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Trump backtracks on payroll tax cut

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Photo: Mandel Ngan/AFP/Getty Images

President Trump abandoned his stance on considering a payroll tax cut Wednesday, just 1 day after telling reporters that he had been "thinking about" whether to pursue the move.

The big picture: Discussions over cutting the payroll tax, which currently sits at 6.2% and is used to fund Social Security and Medicare, are part of a broader White House effort to stem fears of a coming recession — though Trump insisted to reporters that "whether or not we do it now, it's not being done because of recession." Sources tell Axios' Jonathan Swan that Trump is "running out of tools" to juice the economy, with an economic slowdown looking increasingly likely ahead of the 2020 election.

Context:

  • On Monday, Trump tweeted that the Federal Reserve should cut interest rates by "at least 100 basis points" — a drastic measure that the Fed normally uses to stimulate the economy in a recession.
  • The inversion of the yield curve, a warning sign that has preceded every recession for the past 70 years, caused a major sell-off in the stock market last week. The market has since recovered completely, but prolonged trade tensions between the U.S. and China have caused many investors to remain skittish.
  • The White House previously denied an Aug. 19 Washington Post report that cutting payroll taxes was under consideration, before Trump stated in an Oval Office pool spray that he was, in fact, "thinking about it."

Go deeper: Trump economic advisers look to do damage control amid fears of recession