by Greg Valliere, AGF Management Ltd.
AS THE MEDIA HYPERVENTILATED over an impeachment that will fail, several fascinating stories unfolded yesterday — most defying credulity — as Republicans and Democrats openly battled among themselves. Some examples:
LOTS OF REPUBLICANS REALLY HATE THE USMCA TRADE DEAL: President Trump hailed it as a great victory, but GOP critics condemned it as a giveaway to labor and the Democrats. “We ate their lunch” in the negotiations, Nancy Pelosi proclaimed. The treaty so displeased Mitch McConnell that he will wait until after the impeachment trial to hold a Senate vote on USMCA. Once again — a trade deal has been proclaimed as done, except it really isn’t; between now and a final vote later this winter, Republican opposition could intensify.
EVEN MORE REPUBLICANS HATE PORTIONS OF THE DEFENSE BILL, which contained a huge expansion of federal worker benefits — paid family leave for 12 weeks, a provision that isn’t paid for, as we noted yesterday. One Republican we talked with bemoaned the surge of new spending; another called the family leave provision “a gift to Ivanka Trump.” In any event, the enormous explosion in the budget deficit — which will easily exceed $1 trillion this year — is beginning to anger House Republicans.
A CIRCUS OR DECORUM? There’s a rift among Republicans — and still another dispute between McConnell and Trump — over how to proceed with the impeachment trial. McConnell wants it done quickly; his main concern is maintaining Senate decorum. Trump apparently wants a circus — a noisy, nasty, disruptive trial that, the president believes, will so disgust the public that Trump’s re-election prospects will improve.
THE DEMOCRATS, MEANWHILE, ARE PUMMELING PETE BUTTIGIEG because — gasp !! — he once worked for a consulting firm. And Elizabeth Warren had corporate clients when she was a private attorney, how scandalous !! And who’s starting to make a move in Iowa? Bernie Sanders, who has won important endorsements from leftist activists, eclipsing Warren, whose campaign has stalled. And here comes Amy Klobuchar and Andrew Yang, still trailing badly but showing signs of life.
JUST BENEATH THE SURFACE, there’s real grumbling on the left aimed at Pelosi — she allowed only two impeachment charges, while progressives wanted more. And her decision to sign on to the USMCA has infuriated leftists who do not want to give Trump any victory that he could boast about (which he did in a campaign rally in Pennsylvania last night). Trump doesn’t care what’s in any of these year-end bills; he just wants victories, and Pelosi gave him one.
WHILE THERE’S MUCH THAT DEFIES BELIEF right now in Washington, the most comforting story for the financial markets is that the Federal Reserve — which terrorized Wall Street a year ago with threats of aggressive rate hikes — will make it clear today that monetary policy will be on hold for months and months to come (with the exception of huge liquidity infusions into the reeling repo market).
REPUBLICANS AND DEMOCRATS CAN’T AGREE AMONG THEMSELVES, but the accommodative Fed is on the same page — a major positive for investors from Washington, amid the dysfunction.
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This post was first published at the AGF Perspectives Blog.
