The Upcoming Budget “Score” — and Why It’s Crucial; Jerome Powell, Twisting in the Wind
Author: Greg Valliere
November 17, 2021
The Upcoming Budget “Score” — and Why It’s Crucial;
Jerome Powell, Twisting in the Wind
November 17, 2021
THE BEAN COUNTERS at the Congressional Budget Office (CBO) are poised to complicate passage of the $2 trillion-plus Build Back Better Act. Surprise — the numbers don’t add up in the pending measure, which could prompt Sen. Joe Manchin to pull the plug.
THE CBO HAS PLEDGED TO UNVEIL its projections this Friday, amid growing speculation that the bill’s proponents have wildly exaggerated their assumptions of new revenues from the Internal Revenue Service. Could the IRS really add $320 billion through tougher enforcement? The real figure could be half that amount, or less.
MOST HOUSE DEMOCRATS SAY they will overlook the CBO report and vote for the measure, possibly by this weekend. Then the drama will intensify: moderate Sen. Manchin has indicated that a poor score — combined with the ongoing inflation threat — could prompt him to vote no. Only one no vote could kill the package in the 50-50 Senate.
MANCHIN HAS THE POWER to scuttle the BBBA — or delay it for many weeks — and we suspect he will demand that the entire package should be paid for. Where Congress can find extra billions is a mystery, despite Biden’s insistence that the package will not add a dime to the deficit. It obviously will.
WHETHER THE BBBA would raise inflation, as Manchin claims, is in dispute. Former Treasury Secretary Lawrence Summers wrote in a Washington Post op-ed yesterday that the inflationary impact of the bill would be negligible.
BUT SUMMERS, AN OUTSPOKEN CRITIC of Biden Administration economic policies, listed several reasons why the Federal Reserve and others have underestimated the inflation threat. Criticism from Summers may be holding up Biden’s decision on whether to re-appoint Jerome Powell as Fed Chairman.
A POWELL SUPPORTER told us yesterday that Biden’s delay could be a sign that he’s not satisfied with Powell’s handling of inflation. “Why is Biden letting Powell twist in the wind?” our source said.
THE DELAY COULD BE A SIGN OF DISAPPROVAL of the Fed’s sanguine — and incorrect — view this past summer on inflation, which has led to enormous public anxiety over rising prices, contributing to a sharp drop in Biden’s job approval rating.
COULD POWELL BE A SCAPEGOAT, leading to his firing? Or could he be a scapegoat who’s useful to keep — and blame? In any event, Biden’s delay is increasingly seen as a vote of no confidence. And that’s ironic, because if Powell leaves, his near-certain successor would be Lael Brainard — who’s just as dovish on monetary policy as the current chairman.
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.
©2022 AGF Management Limited. All rights reserved.