by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
January 11, 2021
DEMOCRATS IN THE HOUSE ARE RACING to impeach Donald Trump later this week, but there’s pushback from members who think this would be a mistake. We agree and offer three major reasons to avoid impeachment:
1. It could disrupt Joe Biden’s first few weeks in office. We suspect the president-elect would not welcome the distraction — he wants Congress to approve his Cabinet nominations (none have been confirmed yet) and he wants to move quickly on a stimulus package (see below). An emotional battle on impeachment would begin Biden’s presidency on a bitterly partisan tone.
2. It could make Trump a martyr. He still has solid support from Republicans, a majority of whom do not accept the election result. Trump will insist, with some justification, that Twitter’s censoring of him is illegal. And let’s not forget — Trump’s approval rating actually rose during the impeachment hearings and trial a year ago.
3. It would not succeed. While the House is prepared to vote for impeachment this week, we don’t anticipate quick action in the Senate. Are there 67 votes to convict? Probably not. And there certainly isn’t time between now and the Jan. 20 inauguration to act.
THE 25TH AMENDMENT, designed to oust a president who has become incapacitated, is an unlikely option. Vice President Pence and a majority of Cabinet members would have to petition Congress to remove Trump, and there’s no sign that Pence will join this effort. Could they persuade Trump to resign? He won’t listen.
BUT THERE IS ONE OPTION that could gain support this week — a Congressional censure of Trump, which has little real impact but would be in the first paragraph of Trump’s biography. We recommend a column in this morning’s Washington Post by the highly respected Washington attorney David Kendall, who makes a persuasive case for censure, the only option that has an imminent chance of success.
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THE BIDEN STIMULUS BILL — HOW BIG? We wrote late last week that Joe Biden’s stimulus package could cost $1 trillion or more, but we may have to revise that forecast higher.
THE CENTERPIECE of Biden’s plan will be $2,000 checks, sent quickly, probably to everyone earning less than about $70,000 per year. And there will be money for state and local governments, a moratorium on student loan payments, aid to small businesses, extended unemployment benefits, etc.
IF THE STATE AND LOCAL PROVISION is generous, that alone could add $700 billion to the final price tag. Checks to individuals could cost about $400 billion. With all the other provisions, the price tag could hit $2 trillion. Any wonder why bond yields have risen?
AN ENORMOUS STIMULUS BILL COULD ENCOUNTER OPPOSITION from moderate Democrats. West Virginia Sen. Joe Manchin says he opposes $2,000 checks, and a handful of other moderates will try to keep the cost at $1 trillion. But Biden will have the votes, using the reconciliation process, to win passage of a very, very expensive bill.
THIS COULD GET THE ECONOMY HUMMING by spring, with unemployment falling to 6%. There are two very big risks, of course — interest rates could continue to rise, and as soon as the economy looks solid, the other shoe will drop: the Biden tax hikes.
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This post was first published at the AGF Perspectives Blog.
