by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
January 20, 2021
AFTER THE PAST FOUR YEARS, it’s nearly certain that the temperature will drop in Washington, starting this noon at the battle-scarred Capitol.
JOE BIDEN’S THEME will be unity, an admirable goal — but there’s an impeachment trial coming and most Republican voters believe the election was fraudulent.
WE WOULD LOVE TO BELIEVE THAT UNITY will prevail, and Biden is determined to seek it. He’s one of the few politicians who could pull it off — he’s deeply religious, patriotic, likable, reasonably moderate and has a normal-sized ego, which will be refreshing.
BUT THERE ARE TWO ISSUES that make us skeptical about hopes for unity:
1. Impeachment: The trial will begin within days, and it won’t help Biden. A bitter trial will complicate his agenda; it could deepen the nation’s political fissures as Donald Trump’s allies portray him as a martyr; and the final vote probably will be to acquit. So why go through a trial after Trump has already left town?
2. The economic prescriptions: Republicans made it clear during Janet Yellen’s testimony yesterday that they think the latest Biden relief package is too expensive. This issue will become a major source of disunity, as the parties return to their age-old differences on taxing and spending.
IF THERE’S A DEAL, probably below Biden’s $1.9 trillion proposal, it will be a product of negotiations between him and Mitch McConnell. The latter made it clear yesterday that he blames Trump for the Capitol riot, and McConnell is committed to confirming Biden’s nominations — including, obviously, Yellen.
BUT McCONNELL ALREADY IS THINKING about the 2022 elections — sorry, that’s how Washington works — and the Republicans will hammer away against huge new spending and the tax hikes that will take shape by summer. The Democrats will need all of their 50 Senators to enact the party’s aggressive economic program, and we’re not sure all 50 will be on board.
THE KEY FOR BIDEN WILL BE THE VIRUS: New cases and hospitalizations are finally trending lower despite the horrific spike in fatalities. Last night’s moving remembrance sent a clear signal that rolling out vaccines will be Biden’s top priority.
JOE BIDEN will be a transitional president, undoubtedly a one-termer. As Covid subsides on his watch, the nation may return to a more normal climate, not as ferociously partisan, as politicians in both parties seek to lower the temperature. They have a long, long way to go, starting this noon.
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This post was first published at the AGF Perspectives Blog.
