by Greg Valliere, AGF Management Ltd.
JOE BIDEN’S FIRST TEST: High drama this week — will President Biden compromise with Republicans on a covid relief bill, or will he stick with Democrats in Congress and “go big?” We’re betting on the latter.
BIDEN HAS NO CHOICE but to meet at the White House, probably late today, with ten Republicans who have proposed a compromise — a $600 billion relief package as opposed to his $1.9 trillion bill. That’s quite a wide gulf.
BUT BIDEN HAS VOWED to seek bipartisan compromises, and he probably could get his package down to something like $1.4 trillion; he has indicated a willingness to reduce the income thresholds on direct payments to individuals, and he could cut the dollar amount.
THE GOP HAS PROPOSED CHECKS for individuals earning less than $50,000 and couples that make less than $100,000. Biden has proposed checks for people who make up to $75,000 and couples that earn less than $150,000. Biden’s checks would be $1,400 while the GOP probably will propose $1,000.
THERE’S NO DISAGREEMENT on vaccines — both parties would spend $160 billion. But the GOP would not spend any money on state or local governments and would kill a proposal to hike the minimum wage to $15 per hour. Republicans also want to scale back new money for schools, which they feel are well-funded now.
THE PROBLEM FOR BIDEN is that progressives like Senate Budget Committee Chairman Bernie Sanders would howl if the president accepted anything like the GOP plan. Sanders and most Democrats want to use a budget reconciliation process that will largely bypass the GOP in a final bill which would require only 51 votes.
REPUBLICANS SAY RECONCILIATION would poison the well for future deals, but that didn’t affect their thinking in early 2017, when the GOP used reconciliation to ram through a huge tax cut that infuriated Democrats.
OUR SENSE IS THAT BIDEN will attempt a compromise today, but it won’t be enough for the 10 Republicans — not to mention the 40 other GOP Senators who adamantly oppose a huge relief bill.
BOTTOM LINE: There are two scenarios — either a whittled down deal of about $1.4 trillion, or the Democrats will “go big” with a bill costing $1.9 trillion or even more. Most Democrats think they were too timid in the financial panic of 2008-09 and didn’t spend enough; Biden can’t turn his back on these Democrats.
SO WE THINK THE FINAL BILL, which probably will pass in March, will be on the high side. Today’s White House meeting will be cordial and both sides may compromise — but not enough to satisfy the majority of members on both sides. So the reconciliation process, starting with a budget resolution this week, still looks like the best bet.
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COULD DONALD TRUMP DERAIL HIS OWN ACQUITTAL?: Just when it appeared nearly certain that Trump would win acquittal in his impeachment trial, he threw a hand grenade into the process — as his legal team fled.
VIRTUALLY NO ATTORNEY would favor litigating the election, which Trump apparently wants — arguing that there was massive voter fraud that denied him re-election. Dozens of courts and his own Attorney General have rejected that assertion, and his lawyers undoubtedly want to avoid that hot stove.
BUT TRUMP APPARENTLY WANTS TO RE-LITIGATE the election, which many Republican Senators oppose; they’re content to acquit him on the grounds that he’s no longer in office. A re-hash of the election? Don’t go there, many Republicans are arguing.
BOTTOM LINE: Chances of convicting Trump were maybe 5% a few days ago; if he’s really serious about litigating the election — an argument he’s certain to lose — chances of conviction would rise to about 25%, with close to a 50% chance of a censure.
