Time for Triage — Avoiding a Shutdown Comes First

by Greg Valliere, AGF Management Ltd.

September 28, 2021

REALITY BEGAN TO SINK IN YESTERDAY, as Washington’s warring factions realized that compromise is inevitable, starting with a bill to keep the government open when the fiscal year starts on Oct. 1.

THE MEDIA PORTRAYED A SENATE VOTE LAST NIGHT as a sign that a shutdown is very much in play, but we have a different take. By abandoning the provision to raise the debt ceiling, Democrats can get a funding package immediately from the GOP, keeping the government open.

SO THE DEMOCRATS ARE GRUDGINGLY leaning toward withdrawing the debt ceiling provision, kicking the can down the road, keeping the government open well into the fall.

THAT WOULD GIVE EVERYONE SOME BREATHING ROOM, as more compromises take shape on the debt ceiling and the two massive infrastructure bills.

THE PLAYER TO WATCH, AS USUAL, IS NANCY PELOSI: She understands the ultimate realpolitik — how many votes do you have? She will broker a bill in the next 48 hours to avoid a shutdown, and she will infuriate the Progressive left by separating the $1 trillion basic infrastructure bill from the bloated $3.5 trillion social spending package.

THE FAR LEFT THOUGHT THEY HAD A DEAL: No infrastructure bill unless it’s accompanied by the social bill. But the latter has encountered just enough opposition from moderate Democrats to bog it down, possibly for weeks. So Pelosi is thinking: why not pass the first bill and come back later in the fall with another attempt to win the second one?

THAT STRATEGY COULD DELIVER A BADLY NEEDED WIN for Joe Biden, who could get his $1 trillion measure. Biden is in a deep slump and needs an infrastructure victory.

PELOSI THUS MIGHT BRING THE $1 TRILLION BILL to the House floor as early as this Thursday, daring the Progressives to vote against it. Biden and Pelosi will promise to move later on the second bill, but its passage is far from guaranteed because moderates will oppose it.

MAYBE A SKINNY social spending package — costing a mere $1.5 trillion — could pass later this fall, once there’s a consensus on huge issues such as the composition of tax hikes and whether the package is credibly paid for.

A SKINNY PACKAGE could move via the budget reconciliation process, which theoretically would include a debt ceiling hike that the Democrats eventually will have to own. The debt ceiling is a serious issue, but as reported yesterday, the Federal Reserve could employ its trillions to deal with a default threat.

 

 

 


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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