The Biden Budget — a Campaign Document, Dead on Arrival
Author: Greg Valliere
March 9, 2023
THE BIDEN BUDGET, leaked all week, will be officially released today — with a reliance on major new tax hikes. It’s strictly aspirational, a 2024 campaign document that has no chance of passage in the conservative House.
THERE’S BIPARTISAN AGREEMENT on two fronts: defense spending will get another major boost, and something must be done to shore up Medicare and Social Security funds. How to pay for that? Biden’s proposed new taxes on corporations and wealthy individuals are simply campaign noise.
DEMOCRATS KNOW THAT, and are eager to press Republicans to come up with a GOP plan, which will rely almost exclusively on deep spending cuts and benefit curbs.
THERE’S AN ADDITIONAL COMPLICATION this year — the need to raise the debt ceiling and avoid a default on U.S. bonds, notes and bills. There’s been no progress on this, and probably won’t be until summer. We expect a last-minute deal, but
the markets are still too sanguine on odds for passage, which we peg at only 60-40 in favor.
ONE ADDITIONAL COMPLICATION: Further aggressive interest rate hikes from the Federal Reserve will make it more likely that big new taxes and massive spending cuts will have no chance. Why? The Fed’s medicine could increase chances of a recession later this year, which suddenly has become more likely after Jerome Powell’s hawkish testimony this week.
WITH MONETARY POLICY STILL TIGHT, does it make sense to tighten fiscal policy now? The Biden approach — relying on more taxes — and the Republican call for huge spending cuts are exactly the wrong prescription if a recession looms.
WHY PAY ATTENTION TO TODAY’S PROPOSALS if they have no chance of passage? They’re interesting reading for analysts because this is the Democrats’ wish list, a preview of what specifics on taxes may come a few years from now as Congress addresses how to pay for Medicare and Social Security.
NOT TO BE TOO CYNICAL, but the Biden proposal today is simply the first step in a battle over who can win the spin debate, as everyone in Washington begins posturing ahead of the 2024 election. The next election is always the key factor in this city.
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.
©2023 AGF Management Limited. All rights reserved.