Signs of a Consensus on a Massive Infrastructure Bill
Author: Greg Valliere
April 1, 2020
WE BEGIN THIS MORNING WITH THE FOLLOWING QUOTE from President Trump: “With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill,” he tweeted yesterday. “It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country!”
THIS IS ALMOST EXACTLY WHAT NANCY PELOSI is saying; she wants a huge infrastructure component in the next coronavirus bill, which will begin to take shape by late April.
THE NEXT BILL WILL BE MORE DIFFICULT to iron out than the past three measures, for two reasons: first, it will contain provisions (like infrastructure and aid to the oil industry) that aren’t exactly tied to the virus, so the measure could become a “Christmas tree,” a rich Washington tradition.
SECOND, THERE’S INCREASING GRUMBLING from Republicans over the cost. “I’m not going to allow this to be an opportunity for the Democrats to achieve unrelated policy items that they would not otherwise be able to pass,” Mitch McConnell said yesterday. House Minority Leader Kevin McCarthy generally agrees with that sentiment.
McCONNELL HAS STATED IN RECENT DAYS that Congress should wait to see the results of the $2.2 trillion measure that just passed. But there’s a sense of near-panic in this city over the virus and the reeling economy, so money is no object; the deficit this year and next should exceed $3 trillion annually.
TRUMP IS THE LEADING ADVOCATE OF MASSIVE NEW SPENDING, it’s almost as if he’s a proponent of the Modern Monetary Theory, which dismisses huge deficits when there’s such strong demand for Treasury paper. And Trump is correct — with rates close to zero, if there’s ever a time to spend gobs of money on infrastructure, it’s now.
SO WE WOULD ENVISION A BILL that spends much more on hospital construction, telecom infrastructure, highways, new schools, water projects, bridges, dams, etc. It will be part of the fourth virus bill, which also will spend more on paid sick leave, state and local aid, and more backup for the Federal Reserve.
WE WOULD GUESS that 80% of Democrats will support another massive bill, as will about half of the Republicans in Congress; the other half has always argued that infrastructure spending has to be paid for. But the only Republican who counts is Trump, and he will insist on enormous new spending. We reiterate our bottom line on monetary and fiscal stimulus: the sky’s the limit.
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.