Covid Aid Bill Will Pass Today — And Even More Spending is Coming
Author: Greg Valliere
March 10, 2021
THE MOST LAVISH SPENDING MEASURE since Lyndon Johnson’s Great Society will win House approval today, with jubilant Democrats vowing that they will seek to make many of the bill’s provisions permanent.
WE TALKED WITH A DEMOCRATIC STAFFER yesterday who bluntly said that the party sees a post-covid climate that could finally cement an activist agenda — greatly reducing child poverty, expanding health insurance, making rental assistance permanent, etc. The Democrats will not squander this opportunity.
JOE BIDEN, IN THE SPOTLIGHT: After an address to the nation tomorrow night, proclaiming that the end of Covid is in sight, Biden will barnstorm around the country. His $1.9 trillion package is more popular than he is, so Biden won’t brag — his name will not be on the checks.
BUT THE LOW-KEYED BIDEN is already planning the next package — infrastructure and the green retrofitting of America. There will be plenty of money in the next bill to fund electric outlets at gas stations, fueling a new generation of autos. The Chairman of the House Budget Committee said yesterday that this next bill — to be passed via reconciliation — will take shape by July.
REMARKABLY, THIS AMOUNT OF SPENDING has not agitated the public. The stimulus checks — about $7,000 for a middle class family of four — are wildly popular, as are other provisions in this bill that are aimed at child poverty and working class Americans. The Republicans seemingly don’t have an answer, other than complaining about the cost.
WITH INFLATION ALMOST CERTAIN to rise this year, this surge of spending is a major uncertainty for the markets. Whenever there’s a Treasury auction (like today) or the release of inflation data (like today), there could be market volatility. A new era is beginning, reminding us of LBJ’s bold experiment, which ended in the late 1960s with stagflation.
MAYBE THIS TIME WILL BE DIFFERENT: If the economy overheats or inflation rises well above 2%, the Federal Reserve will move quickly, which would be reassuring — but, of course, that means the threat of a less accommodative Fed will hang over the frothy economy. Market volatility is likely as prices rise — and as Biden seeks to make permanent many of the Covid bill’s very expensive provisions.
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