President Donald Trump ended talks with Democratic leaders on a new stimulus package, hours after Federal Reserve Chair Jerome Powell’s strongest call yet for greater spending to avoid damaging the economic recovery.

“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,” Trump said Tuesday in a tweet.

Stocks tumbled after Trump’s posting called an end to months of hard-fought negotiations between the administration and Congress. Democrats had most recently pushed a US$2.2 trillion ($3.0 trillion) package that failed to garner Republican support in the House, while the White House had endorsed US$1.6 trillion.

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The S&P 500 Index closed down about 1.4%, after having risen earlier in the day in the wake of Powell’s mounting pressure on policy makers to act.

House Speaker Nancy Pelosi continued to insist on US$2 trillion or more in stimulus, according to a Republican familiar with the negotiations, while the GOP lacked votes for such a large package.

The legislation that the House passed last week with only Democratic support also had measures opposed by Republicans, including government-funded health coverage for abortions and stimulus checks for undocumented immigrants.

Pelosi repeatedly invoked the Fed chair in her calls for Republicans to move toward the Democrats’ more comprehensive bill. Some recent economic data, along with a resurgence in coronavirus counts in some states, also suggested to many analysts that government assistance was becoming more pressing.

“Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” Powell told a virtual conference hosted by the National Association for Business Economics Tuesday morning. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”

Pelosi said Trump’s willingness to walk away from negotiations shows “the White House is in complete disarray.”

Pelosi earlier told House Democrats on a conference call that Trump’s thinking might be affected by steroids he’s taken to treat his coronavirus infection, according to a lawmaker on the call.

After Trump’s tweet, Treasury Secretary Steven Mnuchin, who had been leading negotiations for the White House, formally told Pelosi that the talks had been halted.

The House speaker suggested Tuesday night at a 92nd Street Y virtual event that if there is still no stimulus deal in the post-election lame duck session of Congress, some of the virus relief funding could be added to a must-pass spending bill needed to keep the government open after Dec. 11.

<blockquote data-dnt="true"><br><i>Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their...</i>

Trump’s announcement by tweet that he was pulling the plug on talks was a turnabout from three days ago when he tweeted while at Walter Reed National Military Medical Center that the country needed stimulus and the two sides should “WORK TOGETHER AND GET IT DONE.”

Trump conferred by telephone Tuesday with Mnuchin, Senate Majority Leader Mitch McConnell and House Republican leader Kevin McCarthy before his tweets ended talks for now.

McConnell has been explicit that Senate Republicans weren’t interested in a bill with a US$2.2 trillion price tag, while Pelosi continually demanded the administration increase its bid. McConnell also has in his ranks a faction that doesn’t want to spend much more at all.

Mnuchin and White House Chief of Staff Mark Meadows were working on a US$1.6 trillion counteroffer to Pelosi, that likely wouldn’t have been pursued without the Senate majority leader’s blessing. McConnell said publicly only that the GOP would look at the White House offer.

It wasn’t just the dollar figure that split the two sides. McConnell and many other Republican senators also opposed a bailout for state and local governments, arguing much of that would have gone to blue states to pay for existing financial problems. And Republicans had many other complaints with Pelosi’s blueprint, which they regarded as a partisan wish-list, preferring a more tailored and cheaper approach focusing on aid for schools, businesses and virus-related health care.

Trump particularly disparaged Democrats’ demand for almost US$1 trillion in assistance to state and local authorities as a hand-out to poorly run, mainly Democratic-led states. The Democrats cut that amount in half in their latest offer, but Trump in his tweets said Pelosi was “not negotiating in good faith.”

The Fed chief in his remarks Tuesday highlighted that analysis after the Great Recession a decade ago showed that tight budgets at the state and local level had held back the economic recovery.

The consequences of the withdrawal of federal fiscal support are tangible and immediate. American Airlines Group Inc. and United Airlines Holdings Inc. said they would start laying off a total of 32,000 workers, blaming expiring government aid. Walt Disney Co. is slashing 28,000 jobs while Allstate Corp., the fourth-largest US car insurer, is cutting 3,800, roughly 8% of its workforce.

Americans’ incomes fell by 2.7% in August as supplemental insurance benefits from the first round of stimulus expired, threatening to sap consumer spending.

“The economy has been moving more or less sideways since mid-summer,” Mark Zandi, chief economist for Moody’s Analytics, said in a recent note to clients. With prospects fading for more federal relief, “odds that the recovery will come undone are rising.”

Trump’s Democratic opponent, Joe Biden, accused Trump of not making a genuine effort to reach an agreement. “Not once did he bring Republicans and Democrats together in the Oval Office, on the phone, or by Zoom, to get a relief package that would help working people and small businesses in this country,” Biden said in a statement.

Trump ends stimulus talks, spurning Powell and roiling markets

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