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Kevin McCarthy’s Priorities — Cut Aid to Ukraine and Ignite a Debt Ceiling Showdown

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Kevin McCarthy’s Priorities — Cut Aid to Ukraine and Ignite a Debt Ceiling Showdown

Author: Greg Valliere

October 19, 2022

IF KEVIN McCARTHY BECOMES HOUSE SPEAKER next year, which is likely, he would lead a crusade on the right wing to slash aid to Ukraine and cut domestic spending, even if those objectives provoke a debt ceiling showdown.

IF THERE’S A SLEEPER ISSUE in this fall’s elections, it’s the growing opposition — stirred by Fox TV’s Tucker Carlson — to sending more U.S. money to Ukraine.
The U.S. has given Kyiv close to $20 billion in military aid; total assistance, including humanitarian aid, is about $60 billion.

SENSING AN OPPORTUNITY TO APPEASE the insurgent House right wing, McCarthy said this week: “I think people are gonna be sitting in a recession next year,” and they’re not going to write “a blank check to Ukraine. They just won’t do it.”

MAINSTREAM REPUBLICANS, led by Senate Minority Leader Mitch McConnell, and most Democrats, have been steadfast in their support for Ukraine. But several GOP candidates — strong supporters of Donald Trump — have been outspoken in their opposition. They include J.D. Vance in Ohio, Blake Masters in Arizona, Don Bolduc in New Hampshire and Adam Laxalt in Nevada.

POLLS SHOW ABOUT A THIRD of Republican voters oppose more aid to Ukraine; many cite a need to focus on economic issues at home. A similar percentage of Democrats also have misgivings. A third of U.S. voters is not enough — yet — to block more aid, but the pendulum may be shifting on this issue.

McCARTHY HAS OTHER OBJECTIVES: He wants to preserve the Trump tax cuts, many of which are scheduled to expire in the middle of the decade. This will be a major GOP talking point in the 2024 elections but President Biden would veto any tax cut extension in 2023-24. That tax fight may not get resolved until 2025 or later.

BUT A BUDGET FIGHT COULD COME SOONER: McCarthy recently told Punchbowl News that the GOP will use raising the debt limit as leverage to force spending cuts next year. To the surprise of leaders of both parties, McCarthy did not rule out reforms to Social Security and Medicare — a risky stance to take, less than a month before the elections.

SEVERAL GOP SENATORS, including Ron Johnson of Wisconsin and Rick Scott of Florida, have called for a review of entitlement spending; they have concluded, correctly, that a balanced budget is very unlikely without some major changes. Since a tax hike is out of the question for the GOP, they now focus on Social Security and Medicare, but major cuts in those programs have no chance of passage.

CURBS ON AID TO UKRAINE have a better chance, and it also seems likely that unrest will increase in Western Europe (there were large protests in France yesterday). McCarthy is correct — a Republican-controlled House may balk at fresh aid for Kyiv. Could this prompt the war criminal Vladimir Putin to see an opening if Western resolve begins to waver this winter?


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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.

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©2023 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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