by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: 8
December 8, 2020
YOU COULD SEE THIS COMING: Congress will need at least another week to agree on a massive budget bill and a Covid stimulus package. The new deadline is 12:01 a.m. on Dec. 18, as an expanding group of bipartisan lawmakers shuttle back and forth with new proposals.
THE ONLY CONSENSUS RIGHT NOW: Almost everyone agrees that it’s unthinkable that Congress would leave town for the holidays without passing a relief package. Most members are anxious to leave Capitol Hill, which is a Covid hot spot; 35 members have gotten the virus this year.
A CACOPHONY OF IDEAS: Everyone, it seems, has a different proposal. The idea of direct payments — stimulus checks of several hundred dollars — still has support on the right and left; President Trump reportedly would accept that provision.
COULD THIS BILL SINK FROM ITS OWN WEIGHT? Can’t rule that out, which would be a huge negative for markets, the economy and millions of Americans who would lose benefits at the end of this month.
WE’LL STICK WITH OUR FORECAST that a bill will pass, costing about $900 billion, with the stimulus lasting through the first quarter. President-elect Biden says he’ll seek a larger bill after his Jan. 20 inauguration, but prospects are cloudy for that in the new Congress.
SO THIS MAY BE THE LAST TRAIN LEAVING THE STATION, which means lawmakers will pack the $900 billion package with all their favorite provisions. Mitch McConnell is adamant that liability protection must be included for businesses facing covid suits.
HOW LONG LIABILITY PROTECTION WILL LAST is a major sticking point (McConnell wants protection thru 2024), while Democrats charge that firms would escape liability for lax anti-virus protections. Sen. Mitt Romney is seeking a compromise between both sides, the Wall Street Journal reports.
SOMETHING FOR STATE AND LOCAL GOVERNMENTS also appears to be non-negotiable, so lawmakers are working on formulas — partly based on infection rates in each state — on how the money would be disbursed. It’s very unlikely that states will get any money for unfunded liabilities or pensions.
THE REST OF THE BILL SHOULD GET IRONED OUT QUICKLY: About $300 billion in aid for small businesses, $300 weekly unemployment checks, money for vaccines and testing, assistance for schools, an extension of eviction protection (with some aid to landlords) and $17 billion to the airlines.
IN LIGHT OF THE ADDITIONAL ONE WEEK DELAY, it’s unclear whether much of this money will reach recipients before Christmas, as fatalities surge. A second measure, later this winter — costing much more — is far from certain (especially if the GOP wins a Senate seat in Georgia). That makes passage of the $900 billion bill even more crucial — and even more likely.
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This post was first published at the AGF Perspectives Blog.
