by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
June 24, 2021
CAN THE CENTER HOLD? That’s the key issue as centrist Senators agreed last night on an infrastructure “framework” that now has to be sold to progressives and conservatives.
AN AGREEMENT IN PRINCIPLE is possible today before Congress leaves town for the two-week July 4 break, but as long as the package sits in the summer sun, the more it will attract opposition. It will take weeks to iron out all of the details, and then the suspense will rise — could this attract 60 votes in the Senate, avoiding a filibuster?
THE LOUDEST GRUMBLING is coming from the left, which is dissatisfied with the apparent price tag of about $1 trillion over five years and about $1.2 trillion over eight years (with $579 in new spending). That’s a far cry from President Biden’s initial $2.25 trillion proposal.
MOST SIGNIFICANTLY, PROGRESSIVES SUSPECT that this deal will not be followed by their two other priorities — a massive social spending package and a tax hike, advanced by a budget reconciliation tactic that would only require 50 votes, with Kamala Harris breaking a tie.
CONSERVATIVES, ON THE OTHER HAND, are suspicious that reconciliation will be used against them later this year, and they also are grumbling about the overall costs and a shaky premise — will increased funding for the IRS really generate hundreds of billions of dollars in new revenue, which would help pay for this initial infrastructure package?
WITH CONGRESS GONE FOR THE NEXT TWO WEEKS, staffers will write legislative language and and iron out details for the debate later in July. We’ll put odds at no better than 60-40 that a package will be enacted just before the August break. After that, debate on more spending and tax hikes will get pushed into the fall as other issues — especially the debt ceiling — clog the legislative calendar.
WE THINK BIDEN WILL ACCEPT this framework of a deal, perhaps as early as today, even with a scaled-back dollar amount. With his job approval rating close to 60% positive in some polls, a $1 trillion infrastructure bill would be a significant victory in what has been a solid first year of Biden’s presidency.
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This post was first published at the AGF Perspectives Blog.
