President Donald Trump’s demand last night that the just-negotiated Covid relief bill be rewritten to bump the allocation for Economic Impact Payment checks from $600 to $2,000 per eligible recipient shocked markets, Congress, and even members of his own administration.
But after an initial sell-off, markets stabilized, even as there is widespread and utter confusion as to the President, and Congressional leaders’ next moves.
** Much of that relief appears to be driven by the fact that President Trump did not explicitly threaten to veto the bill if his demands were not met, or that the current legislation flew through both chambers of Congress with clear veto-proof margins. But Trump’s real leverage, and the risk to the current bill, according to Washington sources closer than most to the President’s thinking, is not of a veto, but rather of a “pocket veto,” whereby the President neither signs nor vetoes the bill once it has been formally submitted to him. With the current Congressional session due to expire, that would shelf the current bill, and throw passage of any additional relief, well into January.
** Should the current stand-off lead to an explicit showdown between the President and the more fiscally reticent members of the Republican party, led by Senate Majority Leader Mitch McConnell, there would indeed most likely be enough votes in both chambers of Congress to override a veto. But we do not think it will come to that, as McConnell has the fallback, albeit a very poor one, of riding out any “pocket veto” until the current bill becomes law.
** Riding on Trump’s comments, Speaker of the House Nancy Pelosi in the meantime essentially “called out” the Republican caucus with a promise to convene a House vote on Christmas Day to bump the stimulus payments to that $2,000 number. The chances of getting a “unanimous consent” vote in the House to make that happen, however, appear slim to none.
** But what has most puzzled analysts, and Republican Congressional members, is the bold, some may call it rash, gambit by the President in taking on a bill negotiated and agreed to by the Republican House and Senate Leaders (not to say his own Treasury Secretary), potentially jeopardizing the re-election prospects for Senators David Perdue and Kelly Loeffler in the January 5 run-off Georgia election, and with it risking Republican control of the Senate.
** Game theory would conclude that the easiest solution would therefore be for Trump, after expressing his displeasure, to back down (a quick solution), or for the Republicans to agree to up the number after all in order to keep the peace (a lengthy process). And that could well happen. But what that analysis fails to fully appreciate is a looming struggle already for future control of the Republican party between Trump and other members of the party.
With Trump’s popularity still high among grassroots members, and control of the Senate at play, sources generally feel that McConnell will not choose this moment to openly break with the President. But some of the Trump faithful are already deeply leery of “establishment” forces slowly dismantling the President’s standing, achievements, and the populist movement after Georgia, and that animosity runs deep both ways. We would thus strongly caution against assuming a quick or easy fix to this last-minute spanner in the works.