by Greg Valliere, AGF Management Ltd.
THE BIG NEWS IN THIS CITY is the impeachment of Donald Trump, coming later today, amid a major erosion of his support among Republicans. For the markets, the big news will be Joe Biden’s pandemic relief bill, scheduled for release tomorrow.
THERE ARE TWO COMPETING OPTIONS within the Biden camp on a relief bill — either a very large package, or a huge one that would go well beyond covid aid. In either scenario, it’s clear that the president-elect will “go big.”
THE FIRST SCENARIO, a very large package perhaps costing close to $2 trillion, would contain the expected checks for individuals, aid for small businesses and restaurants, major new funding for state and local governments, new money for vaccines, etc.
THE SECOND SCENARIO would contain all of the above plus new funding for infrastructure, green jobs, expanded health benefits, etc. The pricetag for this option, as Biden says, could be “in the trillions.”
HOW TO GET IT DONE? The first scenario probably could pass without going to the reconciliation option, but that might require some Republican support to cut off debate in the Senate. That’s possible but not easy. The second option would use reconciliation, which would require a simple majority, which Biden now has in both houses.
TWO MAJOR OBSTACLES: First, the impeachment, which could drag into February, complicating the passage of a relief bill. There’s support for conducting regular Senate business from morning till afternoon, then proceeding with the impeachment trial in the evening. Sounds plausible, but we’re not sure both of these issues can co-exist.
THE SECOND OBSTACLE — prepare to hear this for the next two years — is Sen. Joe Manchin and other moderate Democrats who are reluctant to support bills with massive price tags. The Democrats may have to persuade a couple of Republican Senators — Susan Collins or Lisa Murkowski — to get their package enacted.
BOTTOM LINE: A bill that focuses mainly on covid relief has the better chance, not a massive bill that includes infrastructure. The latter bill would be more difficult to enact, and the pricetag — in the trillions — could encounter opposition. That bill may have to wait; a more traditional bill, costing nearly $2 trillion, is more likely.
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WASHINGTON, AN ARMED CAMP: We’re not particularly worried about violence in DC on Inauguration Day, Jan. 20. The city will be filled with police and National Guard forces, embarrassed by their inept performance on Jan. 6. The greater threat is in state capitals and cities around the country, but it’s certain that the insurrectionists have been infiltrated by government agents who know what they’re planning.
THE IMPEACHMENT PROCESS, MEANWHILE, has been rocked by GOP defectors, headed by Rep. Liz Cheney. The House is certain to impeach and the Senate outcome is less certain now because of Mitch McConnell’s deep antipathy toward Trump.
THE MOST LIKELY OUTCOME is a very narrow Senate vote to acquit, but that’s no longer a sure bet. If Trump avoids conviction, he would still face a serious threat of indictment by the District of Columbia attorney general on charges of inciting a riot. Trump reportedly is still considering pardoning himself and his children, but that would simply inflame the Senate as it considers convicting him.
WHAT’S CHANGED? Members in both parties, in both houses, are furious that their lives were jeopardized by Trump’s crazed mob. Few are more angry than Mike Pence; the mob wanted to hang him last Wednesday, and Trump didn’t seem to care.