As soon as Joe Biden finished speaking on Thursday evening (and even before he started), market participants were already fretting about the “uphill battle” his $1.9 trillion “American Rescue Plan” faces in Congress.
That was the narrative Friday, as folks looked longingly toward the weekend after another five days of D.C. rancor including an impeachment, Donald Trump’s second in 13 months (an “impressive” feat, to be sure).
According to one FX strategist at Credit Agricole, Biden’s stimulus plan “underwhelmed the market.” The same person complained that it “includes Democrat initiatives,” which might mean it gets bogged down and “could end up smaller.”
Forgive me, but I’m not sure anyone should be surprised that a Democratic president with a Democratic House and a Democratic Senate is proposing a plan centered around “Democrat initiatives.” Was anyone really under the impression that Biden wasn’t going to ask, for example, for state and local aid?
Other criticism included accusations that the plan wasn’t detailed enough. I’m not entirely sure how much more detail he could have offered. The numbers are there, and it’s clear where he wants the money to go. I suppose if the measuring stick are the voluminous policy tomes Elizabeth Warren released during the primaries, then Biden is, in fact, short on details. But how many of you read those Medium posts from Warren? Show of hands. Anybody? No? Exactly.
Still, concerns are warranted given that the GOP will predictably pretend to worry about fiscal rectitude again now that the White House isn’t occupied by a Republican. Remember: Deficits are fine with Republicans as long as they fund tax cuts for corporations and the rich. They’re only bad if they do something for real people.
“Given the hostility in the Republican party for money for state and local government, which won’t be calmed in any way by the additional acrimony generated by impeachment proceedings, this could [be a] struggle,” ING said, underscoring the point. “Many Republicans have also shifted to a more fiscally conservative stance since the election, with some likely to question the size of the unemployment benefit payments and additional checks.”
“Biden’s $1.9 trillion relief package was met with remarkable indifference on the part of financial markets,” BMO’s Ian Lyngen and Ben Jeffery said, noting that “the muted response reflects several aspects of the plan, with its viability making the top of the list as certain aspects may complicate the bill’s journey through Congress.”
Anyway, it was always the case that parts of Biden’s plan would be challenged by Republicans and, at least on my read, there wasn’t anything “radical” about the proposal other than the price tag, which, while large, is lower than the CARES Act.
And besides, what does “large” even mean these days? A Republican-controlled Senate just passed a $900 billion relief package. A Republican president and his Treasury Secretary spent the latter two weeks of October agreeing with Nancy Pelosi that a proposal with the exact same price tag as Biden’s plan was necessary.
If you want to say a lack of follow-through in markets is just an example of the “sell the news” phenomenon, that’s probably a more accurate characterization, as generic as it might be. BMO’s Lyngen nailed it. “There is also the reality that a fresh round of stimulus has been extremely well telegraphed and with the details now in hand, the market is content to move on to trading the next event,” he said.
Capturing the bigger picture, AxiCorp’s Stephen Innes wrote that “while the proverbial cat was out of the bag yesterday, there were some expectations that we would hear the clink of at least one champagne glass, but so far risk sentiment has pancaked.”
The reason, he said, is simple. “The mortifying COVID death counts leave politicians with no option but to reinstate or lengthen lockdowns to stem the pandemic,” Innes added, calling that “no cause for celebration even if the party does cost two trillion dollars.”
It seems to me that concerns over Republican obstructionism in the Senate to Biden’s stimulus plan are overdone. I’m not trying to say Republicans won’t be obstructionists, they will. But the dual wins in Georgia have given the Democrats a majority, and this provides them with two paths forward that don’t require any Republican support.
They can either go down the budget reconciliation road, although this would expend its one use for the year, or they can eliminate the legislative filibuster. Schumer has already stated his openness to eliminating the filibuster and it is something the progressive base would like to see accomplished in its own right. It would be in line with McConnell’s move to eliminate the filibuster for Supreme Court nominees, and a stalling economy with a million jobless claims a week provides plenty of political cover for such an action.
My guess is that Joe Biden will publicly state his reticence to eliminating the filibuster, but Republicans unwillingness to cooperate will cause Schumer to go ahead with it anyway. I can’t see Biden vetoing legislation based on principled opposition to eliminating the filibuster, and so the bill will become law. This will also have the added advantage of making it easier for the Democrats to push through more of their legislative agenda for the remainder of the 117th Congress as well.
with a 50/50 Senate I don’t think the dems are well served with filibuster elimination talk; they needed better results from Maine and North Carolina at least.
Joe Manchin, Jon Tester, Krysten Synema, Susan Collins, Lisa Murkowski should be the main Senate power brokers for the next two years, and the rest will come down to what they can achieve via the reconciliation process.
I suspect Susan Collins may be motivated to repair her reputation, anyway I hope so.
It wouldn’t hurt to try to include as many Republicans in the reconstruction of the nation as are willing to cooperate and add constructive thinking.