The Schumer-Manchin Bill is in Real Trouble; Social Security, a Campaign Issue
Author: Greg Valliere
August 4, 2022
SENATE DEMOCRATIC LEADERS are scrambling to appease Sen. Kyrsten Sinema (D-Ariz.), who has made demands this week to colleagues in private negotiations: Sinema wants no carried interest provision or big corporate tax hikes — or she will walk, leaving Democrats one vote short of victory.
PARTY LEADERS WILL HAVE TO MAKE CONCESSIONS: The carried interest provision, like Rasputin, seemingly cannot be killed. Sinema wants it out of the final bill, and she probably will succeed. And the proposed 15% minimum corporate tax may have to be scaled back to appease her.
COMPLICATING THIS NARRATIVE is the likelihood that several provisions may have to be abandoned after the Senate parliamentarian rules on what can be considered under the complicated reconciliation process. At risk in the negotiations are the electric vehicle provision, capping insulin costs, leasing of public lands for energy production, and the tax provisions.
THIS BILL will either get smaller or it will die in the Senate. The current bill is
filled with pork (see this morning’s Wall Street Journal editorial) and it gives Republicans a strong argument during this fall’s campaign that more taxes and spending will harm an economy facing a potential recession.
BOTTOM LINE: Several sectors — renewable energy, health care, manufacturers who face tax hikes — would face a modest impact if a bill passes. But the macro impact on the economy and the markets would be minimal; a $700 billion package over ten years would be a rounding error.
* * * * *
THE THIRD RAIL OF POLITICS is any discussion about cutting Social Security or Medicare benefits: you don’t touch the third rail. To the horror of Mitch McConnell and other mainstream Republicans, the erratic GOP Sen. Ron Johnson of Wisconsin yesterday advocated shifting these programs from mandatory to discretionary, requiring renewal every year.
WE GIVE JOHNSON AND SEN. RICK SCOTT of Florida credit for highlighting the costs of these two massive programs, but a requirement to authorize them every year inevitably would worry beneficiaries because of the threat — like the frequent threat of a government shutdown — could erupt annually, raising anxiety over Social Security and Medicare.
NEEDLESS TO SAY, Democrats pounced on Johnson’s remarks, contending that seniors would be jeopardized. McConnell clearly stated that he would not permit this to pass, but he’s now on the defensive on two important issues: abortion and Social Security.
THE BIGGEST IMPACT OF JOHNSON’S REMARKS may be the damage done to his own re-election fight in Wisconsin, which already was a close call. Johnson, a conservative Republican, could become the underdog — still another state for McConnell to worry about, along with Pennsylvania, Ohio, Arizona and Georgia, where GOP candidates suddenly look vulnerable.
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.