Infrastructure Bills Hit the Wall
Author: Greg Valliere
October 18, 2021
Infrastructure Bills Hit the Wall
October 18, 2021
AFTER A FRACTIOUS WEEKEND, it’s clear that key elements of President Biden’s social spending bill are on life support. In fact, the concept of massive new spending programs — very popular six months ago — has lost support as the public turns against big government.
WHAT HAPPENED? In a word, this is about hubris — a deadly sin in Washington. Biden and his allies thought they could prevail with trillions of dollars in new spending, oblivious to a 50-50 tie in the Senate and their razor-thin margin in the House. There aren’t enough votes for more massive spending.
IN A HUMILIATION FOR DEMOCRATIC ACTIVISTS, their assignment this week is to begin radical surgery on the social spending bill that once cost $3.5 trillion but ultimately will cost less than $2 trillion (if there’s a bill at all).
ENVIRONMENTALISTS ARE AGHAST to realize that the electric utility provision and many other Green programs are near death, as Sen. Joe Manchin prevails against anything that would hurt the coal or natural gas industries. Plan B might be a carbon tax, which was floated over the weekend, but it’s inherently regressive and would give Republicans a huge campaign issue — higher energy taxes just as prices already are climbing.
OTHER PROVISIONS FACE DEEP CUTS OR ELIMINATION: On the chopping block are two years of free community college, Medicare benefits for vision, dental and hearing programs, pre-kindergarten child care, new housing benefits, tough prescription drug price controls, and other cradle-to-grave programs that won’t fit in a scaled-back bill.
AN OVER-RIDING ISSUE is a sharp shift in public opinion polls. During the spring, an activist, big-spending federal government had surprising support — but attitudes have changed dramatically. Gallup and other polltakers are reporting that the public now opposes spending in the trillions; the connection to inflation is a key factor.
BOTTOM LINE: Our sense is that the $1 trillion basic infrastructure bill still has a chance of passage, but the social spending bill — accompanied by tax hikes — is on thin ice. With Congress coming back to Washington this week, let’s see how progressives react to the prospect of losing some of their pet projects. Could the left scuttle the entire package rather than get something modest?
FOR THE MARKETS, a much smaller price tag has been factored in for the past few weeks, but no bill whatsoever would be a negative for infrastructure and environmental stocks. And there’s a bigger issue — as Democrats continue to bicker internally, with no consensus, the clock will be ticking on still another debt ceiling expiration in early December.
THE UNSPOKEN ISSUE AMONG DEMOCRATS is the mediocre messaging by the White House; Biden appears to be adrift. If not Biden, who’s the messenger? Nancy Pelosi or Chuck Schumer or the disappointing Kamala Harris? There’s no dominant messenger and the public has no clear understanding of what’s in these bills — other than a price tag that seems too rich as inflation heats up.
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