by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
July 13, 2021
SAILING ALONG WITH GOOD JOB APPROVAL NUMBERS, Joe Biden suddenly faces major new problems that weren’t apparent just a couple of months ago. Here are six examples:
1. THE CARIBBEAN: No one saw this coming. Biden said all the right things about Cuba in recent days, condemning Havana’s repression, but is he willing to keep — or even toughen — Donald Trump’s sanctions on Cuba? After the U.S. abdication in Afghanistan, Washington’s reaction to beatings and imprisonment in Cuba will be carefully scrutinized by U.S. foes and allies.
This will be a huge litmus test for Biden. Progressives want to retain Obama reforms but Republicans like Marco Rubio see a potent campaign issue. As for the other eruption in the region, it’s highly unlikely that Washington will agree to send troops to Haiti, which is on the verge of anarchy.
2. PFIZER MAY HAVE JUMPED THE GUN: There’s a growing belief among scientists in the U.S. — and in Israel, France and the U.K. — that booster shots will be needed this fall. The key phrase will be “waning immunity,” especially among the elderly and those with pre-existing conditions.
Pfizer is working on a booster shot, but the Biden Administration doesn’t want to address the issue yet, since vaccinations already have become politicized and the delta variant is surging in many states. Can the public be persuaded to get a third shot this fall? For now, the bigger concern is new cases of the virus among the 30% of the population (or more) that will refuse to get shots.
3. INFRASTRUCTURE TALKS OFF TO A ROCKY START: We’re hearing that some of the 11 Republicans who agreed to a $1.2 trillion infrastructure package are getting cold feet. The reason: doubts over how infrastructure spending will be paid for; dubious assertions about IRS enforcement and other revenue assumptions could prompt the Congressional Budget Office to challenge the scoring.
4. DEBT? WHO CARES? Highly recommended reading this morning — a lengthy and sobering article in the Wall Street Journal on the growing acceptance by most countries of huge new levels of debt. There may be no stopping the debt locomotive. The article is titled: “Governments World-Wide Gorge on Record Debt, Testing New Limits.”
5. URBAN GUN VIOLENCE, OUT OF CONTROL: Eleven people were shot and killed in Chicago this past weekend (down from 19 murders the weekend before). A Chicago rapper was shot 64 times. Homicides are surging from South LA to NYC, and the White House doesn’t have a clear plan; Biden’s poll ratings on this issue are terrible.
An intriguing new player in this debate is Eric Adams, the likely new mayor of New York City. An ex-police officer, Adams is tough on crime — a stance the Democrats need to embrace ahead of the 2022 elections.
6. WITH 94% OF THE U.S. WEST IN A SEVERE DROUGHT, the likelihood of huge fires, water shortages and power outages may become Biden’s greatest headache. California, with the world’s fifth largest economy, faces rolling blackouts. Its governor, Gavin Newsom, faces a recall vote on Sept. 14. He’s the frontrunner, but even a close result would send a signal that Democrats face a tough election next year.
BOTTOM LINE: Like all presidents, Biden has to avoid the appearance of getting caught off-guard, but it happens. The Republicans don’t have a clear agenda and have to deal with Donald Trump, so Biden has some wiggle room; he has political capital as long as his job approval rating stays above 50% positive.
BUT JUST ONE EXPLOSIVE ISSUE — indecision on Cuba, a debate on booster shots, etc. — could divert attention away from Biden’s ambitious agenda in the coming weeks. It’s an agenda that requires virtual unanimity among Democrats, and that’s far from certain.
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