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

Insights and Market Perspectives

Author: Greg Valliere

August 11, 2021

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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.