Easy Part Done, Biden Now Faces AOC and the Progressives; A Setback for Democrats’ House Prospects

by Greg Valliere, AGF Management Ltd.

Insights and Market Perspectives

Author: Greg Valliere

August 11, 2021

JOE BIDEN WON 19 REPUBLICAN SENATE VOTES yesterday for his $1 trillion infrastructure package, quite an accomplishment for the President, reinforcing his reputation as a skilled negotiator. Now comes the hard part.

SENATE PASSAGE OF THE INFRASTRUCTURE BILL — and approval, by one vote, early this morning to take the reconciliation path for $3.5 trillion in new social spending — was expected. Congress can finally leave town, setting the stage for debate on the two measures this fall.

WHAT IS DEFINITE is that none of the 50 Republican senators will vote for the second bill, which means every Democrat will have to support it, just to get to a tie-breaking vote from Kamala Harris. At least two Democrats are expected to demand a final price-tag far below $3.5 trillion.

THE LIKELIHOOD OF A LOWER PRICE-TAG and only modest tax hikes will enrage the Democrats’ powerful progressives, led by Alexandria Ocasio-Cortez, who controls a powerful faction. Just how good are Biden’s negotiating skills? We’ll find out this fall.

BOTTOM LINE: There’s so much money at stake — not to mention a dramatic escalation of Big Government — that even a scaled-back package of spending and tax hikes can prevail. But Democrats on Capitol Hill are telling us that it’s far too early to declare victory on the second bill.
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THE 2022 OUTLOOK DARKENS FOR DEMOCRATS: A highly respected moderate Democrat, Rep. Ron Kind, announced yesterday that he will not seek re-election in his conservative Wisconsin district. He joins several other Democrats who will not run in 2022, as the party’s chances of keeping the House continue to fade.

WE LOVE CANDID POLITICIANS, and Kind bluntly stated yesterday that “the truth is that I’ve run out of gas.” After serving for 13 terms, he narrowly won re-election last year and was facing a tough re-election fight, opposed by a pro-Trump Republican who has plenty of money.

KIND WAS A FOUNDING MEMBER of the New Democratic Caucus, a moderate group, and has been frustrated by the House leadership of Nancy Pelosi, 81, Steny Hoyer, 82, and James Clyburn, 81.

THE LIKELIHOOD OF A GOP HOUSE TAKEOVER explains why Biden is moving so quickly on legislation; he knows his political capital is at risk next year. We think the GOP has at least a 55% chance of capturing the House; the census and redistricting will help Republicans, and history shows that first-term presidents like Biden almost always lose seats.
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THE DOG DAYS OF AUGUST: We usually don’t publish every day when Congress leaves town, so we’ll write maybe two or three times a week until Labor Day. Enjoy the rest of the summer; the fall will be intense.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2021 AGF Management Limited. All rights reserved.

This post was first published at the AGF Perspectives Blog.

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