Things were relatively quiet in the US Tuesday, if you don’t count Donald Trump’s second impeachment trial.
It’s clear, to most rational people anyway, what the result of those proceedings should be. I’m going to leave it at that until such a time as additional editorializing becomes unavoidable.
Markets are still content to surf the reflation wave in anticipation of forthcoming stimulus. Joe Biden and Kamala Harris met with Jamie Dimon, Doug McMillon, and a handful of other CEOs in the Oval Office to chat about the state of the economy and, more to the point, to emphasize why it’s necessary to speed a $1.9 trillion relief package through Congress with or without the support of recalcitrant Republicans.
Janet Yellen was present. Just in case anyone had any questions that needed to be directed to the Treasury Secretary and de facto Fed Chair.
Republican Rob Portman thinks it’s “too bad” and “discouraging” that the Biden administration and Democrats are moving forward rapidly with the relief plan, as opposed to — and I don’t know how else to put this — cutting the price tag by two thirds in order to appease the deficit gods, who the GOP imagines might smite us all if we authorize “too much” spending. (Those deities are fine with deficits if they’re the result of tax cuts, though.)
The figure (below) looks “scary,” but only because America has been indoctrinated for decades to believe that red ink at the federal level is inherently dangerous. It’s not. Not for the US. And not for any other advanced, DM nation either. And especially not when juxtaposed with the dire situation on Main Street, and on state and local government balance sheets, where red ink not only matters, but can in fact be catastrophic.
There are some Republicans who are genuinely interested in a bipartisan solution. But the circumstances just aren’t conducive to any kind of drawn-out courtship.
The GOP spent the last four years metamorphosing into a personality cult, a transformation that culminated in a terrifying attempt on the part of some Republicans to overrule voters and convince Mike Pence to declare the election void, a gambit so exceedingly dangerous that Pence felt the need to write an entire letter explaining why he wasn’t going to do it.
While it’s true that key members of the Republican leadership (including Mitch McConnell) didn’t stick around for the finale of “The Apprentice: White House Edition,” they watched (and participated in) every other episode. Between that, and the urgency of both the public health crisis and the economic situation, there’s just not much in the way of patience from Biden and Harris, let alone from Nancy Pelosi and Chuck Schumer.
The whole thing has an unmistakable “caretaker” feel to it. Harris, at least in her demeanor, comes across as a kind of President in-waiting. There’s a lot of energy there, and it feels like she’s bottling it up and saving it for the day when America is stable enough to have an outspoken, occasionally abrasive leader again. Biden and Yellen, by contrast, seem to be presiding over a transition period, during which compromise is possible (indeed, welcome) but only to the extent it doesn’t jeopardize the mission which, basically, is to steer the Titanic away from the iceberg.
The idea, one gathers, is that barring any slippage in their mental acuity due to age, the chances of Biden and Yellen making any grievous errors are very slim. And to the extent their approach can be described as “go-it-alone,” it’s not out of spite. It’s out of what they clearly believe to be necessity. Something like: “If you’ve got any good ideas or a real compromise, now’s the time to get serious, because next week, we’re moving ahead with or without you.”
That’s Biden and Yellen. Pelosi and Schumer may well harbor some ill-will towards the GOP and might fairly be described as a semblance of spiteful. One can hardly blame them. It was a trying four years, after all.
Coming full circle, markets are in a holding pattern after advancing for six straight sessions. US equities were little changed, and Treasurys were mixed after a decent three-year sale and ahead of 10- and 30-year supply. Notably, TLT saw its largest single-day outflow since March on Monday.
The dollar dropped to a two-week nadir.
In remarks to the media Tuesday, Biden said the country faces “a whole range of issues.” “I think they’re all solvable,” he added.
” And especially not when juxtaposed with the dire situation on Main Street, and on state and local government balance sheets, where red ink not only matters, but can in fact be catastrophic.”
There it is in a nutshell.
Local governments are nailed not to the Cross of Gold, but to the cross of Calvinist-German pro-cyclical deficit requirements. You might think that rational people have washed their hands of the notion that austerity cures recessions. WRONG!
Main Street has the bankruptcy “out”, though it comes with the cost of seven years in Credit Rating purgatory.
One of my many “pet peeves” is that in the US, entrepreneurs and companies which fail and declare bankruptcy are hailed and held up as examples of the vibrancy and flexibility of US capitalism. But if a government or some common person does that, it’s considered to be a moral failing.