Despite Yesterday’s Vote, Infrastructure Bills Face a Long Slog
Author: Greg Valliere
July 29, 2021
COMMENTATORS THIS MORNING are applauding a bipartisan deal on infrastructure, but this measure faces weeks of wrangling over the details, with a huge second bill still far from guaranteed.
LAST NIGHT’S PROCEDURAL VOTE — allowing debate to continue on a $1 trillion bill for roads, bridges, clean water, transit, broadband, etc. — was expected before the August break. Here are our odds on what happens next:
1. Yesterday’s bill breaks down — 40% chance: It hasn’t been written, and the revenue-raising assumptions rely on some fuzzy math. Donald Trump, bitter that he couldn’t get an infrastructure bill passed, is ranting that this deal should be killed; and on the Democrats’ left there’s a sense that it doesn’t spend enough.
2. Yesterday’s deal passes — 60% chance: Mitch McConnell is on board for the compromise, and that’s a big deal. We think this deal will pass, maybe even before the summer recess begins a couple of weeks from now. The House will grudgingly go along, with one important caveat.
WHAT ABOUT THE NEXT BILL? This is where things will get complicated. Senate Majority Leader Chuck Schumer wants to pass yesterday’s deal AND a budget reconciliation procedure that could win passage of a $3.5 trillion spending package that would include more spending for health care, housing, free community college, an extension of the higher child tax credit, etc.
THE PELOSI FACTOR: Not much bipartisanship here — the House Speaker called Kevin McCarthy a “moron” yesterday, and pro-Trump Republicans are blaming her for the Jan. 6 riot. More importantly, Pelosi has a very slim Democratic majority, and there will be grumbling from the left, which wants a guarantee on the second bill. And several members from wealthy states are insisting on the restoration of the state and local tax break.
BOTTOM LINE: We’ve thought for months that something close to the first bill would become law, and we still think it will. The timing is uncertain. As for the huge second bill, the only way it will pass (via the 50-vote reconciliation process) is if the price tag gets a major haircut.
A SLIM-DOWNED SECOND BILL, not costing anywhere close to $3.5 trillion and not raising taxes too much, could persuade moderate Democrats Joe Manchin and Kyrsten Sinema to vote yes, but that won’t be determined until late this year.
* * * * *
A MAJOR SURPRISE IN THE U.K: Highly recommended reading this morning — an article in the Washington Post that focuses on plummeting Covid cases in the U.K., defying predictions of a huge upswing this summer.
EXPERTS ARE DIVIDED on the reasons for the dramatic reduction of cases, but it’s possible that the U.K. has reached “population immunity,” according to an expert quoted in the article.
ANY SIGN OF IMPROVEMENT in new cases in the U.S. would be very good news for politicians, who are facing a strong push-back on new mask and vaccine mandates. Confusion over policy has suddenly made Gavin Newsome a very shaky favorite in California’s Sept. 14 recall vote.
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.
©2021 AGF Management Limited. All rights reserved.