by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
April 7, 2020
DESPITE GLITCHES IN GETTING MONEY to individuals and businesses, congressional Democrats and President Trump are gung-ho on passing another emergency bill later this spring that may pump another $2 trillion into the staggering economy.
THE NEWS IS VERY ENCOURAGING on new infections slowing in Europe and New York, but Washington will have to do more.
THERE WILL BE OBSTACLES to this next measure compared to the one that sailed through Congress in late March, because deficit hawks are aghast that red ink could exceed $4 trillion this year and next, and because most members of Congress are in no rush to return to Washington, where new virus infections have spiked in recent days.
BUT THE NEED FOR MORE STIMULUS is so acute that Nancy Pelosi reportedly wants to streamline the next measure, excluding anything major on infrastructure or any “Green New Deal” provisions. That may have to wait for a fifth bill in mid-summer.
THE KEY PLAYER PUSHING FOR ANOTHER BILL is Trump. He gets angry whenever anyone suggests that small business aid or government checks are stalled; he’s determined to send more Washington money to the country. Pelosi agrees.
THE DEMOCRATS WILL PUSH HARD for more unemployment aid, another round of direct checks, plus aid to health care workers, first responders, hospitals and education. And there’s a consensus that state and local governments need more assistance, with something significant for small cities and towns. Trump basically agrees on these provisions.
CONGRESSIONAL REPUBLICANS, led by Mitch McConnell, grudgingly concede that another bill is necessary; they worry about exploding deficits. But they have no choice but to move on another bill; quite clearly, aid needs to be expanded despite the chaotic start to the small business loan program.
LAWMAKERS WHO WANT TO GO SLOW point to the rocky start to business loans, but we think by late April the glitches will be ironed out, paving the way for moving another bill in late May.
EVEN AS THE LOCK-DOWN BEGINS TO EASE in a month or so, there’s growing anxiety in Washington that a horrible second quarter GDP rate will be followed by a halting, mediocre recovery in the second half, with unemployment still over 10% for the rest of the year.
SO WE REITERATE OUR MANTRA: Money is no object, the sky’s the limit for both fiscal and monetary policy. More aid will come this summer.
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This post was first published at the AGF Perspectives Blog.
