Non-negotiable Demands as Stimulus Debate Begins
Author: Greg Valliere
July 17, 2020
CONGRESS RETURNS NEXT WEEK, resigned to a bruising debate over what will be included in the next stimulus bill. We continue to believe that the measure will cost about $1.5 trillion, but the devil is in the details.
REPUBLICANS ARE LUKEWARM about still another massive package, but they acknowledge that failure to pass a bill would further diminish their shaky election prospects. So the debate is about to begin — starting on Sunday’s talk shows, followed by horse trading for the rest of this month.
THE DELIBERATIONS COULD EXTEND beyond the July 31 expiration date for $600 weekly unemployment benefits. Nancy Pelosi has said that the House could stay in session well into August, until a bill is passed, but there’s this problem —
EVERY MAJOR PLAYER HAS AT LEAST ONE NON-NEGOTIABLE DEMAND: In order to patch together a bill, everyone will have to get their must-pass provisions. Here’s our take:
DONALD TRUMP INSISTS ON A PAYROLL TAX CUT: The president doubled down yesterday; he apparently will not sign a bill that doesn’t include a payroll tax reduction.
MITCH McCONNELL INSISTS ON LIABILITY REFORM: The Senate majority leader won’t agree to a bill without protecting companies from lawsuits. The broad outline of his plan is in this morning’s Wall Street Journal.
THE DEMOCRATS INSIST ON AID TO STATE AND LOCAL GOVERNMENTS: Pelosi wants at least $500 billion for reeling state and local governments, which are laying off workers as revenues shrink and outlays rise.
EVERYONE INSISTS ON AID TO SCHOOLS: The new element of this narrative is the need for at least $100 billion for K thru 12, and for colleges. There’s no question this will be included in a final bill.
IN ADDITION TO THESE NON-NEGOTIABLE DEMANDS, there’s strong support for sending out more stimulus checks (Treasury Secretary Steven Mnuchin favors this), and there’s an acknowledgement that either unemployment benefits will have to continue, at a lower rate, or a bonus will be necessary to lure people back to work.
BOTTOM LINE: Washington is shell-shocked by the rise of infections, hospitalizations and deaths. The economic data has been surprisingly good, but that may fade as this new Covid-19 surge persists. So Congress has no choice — more stimulus is coming, despite a budget deficit that may exceed $4 trillion this year.
WHAT IF THERE’S NO BILL? It’s possible that this upcoming measure could sink from its own weight, and it’s possible that negotiations could drag well into August. Gridlock would be a major negative for both parties and the financial markets — which is why odds still favor passage of a very expensive bill.
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.