GOP Faces Political Relations Debacle as Stimulus Bill Stalls
Author: Greg Valliere
July 24, 2020
WHAT AN EMBARRASSMENT: Republicans had weeks to come up with a stimulus bill, yet talks broke down yesterday as three specific GOP factions emerged, all at odds with each other. A final deal with Democrats is many days away; even a “kick the can” stopgap bill now looks unlikely.
ONE GOP FACTION of deficit hawks opposes even a $1 trillion bill, which seems to be the floor. Another faction, led by Treasury Secretary Steven Mnuchin, wants a robust package, as the economy clearly shows signs of sputtering. Still another faction, headed by the Wall Street Journal editorial page, wants growth-oriented proposals, not more federal payments that they deride as “helicopter money.”
WHAT THESE FACTIONS DON’T GET is that the Republican Party faces a disastrous public relations debacle — and a deteriorating economy — with millions of Americans facing evictions and bankruptcy as a deal stalls and the election looms.
THE DEMOCRATS COULDN’T HAVE SCRIPTED THIS BETTER: They can blame Republicans as unemployment benefits lapse, and when they begin negotiations with the GOP, Nancy Pelosi will have the upper hand on issues such as aid to state and local governments. (Checks to individuals, aid to schools, liability protection and money for businesses still look like safe bets whenever a final deal is hammered out.)
THIS BREAKDOWN IS BAD NEWS FOR PRESIDENT TRUMP, who’s now far behind in Michigan and Pennsylvania in a new Fox poll (and is clearly trailing, incredibly, in Florida). He’ll need a scapegoat, fast, and Mnuchin’s role as chief White House negotiator could be in jeopardy.
TRUMP WON’T GET HIS PAYROLL TAX CUT, and — more importantly — a V-shaped recovery is out of the question as a Covid-19 surge ravages the Sunbelt. Another major stimulus from Washington is urgently needed, yet Mitch McConnell won’t even have a draft proposal for his GOP colleagues until early next week. McConnell’s halo has slipped; maybe he isn’t a wily deal-maker after all.
BOTTOM LINE: We’re still at 70-30 that there will be a final deal. The issue is when.
The summer recess is scheduled to start on Aug. 7, so that’s one option. Or Congress could stay in town past Aug. 7. But GOP obstructionists — led by Sens. Rand Paul, Mike Lee and Ted Cruz — could delay final passage until well into August, potentially still another self-inflicted wound for the Republicans.
BETWEEN NOW AND THEN, the Republicans will have to endure daily bashing from the eager media for incompetence and a lack of empathy. But a tone-deaf Wall Street Journal editorial this morning lists what should happen in a perfect world, naively ignoring the political consequences of this delay — which will further diminish the GOP’s chances in November.
PERHAPS THE INCREASINGLY VOLATILE MARKETS will render a verdict that the Republicans will have to respect, as the economy fizzles. If there’s no quick deal, a “blue wave” — sweeping Democrats to control of the White House, Senate and House — will look increasingly likely.
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.