by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
August 19, 2021
THERE’S NO QUESTION that Joe Biden’s political capital has taken a hit, as withering hearings loom in several congressional committees in the coming weeks. The central issue: was the Afghanistan intelligence really bad, or did Biden ignore warnings of a messy pull-out? Someone is disingenuous, as the hearings will show.
BIDEN’S ALLIES CONCEDE that weeks of hearings will erode his political capital — if the next election were held today, the Democrats probably would lose the House and Senate. Biden is betting that the public will either overlook Afghanistan or continue to support the withdrawal, despite the messy exit.
BUT THAT VIEW is naïve — the Taliban is ruthless, unlikely to become more tolerant and vulnerable to infiltration by the fanatic Al Qaeda, which suddenly has an opening in the region. Biden now owns this mess, and upcoming hearings won’t help him. So the question in Washington is how badly Biden’s political capital will erode.
THE POLITICAL KEY, in our opinion, is whether Democrats will begin to flee in an attempt to avoid major losses in the 2022 elections. They already are nervous about Biden’s vulnerability on illegal immigration, urban crime, and inflation.
WHAT DOES THIS MEAN for Biden’s agenda? The idea of passing two expensive bills — $1 trillion in a basic infrastructure package, then $3.5 trillion in a social spending spree — has dwindling support. The latter measure worries American voters, who sense a connection between massive new spending and inflation.
THE LIKELIHOOD OF A MAJOR HAIRCUT for new spending proposals has the financial markets worrying that fiscal stimulus will begin to fade just as monetary policy gets less accommodative.
BIDEN’S ALLIES CONTEND that the public eventually will tire of Afghanistan, and that’s probably the correct call, but there’s been something troubling in Biden’s demeanor in the past week — he’s defiant, tone deaf, and angry over the criticism. Biden’s strong suit has been his likability; he didn’t seem likable as he doubled down with George Stephanopoulos last night.
DEMOCRATS WE TALKED WITH YESTERDAY are resigned to months of battering on Afghanistan, and they concede they may have to distance themselves from Biden. Some are even speculating that Biden is a one-term president, as confusion persists on Covid and Afghanistan. The problem with a one-term scenario is that there’s no logical Democratic successor; Kamala Harris has not been impressive.
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This post was first published at the AGF Perspectives Blog.
