Democrats, Stunned, Survey the Damage
October 22, 2021
Democrats, Stunned, Survey the Damage
October 22, 2021
WE TALKED WITH DEMOCRATS YESTERDAY who are stunned by the party’s capitulation on social spending and tax hikes. They like Joe Biden but they blame Joe Biden.
BIDEN INDICATED LAST NIGHT that he might support some reforms of filibuster rules that have thwarted the Democrats’ agenda. But it’s too late — filibuster changes couldn’t be passed in time to affect the tax and spending debate.
ANGRY VOTERS WANT ACTION: Polls show strong support among Democrats and moderates for the “Build Back Better” agenda; voters increasingly believe Biden has been too passive on this issue, as well as voting reform.
PARTY LEADERS WORRY that Terry McAuliffe may lose his gubernatorial race in Virginia, where polls show a tie after McAuliffe led fairly comfortably during the summer. Even a strong finish by GOP challenger Glenn Youngkin would send a message to the reeling Democrats.
BIDEN INSISTS THAT CONGRESS will pass his signature social spending bill, with an agreement in principle coming as early as this weekend. But any deal faces a harsh scoring from the Congressional Budget Office, and charges of gimmickry because many new spending proposals would last for only a year or two.
THE BIG STORY FOR THE MARKETS is the apparent abandonment of any hike in the top corporate rate; weeks ago it seemed virtually certain that the rate would rise to 25% or 26%, up from 21% now. Desperate for revenues, Democrats may try to enact a minimum corporate rate and curbs on stock buybacks, but there’s no unanimity on these fall-back provisions in a Senate where unanimity is required.
SOME NEW TAXES, NOT TOUCHING RATES, might satisfy Kyrsten Sinema, who has become the most dominant member of Congress. She apparently will prevail with her demand of no new tax rate increases for corporations, individuals, and capital gains.
FURIOUS DEMOCRATS ARE WEIGHING higher taxes on capital gains that haven’t been cashed in, and they are eyeing other provisions that would increase taxes on the ultra-wealthy. But no hike in capital gains taxes and other provisions would be a humiliation for the Democrats.
BIDEN CAN STILL CLAIM A MAJOR VICTORY because the basic infrastructure bill — for highways, dams, bridges, wi-fi, clean water, etc. — would pass along with the scaled-back social spending measure. But Wall Street could also claim a major victory, as investors dodge a bullet. This bill could have been much, much worse for the markets.
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