Covid Aid Bill Nears Passage — With Two Huge Political Implications
Author: Greg Valliere
March 5, 2021
EXCUSE US FOR THINKING that everything is political — even the wearing of masks is political. Here comes the Covid aid bill, likely to win enactment by early next week, with two major political implications for the Democrats.
THE FIRST is that Democrats see a winning issue, so they don’t mind that controversial Sen. Ron Johnson will have the entire 628-page bill read aloud; polls show the public overwhelmingly favors the measure; even a third of Republicans support it.
ACTUALLY, CHUCK SCHUMER AND THE DEMOCRATS are happy to publicize the extremely generous details — checks for the middle class, whether they need it or not; aid to states whose revenues are in fine shape; and $86 billion to boost private pension plans, including the notorious Central States Pension fund, the Teamsters’ piggybank.
THE IRONY: The investment world is obsessed with surging interest rates — which have accompanied the Covid bill’s dash toward enactment — but voters apparently do not see a link between this staggering bill and the rise in interest rates. The public doesn’t care about the pricetag; many Republicans do, and they may pay a price for voting against the bill.
THE SECOND POLITICAL ANGLE is the 2022 election, which is very much on Washington’s radar. It will take time to spend $1.9 trillion — a good deal of this bill won’t have an impact until late this year or 2022 (much of the $900 billion stimulus bill that passed just in late 2020 still hasn’t been spent).
CHECKS AND UNEMPLOYMENT BENEFITS will have a more immediate impact, of course, but the bill will keep the economy humming in 2022 as this huge stimulus clogs the pipeline in 2021. And there could be the beginnings of a new spend-out if a $2 trillion infrastructure bill passes via reconciliation this fall.
WITH FISCAL POLICY ON STEROIDS and the Federal Reserve content to stay remarkably accommodative, the Democrats almost certainly can campaign in 2022 on a very strong economy. They know that history shows the party in power usually loses House and Senate seats in mid-term elections — so Democrats are determined to avoid that fate next year.
TIMING IS EVERYTHING: Who will get credit for vaccinations? Who will get credit for passing the Covid aid bill? Who will get credit if the economy is red-hot in 2022? The Democrats, of course, and they know it. Jerome Powell surely worries that the economy could over-heat; Powell has his work cut out for him next year — if not sooner.
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