by Greg Valliere, AGF Management Ltd.
SO MUCH FOR THE UNITY THEME: We have argued for days that the concept of “unity” in Washington is illusory — and, sadly, that appears to be case as the week ends with the Senate in disarray over a covid relief bill.
THERE’S A DIZZYING NARRATIVE involving filibusters and budget sequestration, but the bottom line is increasingly clear: passage of a covid bill is many weeks away, despite the dismal employment data yesterday. And the bill’s price tag probably will be whittled down.
PRESIDENT BIDEN AND HIS TOP AIDES will meet with Republican Senators this weekend, seeking a compromise. But the idea of spending $1.9 trillion is a non-starter for the GOP. At the least, they will resist a $400 billion grant to state and local governments.
THERE ARE NOT 60 SENATE VOTES to cut off debate and thus move the Biden bill, no chance whatsoever. So Biden will have two options: go with the budget sequestration process, which can be used only twice this year, allowing for passage of a covid bill with only 51 votes. But at least one Democrat, Sen. Joe Manchin of West Virginia, will oppose that tactic unless the bill is pared back.
THE OTHER OPTION would be killing the Senate filibuster rule that requires 60 votes to pass legislation. Many liberal Democrats want to take this route, but that also would have detractors among moderate Democrats. Mitch McConnell wants a pledge now that Democrats will not seek that option; he could sit on Biden Cabinet nominations if he doesn’t get assurances on the filibuster rule.
COMPLICATING THIS NARRATIVE is the determination of Democrats to proceed on impeachment. We get pushback from some of our readers but we reiterate — impeachment is a strategic blunder.
AN IMPEACHMENT TRIAL will be a huge distraction as more important legislation languishes; it will make Trump a martyr, which he most definitely does not deserve; and it ultimately will fail. Yet Nancy Pelosi — who miscalculated spectacularly last fall on covid relief — is determined to hold a trial.
MUCH OF FEBRUARY will be consumed by a bitter impeachment trial as debate rages on a covid relief bill that may not pass until the next key deadline — March 14, when unemployment benefits are set to expire.
BOTTOM LINE: One way or another — through sequestration, the death of the filibuster, or a reduction of the covid bill’s price tag — something will pass by spring.
BUT THIS BRUISING BATTLE will make it even more difficult to win passage of the next bills — including a massive infrastructure package and tax hikes — which will be unanimously opposed by Republicans and perhaps a few Democrats as well.
FOR THE MARKETS, A REASSESSMENT MAY BE NECESSARY: Bond yields soared and stocks rose earlier this winter on the belief that massive stimulus is coming. There eventually will be some stimulus, but not as massive as expected just a few weeks ago.
