by Greg Valliere, AGF Management Ltd.
A DIFFERENT APPROACH: It never seemed likely that a massive social spending bill, poorly understood by the public and filled with accounting gimmicks, would win enactment this year — but there’s another path in 2022.
SEPARATE BILLS WILL EMERGE: Rather than push again for a $2 trillion-plus behemoth, Democrats may break up the bill — Manchin could accept an environmental package (without major new methane curbs or big subsidies for purchasing electric vehicles). And Manchin definitely could accept money for pre-kindergarten education and some expansion of Obamacare.
MOST SIGNIFICANTLY, MANCHIN COULD ACCEPT A SEPARATE TAX BILL that would kill most of the 2017 Trump tax cuts, although re-writing much of the tax code in an election year would be a heavy lift — especially since Sen. Kyrsten Sinema opposes any rate increases for corporations or individuals.
A CONTINUATION OF THE EXPANDED CHILD TAX BREAK is a non-starter for Manchin, infuriating progressives, but it’s important to note that this tax break won’t die — it will just revert back to pre-2021 levels. Manchin also is adamant in opposing a paid family leave plan and other elements of Joe Biden’s BBB bill.
BUT THERE’S ENOUGH AREAS OF AGREEMENT that Manchin and Biden could accept a handful of separate bills, with a ten-year pricetag of about $1.5 trillion. Progressives and many White House staffers are so angry with Manchin that it could take another few months to get new bills on a path toward enactment by late spring.
IN THE MEANTIME, BIDEN FACES AN ENORMOUS CHALLENGE — mobilizing the public for one more fight against Covid. In a speech this afternoon, Biden will propose more testing and funds for hospitals, but the policy cupboard is nearly bare, and in much of Middle America the public is tuning out calls for more vaccinations.
EVEN DONALD TRUMP got backlash, as some people in an audience of his adoring supporters booed recently when Trump said he has gotten a booster shot. And Biden’s gaffe-prone vice president, Kamala Harris, said over the weekend that “we didn’t see delta coming … we didn’t see omicron coming.” Health experts have warned for months about the emergence of new variants but Covid fatigue is now rampant.
WE AGREE WITH MANY HEALTH CARE EXPERTS who think the omicron variant will peak later this winter, but the damage to the economy — and Biden — will persist into the spring. The antidote for many Democrats will be to get things done, so we’ll take a contrarian stance — Joe Manchin wants to negotiate, and many of the provisions in the BBB bill still have a chance of enactment.
* * * * * *
THE LIKELIHOOD OF A GOP TAKEOVER OF THE HOUSE next fall has increased after yesterday’s announcement by a key moderate that she’s retiring, and the announcement of a veteran Democrat that she also will be leaving.
THE GOP NEEDS ONLY three or four seats to recapture the House, and we think the Republicans are headed for a pickup in the 15-25 seat range.
KEY MODERATE REP. STEPHANIE MURPHY announced that she won’t run again, and her Florida House seat now looks vulnerable. Murphy said she wants to spend more time with her family. And longtime Rep. Lucille Roybal-Allard (D-Calif.), 80, said she will not seek re-election in 2022.
ROYBAL-ALLARD’S California seat is safe but Democrats now have 23 members who are not seeking re-election, a sure sign that they don’t want to serve in a House in 2023 with Kevin McCarthy as Speaker.
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.
