Do the Republicans Have a Death Wish?

by Greg Valliere, AGF Management Ltd.

HEADED FOR AN EASY TAKEOVER OF THE HOUSE next fall, as still another prominent Democrat announces his retirement, Republicans are cruising toward a major comeback — as long as they don’t veer off the road.

THAT WAS THE TAKE-AWAY after yesterday’s chaos on Capitol Hill, as the GOP’s mainstream conservatives faced a rebellion from the right, which is eager to shut down the government in an attempt to block Biden administration vaccine and testing mandates.

THE PROSPECT OF A GOVERNMENT SHUTDOWN at midnight on Friday night is possible as debate intensifies over Covid mandates. A deal still appears likely, keeping the government open, but it might take until early next week before a compromise is reached.

A WEEKEND SHUTDOWN won’t have much of an impact — the markets, focused on inflation and Covid variants, probably won’t care — but it would dominate the weekend talk shows. The Republicans are always blamed for shutdowns, and this time would be no exception.

THIS WOULD BE AN EARLY CHRISTMAS PRESENT for Chuck Schumer and the Democrats, who could get an opportunity to blame Republicans for a shutdown — and for a much more serious issue, the debt ceiling extension. Schumer could blame Republicans for seeking a default on government debt, which won’t happen but might worry the markets just before the holidays.

EVEN THE DEFENSE SPENDING BILL, a favorite of pork-loving politicians, has hit an obstacle: Sen. Marco Rubio’s amendment to ban imports from China’s Xinjiang region, where officials allegedly are carrying out genocide against Uyghur Muslims.

THESE AND OTHER ISSUES ARE SHAPING UP as an epic battle between the Republican establishment, led by Mitch McConnell, and the party’s increasingly strident right wing, led by Donald Trump. Once these budget issues are resolved — perhaps not until early next year — the bitter partisanship will shift to an even bigger issue: abortion.

THE SUPREME COURT is clearly on a path to either kill abortion rights or greatly curb them in many states, still another political gift for Democrats, who face huge House losses next November. If abortion rights are jeopardized, which seems likely, Democrats will have an issue that could boost turnout among women and moderates.

REPUBLICANS WILL HAVE TO DEAL with a fundamental contradiction — they want the government out of our lives on vaccines, but they want the government to dictate reproductive rights.

WHETHER SCHUMER AND THE ELDERLY DEMOCRATIC leadership can motivate voters to turn out next fall remains to be seen; the party is losing veterans, such as liberal firebrand Rep. Peter DeFazio, who said yesterday that he won’t run again . DeFazio is the 19th Democrat to announce his retirement.

REPUBLICANS ARE LIKELY TO WIN MORE THAN 20 HOUSE SEATS — they only need three to take the House — but if they have to defend abortion curbs, and are viewed as the architects of a December budget train wreck, the Democrats suddenly may have a chance next fall. That’s why the GOP establishment is telling members to cool it on the idea of a government shutdown.

BUT THEY HAVE TO DEAL with the incendiary Trump, who’s determined to drive out all moderate Republicans, like Massachusetts Gov. Charlie Baker, who announced his retirement yesterday. Trump and the hard core right are still ascendant within the party, but they risk a blow-back in the general elections, when the center will get a say.

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.

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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.

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This post was first published at the AGF Perspectives Blog.

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