How Will Biden’s Loss of Political Capital Affect His Agenda?

by Greg Valliere, AGF Management Ltd.

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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.


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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