborah Birx, Trump and his advisers agreed that turning his attention to the economy was the best move.

Not only would it keep him from making precarious health musings, aides also believed Trump was a more natural messenger on economic issues rather than health ones, where he repeatedly committed blunders when discussing the medical aspects of the crisis.

Frustrated with the bleak advice they were getting from medical advisers, and with the November election looming, the President’s economic team prevailed with a simple message: reopen the country as soon as possible.

The pivot, however, has been halting. While Trump’s public messaging has shifted decidedly from concern over the health effects of the virus to concern over the reeling economy, it’s unclear what difference it’s making.

A much-heralded “Reopening the Country Council” wound up being little more than a list of important names from the private sector, many of whom didn’t even realize they were participating. Attempts to wind down the health-focused White House coronavirus task force were abandoned after an outcry persuaded Trump to preserve it. And the government’s own guidelines for re-opening have effectively been tossed aside, as many states set to reopen fail to meet the White House criteria.

Meanwhile, the bad numbers keep coming. On Friday, a dire April jobs report threw into stark relief the pain Americans are facing as the virus continues to crater the economy. The US lost a record 20.5 million jobs in April, the largest single month of job losses since the government began tracking the data in 1939.

The unemployment rate rose to 14.7%, the highest on record since the Bureau of Labor Statistics began its monthly series in 1948.

Inside the West Wing, the report was widely expected to be catastrophically bad and aides braced for some of the worst numbers in recorded American history. Even before Friday, Trump and his advisers had realized their hopes for a quick rebound had faded, with potentially grave political implications.

“It’s fully expected. There’s no surprise. Everybody knows that,” Trump said during a phone interview with Fox News that was underway when the numbers were released Friday morning – a scenario that ensured his favorite morning program focused on him rather than the dire numbers. “I’ll bring them back.”

The push to focus on reopening the economy comes with distinct risks. If things open too soon, and social distancing measures are eased, there could be another spike in contagion. That would not only undo any economic gains, but likely lead to more deaths as well. This week, Trump nodded to that reality when for the first time publicly he acknowledged that some Americans may die as states begin to reopen and restrictions on economic life are eased.

Outside advisers have warned the White House of the potential economic ramifications of a “stop-start” reopening. Though the message doesn’t seem to be taking.

“They aren’t hearing it,” said one person with direct knowledge of internal White House discussions who noted those closest to the President, including Treasury Secretary Steven Mnuchin and top economic adviser Larry Kudlow, believe reopening is the only real option. “They are so desperate for a short term uptick that they are not willing to look at the big picture.”

Early optimism fades

President Donald Trump talks to reporters at the Capitol after attending the Senate Republicans weekly policy luncheon on March 10, 2020.

To Trump, it hasn’t always seemed so dire. Like his early attempts to downplay the severity of the virus itself, the President initially suggested the economic fallout would be temporary and limited to the first part of the year.

He wasn’t alone in his projections. For weeks, administration officials described the economic slump as merely a second-quarter problem that would not spill into later months and impact the election. During the earliest days of the market sell-off, Trump and Kudlow saw silver-linings, suggesting the dip amounted to a good buying opportunity for investors.

Even a month ago, many of the President’s closest advisers seemed not to grasp the severity of the problem.

“Can you imagine if this happened in the summer? Then we’d really have a problem in November,” one senior administration official told CNN in early April.

When Mnuchin warned Republican senators during a closed-door meeting in March that the coronavirus pandemic could drive US unemployment up to 20%, Treasury Department officials rushed to downplay his dire warning. Mnuchin was merely “using several mathematical examples to illustrate potential risk if there was no intervention,” a Treasury Department official told CNN at the time.

Since then almost $3 trillion of emergency stimulus money has been shoveled into the economy, but the effect hasn’t made much of a dent in the crisis. Kevin Hassett, a top White House adviser, has been the most sober-sounding of Trump’s economic advisers. Since returning to the White House in March as a senior adviser, Hassett has repeatedly offered forecasts that are more bleak than his colleagues, at times, prompting them to pushback publicly.

White House senior adviser Kevin Hassett speaks about reopening the country, during a roundtable with industry executives at the White House, April 29, 2020

Last month, Hassett warned of unemployment figures rivaling the Great Depression, a prediction that White House trade adviser Peter Navarro rejected during an interview on CNN, calling it “all gloom and doom.”

Briefed by officials on the new economic outlook over a series of meetings last month, Trump frequently grew angry that matters had spiraled beyond where he initially thought they might at the start of the crisis. Trump insisted his economic team find ways to fix the problem, though he was told a simple solution wasn’t in the cards and that anything he did unilaterally would likely only make a small dent.

Part of the frustration inside the White House is that they lack the tools to address the economic problems. Trump and his aides have discussed some measures like another extension of the tax filing deadline, which currently stands at June 15 after the administration moved it back two months to give taxpayers extra time.

Officials have also discussed options like limiting new business regulations and providing some type of liability protection against lawsuits from workers who contract coronavirus.

But aides acknowledged those steps are unlikely to spur the economy back to where it was before the coronavirus struck. To do that, they need Congress, where there is an entirely other set of political calculations at play.

Republicans cautious

Senate Majority Leader Mitch McConnell (L) (R-KY) walks to his office while arriving at the U.S. Capitol on March 18, 2020.

While Democrats have urged quick action on another stimulus package that would likely top $1 trillion, it’s the President’s own party that’s largely urging a slower pace of spending.

“We think we ought to take a pause here, do a good job of evaluating what we’ve already done,” Senate Majority Leader Mitch McConnell told reporters, saying he was speaking for his conference.

It’s a point echoed by Senate Republicans throughout their first week back in Washington since March, wary of the scale of the spending up to this point, but also, several told CNN, cognizant that much of the nearly $3 trillion appropriated so far hasn’t actually been spent in full.

GOP senators were presented with numbers that showed more than $500 billion in funds from the CARES Act still hadn’t been distributed, according to a document obtained by CNN. That money will continue to flow in the weeks ahead, leading many Republicans to take a wait-and-see approach.

Still, with economic forecasts underscoring the depth of a crisis that hasn’t been seen in nearly a hundred years – if ever – there’s risk to shutting off the spending spigot, particularly when it comes to funneling money to states and localities that have been sucked dry by the pandemic.

McConnell, aware of that fact, has already drawn one clear redline on an item that must be included in any new spending agreement: protection for businesses from pandemic related lawsuits.

Democrats have already said they are opposed. But it’s crucial to more than just Republican interests. It’s considered a key component of clearing the way to a more fulsome re-opening of the economy – something that tracks directly with Trump’s current desire and has been pushed repeatedly by his top advisers in White House economic team meetings for precisely that reason, sources say.

But there’s another factor that could slow down a deal. Among Republicans there is widespread frustration over Mnuchin’s role as the White House’s lead negotiator on the emergency relief packages up to this point. “Let’s call it a general lack of trust right now,” a GOP senator told CNN.

Several Republicans have communicated to the White House that they feel Mnuchin has been overly generous in his dealings with Democrats and cut deals they didn’t like, sources told CNN.

Those senators have made clear that Mnuchin shouldn’t be the sole negotiator in any new negotiations, the sources said. Among the senators who made that point to Trump directly: McConnell, the sources said.

A McConnell spokesman said the Kentucky Republican and Trump speak regularly and he had nothing to read out.

Political worries

While he waits for Congress to act, Trump’s primary tool remains the power of persuasion as he works to convince Americans that the outbreak is waning and that it’s safe to return to work. That could be a hard sell. More than two-thirds of Americans – 68% – are concerned about their respective states being reopened too quickly, according to a new poll from Pew Research Center.

The worsening economic predictions – compounded by internal campaign and RNC polling showing Trump losing to presumptive Democratic nominee Joe Biden in key battleground states – have heightened concerns inside the President’s political orbit about his reelection prospects.

Inside the Trump campaign, the leading political calculus is that the economy needs to begin to rebound in the third quarter, which begins in July, at the latest. Without the glimmer of an economic rebound before the November presidential election, several of the President’s political advisers are predicting defeat.

“They need to have money in their pocket and they need to have a job,” one source close to the White House said of voters in battleground states.

The President continues to look at the stock market to assess the severity of the crisis but believes the market’s fundamentals are good and therefore the crisis will be short-lived.

But the markets didn’t respond to the administration’s repeated reassurances that the US would quickly bounce back, particularly as the internal disagreements between the President’s economic team and his medical advisers were on full display during the daily White House press conferences.

Trump has often dismissed market fluctuations as part of a natural correction, but several people close to him say he places as much importance on the health of the Dow Jones for validation of his job performance as he does with his polling numbers.

Stephen Moore, an outside economic adviser to the White House, said he and fellow conservative economist Art Laffer shared a study with the White House last week stressing the extent to which the economy will be “severely permanently damaged” the longer the economy remains shut down.

“We were warning that we would be having a really bad economy for the rest of the year if we didn’t start getting states opened up as rapidly as possible,” Moore said.

Moore warned of a “horrible” summer on the economic front and said he believes the President’s reelection will depend on the economy showing signs of recovery by the fall.

“I think he has to have something by the fall – showing signs that things are getting better,” Moore said. “If we’re in a severe recession and people feel like we’re just stuck in an L-shaped recession, then he’s in real trouble.”