Joe Biden’s Agenda is in Trouble
May 25, 2021
Joe Biden’s Agenda is in Trouble
May 25, 2021
A SELF-IMPOSED MEMORIAL DAY deadline for reaching a bipartisan deal on
infrastructure spending will come and go — as President Biden’s ambitious agenda
DEMOCRATS WE TALKED WITH YESTERDAY conceded that both parties are far apart on an infrastructure deal, despite a White House offer last week to cut its $2.3 trillion request to about $1.7 trillion. In private, Republicans respond that something
around $800 billion is as high as they will go. The talks may collapse soon.
THERE ARE SEVERAL REASONS FOR THE IMPASSE OVER SPENDING: The economy is surging, states are now flush with cash, and as former Treasury Secretary Lawrence Summers writes in this morning’s Washington Post, massive federal stimulus may contribute to an inflationary over-heating of the economy.
ANOTHER KEY FACTOR IS GROWING ANGER from the left, as progressives oppose delaying the infrastructure bill as Congress stalls on police reform, gun control, a Jan. 6 commission, extending the debt ceiling — which could gobble up time this summer. Complicating this scenario are aggressive White House aides who seemingly contradicted the president’s conciliatory stance late last week.
DEMOCRATS EYE PLAN B: White House aides aren’t interested in more negotiations — they want to move an infrastructure bill via budget reconciliation. But that requires all 50 Democrats to vote for it and at least two moderates — Joe Manchin and Kyrstin Sinema — may not go along. Getting all Democrats on board will require watering down the amount of money spent on infrastructure.
A STAND-ALONE infrastructure bill may come into focus by mid-summer, but what about the other two Biden blockbusters? Winning passage of nearly $2 trillion in social spending and a major tax hike will be an uphill fight. Both will be scaled back significantly later this year, as debate drags on until winter.
THIS IS A BLOW to Biden’s reputation as a skilled negotiator. Everyone he deals with reports that he’s likable and sharp on the details, but he cannot control the biggest variable — next year’s elections. Republicans aren’t likely to agree to trillions of dollars in new spending; the GOP will make spending a major issue in next year’s campaign.
THE MARKET IMPLICATIONS: With a huge new spending bill looking increasingly unlikely, bond yields may stay relatively low (although the likely path of rates is higher). For equity investors, the big Washington story is that major tax hikes are looking less and less likely, which could ease a major concern.
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.