by Greg Valliere, AGF Management Ltd.
November 4, 2021
GO FIGURE: After a dismal electoral performance on Tuesday, it’s unclear whether Democrats learned a lesson. They added even more goodies yesterday to the massive $1.75 trillion social spending bill.
SEEMINGLY EVERYONE IN THIS STUNNED CITY offered advice to the Democrats — pass an aggressive bill, stop the spending, listen to parents, etc. It’s clear that the public is restive, worried about inflation and a choppy economy — which many voters blame on Joe Biden’s huge spending goals.
WE’RE NOT SURE THAT THE THREAT OF MORE SPENDING is having a major impact on the economy or the markets; more troubling is that there’s no road map for the end of a pandemic, with its accompanying supply chain disruptions and an acute labor shortage.
IN ANY EVENT, there was little contrition from Democrats on spending yesterday; the vast majority of Congressional Democrats insisted that they will speed up consideration of the two infrastructure bills.
THE SAUSAGE-MAKING intensified in the House, with members adding more provisions to their 2,135-page bill. Speaker Nancy Pelosi is determined to add paid family and medical leave, which may survive in some form. Other provisions, once considered dead, have been resurrected, including a state and local tax (SALT) break.
PROGRESSIVES ARE ANGRY about SALT reform, which would raise the $10,000 cap to $72,500, effective this year, which would hike tax exemptions — and lower tax bills — next year for residents in wealthy states like California, New York and New Jersey.
OTHER GOODIES HAVE BEEN ADDED, including a new tax credit for companies that employ local news journalists, expansion of a tax break for employers that pay for child care and deductions for union dues and employee uniforms. One can only imagine what else is tucked into this massive bill.
NOT SUPRISINGLY, ADDING MORE PORK is not favored by Sen. Joe Manchin (unless it’s for West Virginia). He will be the final holdout — Kyrsten Sinema apparently is on board with the bill — but after hearing Manchin last night on Fox TV, it appears he wants more concessions. Biden undoubtedly will have a private meeting with Manchin today or tomorrow.
BOTTOM LINE: We still think there’s solid support for the first bill, which funds
basic infrastructure spending for highways, bridges, clean water, wi-fi, etc. The second bill may need more trimming — not more goodies — before Manchin agrees to it.
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This post was first published at the AGF Perspectives Blog.
