by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: 8
July 26, 2021
Biggest Obstacle to Infrastructure Bill
May Be Nancy Pelosi
July 26, 2021
HOW’S THIS FOR IRONY? Progress on infrastructure spending may grind to a halt because of House Speaker Nancy Pelosi, who adamantly opposes a compromise deal that is likely to emerge in the Senate this week.
PELOSI SAYS SHE WON’T ALLOW a House vote on just the one Senate bill, which would add roughly $1 trillion for highways, bridges, dams, water, etc. She insists that a second infrastructure bill also must be included; it would spend several trillion dollars — estimates vary — for social spending on college tuition, child tax credits, housing, etc.
NOT SURPRISINGLY, PELOSI HAS INFURIATED Republican negotiators in the Senate, who are close to a $1 trillion bipartisan deal, which should pass within days. But these Republicans — and one or two Democrats — are not ready to approve the very expensive second bill.
WITHOUT A SECOND BILL, Pelosi won’t move anything on the House floor. There’s a precedent: she bottled up a covid aid bill for several months last fall, finally getting less than Democrats initially sought.
SO THE FOLLOWING SCENARIO SEEMS LIKELY: Senate passage in early August of a $1 trillion bill, no agreement on a second bill, with the House gridlocked. A wide range of issues — social infrastructure, a debt ceiling increase, tax hikes and a 2022 budget — will be stalled until fall. These bills eventually will move, but for now — Pelosi can’t take yes for an answer.
THIS IS STILL ANOTHER HEADACHE for Joe Biden, whose job approval rating has slipped as crime explodes and Covid surges. He needs a victory — and infrastructure spending is popular — but Pelosi is focused on the 2022 election and an investigation of the Jan. 6 riot on Capitol Hill. That might win some political points, but passage of an infrastructure bill would be far more significant for Biden.
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CANADA NOW HAS MORE FULLY VACCINATED PEOPLE than the U.S. yet the Biden Administration has kept the border closed; vaccinated Canadians won’t be able to enter the U.S. until Aug. 21, even though Canada has declared Americans can cross the border by Aug. 9. The closed border has been a significant economic drag on both sides of the border.
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THIS IS FED WEEK, and we reiterate our assertion that the surging delta variant will have a major impact on the central bankers. They will talk tough on inflation, but Covid will preclude the Fed from any policy changes. If this new outbreak of the virus persists into early fall, the Fed will have to stay neutral; a tapering of asset purchases is still months away.
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This post was first published at the AGF Perspectives Blog.
