A Revolt on the Left
Author: Greg Valliere
June 14, 2021
WITH THE BOSS OUT OF TOWN, Democrats are increasingly vocal that last week’s proposed compromise on infrastructure is insufficient. President Biden will have to focus on this issue immediately upon his return, because a bare-bones deal on bridges, roads, water, etc. simply isn’t enough for rebellious Democrats.
WHAT’S CHANGED? The willingness of Biden to accept a modest infrastructure deal — while postponing tax reform and a second spending bill until later this year — has prompted the progressive left to waver in its support for even the initial infrastructure measure.
THE REBELLION IS LED by Sen. Bernie Sanders, who proclaimed yesterday that he will oppose a bipartisan compromise that would spend far less than the $2.25 trillion over eight years that was originally proposed. A compromise of around $1.2 trillion over eight years is unacceptable to him.
THERE’S GROWING SKEPTICISM over how to pay for the compromise unveiled last week. Indexing the gasoline tax to inflation has little support; neither does clawing back Covid relief money from states that are flush with cash.
A KEY ISSUE FOR PROGRESSIVES is their desire to use this legislation to tax the wealthy and big corporations — not necessarily for the revenue, but to address income inequality. The compromise bill also has little focus on climate change, they charge.
IS THERE A PLAN B? If the compromise proposed by five Democrats and five Republicans collapses in the next week because supporters can’s find 60 Senate votes for it, Plan B would be an embrace of the reconciliation process, which would require only 51 votes.
THIS TACTIC WOULD THRILL THE LEFT, but moderate Democrats, led by Sen. Joe Manchin, probably would oppose such a move. Gridlock could ensue, with no infrastructure bill moving this summer.
THE PROSPECT OF A COLLAPSE will get Biden deeply involved in negotiations this summer, and we think he could win just enough votes to get a modest bill passed. But even this is now in jeopardy, and the rest of his agenda — taxes, more spending, police reform, gun control, etc. — could stall.
MARKET IMPLICATIONS: The Joe Manchin bond rally may continue, as prospects for blowout spending recede. With fiscal spending perhaps not as huge as anticipated, the Federal Reserve may be less inclined reduce its asset purchases until the second half GDP and inflation outlook comes into better focus.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2023 AGF Management Limited. All rights reserved.
