Insights and Market Perspectives
October 27, 2021
A Final Deal Isn't Imminent - New Confusion on Taxes
October 27, 2021
IF YOU HEAR CHUCK SCHUMER OR NANCY PELOSI proclaim that a final tax and spending bill is close to enactment, don't believe them.
THE DYSFUNCTIONAL DEMOCRATS are hopelessly deadlocked on several issues - including how to raise revenues to pay for nearly $2 trillion in new social spending; we reiterate that a billionaires tax may not be the answer.
DEMOCRATS WANT TO GIVE PRESIDENT BIDEN a victory ahead of his European trip, but he'll be leaving town tomorrow without a final deal.
EVEN A VAGUE "AGREEMENT IN PRINCIPLE" is days away; a truly final deal, with completed legislative language, is probably weeks away.
THE LATEST CONTROVERSY is in the House Ways and Means Committee, which may have to re-write its tax proposal to accommodate last minute changes. But its furious chairman, Richard Neal, is balking at new proposals from Senate progressives that haven't been vetted. Tax experts believe a billionaires tax would be a nightmare to enforce - and may unconstitutional.
OTHER DISPUTES PERSIST, including the insistence by Sen. Bernie Sanders that Medicare include vision, hearing and dental aid, which is on thin ice because Sen. Joe Manchin doesn't want to pay for it. Other issues include the duration of paid leave, the shape of a corporate minimum tax, and whether to totally kill an attempt to have the IRS snoop into bank account activity (Manchin declared this dead yesterday).
UNLIKE THE TIGHT-LIPPED AND ENIGMATIC Sen. Kyrsten Sinema, Manchin seems to be relishing the attention - meeting nearly daily with Biden, trailed by a press corps that hangs Manchin's every word, then dining with power brokers at Georgetown's legendary Cafe Milano.
BOTTOM LINE: There's a 40% chance this entire package could collapse, especially if there's scathing scoring from the Congressional Budget Office. But we think there's a 60% chance that a bill could come into focus within a few days, with a final package enacted later in November.
THEN IT WILL BE ON TO THE DEBT CEILING, which has to be raised in early December. Democrats think they can win public support in the debate over debt default - but after this chaotic fight over spending and taxes, the public sees incompetence in Washington, with Democrats justifiably getting most of the blame.
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