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.
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.
