
Hardball on Debt Ceiling; Manchin Sets His Price
Author: Greg Valliere
September 8, 2021
THE INFRASTRUCTURE SPENDING BILLS may stall until early winter, but a debt ceiling extension needs to be resolved within the next two months. So this may prompt a change in strategy at the White House.
POLITICAL HARDBALL: Joe Biden and his top aides are considering this quid pro quo: if at least some Republicans don’t agree to hike the debt ceiling, they would jeopardize emergency aid for hurricane victims and Afghan refugees, which may be combined with a debt ceiling extension. And who would want to vote against aid to hurricane victims?
SO THIS SUMMER’S STRATEGY of attempting to raise the debt ceiling in a separate, stand-alone bill may be scrapped, wisely, because there probably aren’t enough votes for that. The need to pass a stop-gap budget resolution, keeping the government open when the new fiscal year begins on Oct. 1, changes the dynamics.
WHAT A DIFFICULT CHOICE for the two Republican Senators from Louisiana — they hate the idea of raising the debt ceiling, but are they prepared to accept blame for a government shutdown on Oct. 1 if they don’t pass a continuing spending resolution by then? And, more importantly, would they be willing to delay federal aid to their storm-ravaged Louisiana constituents? Now that’s hardball.
WE THINK THERE WILL BE SOME BRUTAL ARM-TWISTING to pass a continuing resolution by Oct. 1, accompanied by the debt ceiling hike and hurricane aid. But the mammoth infrastructure bills are another story, as Joe Manchin once again becomes the key player.
* * * * *
JOE MANCHIN’S PRICE: While a debt ceiling deal can get hammered through Congress, getting $3.5 trillion in new social spending may be more difficult. Moderate Democratic Sen. Joe Manchin, always in the spotlight, dropped this bombshell yesterday — he will accept only a $1.5 trillion social spending bill, and might not approve much above $1 trillion.
MANCHIN OFTEN POSTURES, because his conservative constituents in West Virginia don’t like big government and spending (both of which help those constituents). Manchin could be bluffing, but our sense is that $1.5 trillion really is his limit; same with Sen. Kyrsten Sinema, another moderate Democrat.
THIS ENRAGES PROGRESSIVES IN THE HOUSE, who will not agree to a measly $1.5 trillion. Thus we think that a “pox on both your houses” mood may prevail, with the massive $3.5 trillion social spending bill gridlocked for weeks to come — a source of uncertainty for the markets, which want to see more stimulus as the economic outlook turns cloudy because of Delta.
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.
©2023 AGF Management Limited. All rights reserved.