AGF Management : What Joe Manchin Wants

Insights and Market Perspectives

Author: 8

January 7, 2022

WE TALKED WITH A SOURCE close to West Virginia Sen. Joe Manchin yesterday, and came away believing a scaled-back Build Back Better bill can pass by spring.

WHY THE OPTIMISM? Manchin has been vilified by most Democrats for the past few months, and he doesn't want to be known as the one Senator who cost Joe Biden the House and Senate in this fall's elections.

MANCHIN KNOWS THAT A DEAL - any deal - could boost the party's prospects in November, and it would benefit his poverty-stricken constituents. And like most Senators, he still may think about a long-shot scenario: could a moderate Democrat be on the party's presidential ticket if Biden doesn't run in 2024? Don't laugh, they all think that way late at night.

MANCHIN CAN ACCEPT MOST OF THE PROVISIONS in the failed $2 trillion package that crashed and burned in December. In fact, he has privately offered a compromise.

MANCHIN WOULD HAPPILY ACCEPT more funding for universal pre-kindergarten education, an expansion of Obamacare benefits, and a range of environmental proposals - as long as they aren't negative for West Virginia. He is very skeptical of big federal tax breaks for people who purchase electric cars but Manchin generally accepts higher taxes for the very wealthy and large profitable firms.

THE BIGGEST STUMBLING BLOCK, OF COURSE, is the child tax credit. Democrats greatly expanded the credit last year but that extension is ending, along with its generous monthly checks. A return to a less expensive benefit, not paid monthly, could be an economic headwind as Americans lose a benefit they depended on last year.

MANCHIN WANTS THE TAX CREDIT to be means-tested, and he wants a credible accounting of the costs. In the failed bill, Democrats funded key provisions like this one for only a year, even though they accept a premise that benefits would be extended annually. This gambit would lower the bill's price-tag, on paper.

THE KEY FACTOR, WE BELIEVE, is whether progressive Democrats can accept half a loaf. We think they don't have many options; something is better than nothing, especially if the Democrats don't have control of either house in 2023-24. Why not claim a victory, our source says, and accept what's do-able now?

THE FATE OF NEGOTIATIONS later this winter will depend on whether there's an atmosphere of trust. White House officials were furious last month when Manchin announced on a Sunday morning Fox interview that he would not support the bill. Exasperated Democrats say they will now focus on voting reform, but that's a steep uphill climb. The BBB bill has the sizzle.

BOTTOM LINE: We sense a mood among Democrats to resurrect the talks, and we think Manchin will engage with them. Chances of a $2 trillion-plus package are shaky, but prospects for a bill that costs less - with credible long-term funding - are actually pretty good. If Manchin and Biden can agree on an extension of the expanded child tax credit, a deal could be in sight.

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.

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.

©2022 AGF Management Limited. All rights reserved.