Page 13 - Investment Advisor - October 2021

lines never leads to good policy or sound spending package “is clearly not credibly the expected path forward,” Raymond
decisions. I have always said if I can’t paid for, so Democrats are looking at Plan James’ analysts said. “This is especial-
explain it, I can’t vote for it, and I can’t B — even more new taxes,” Valliere said. ly applicable to the tax and revenue
explain why my Democratic colleagues Bloomberg reported that Democrats conversations, with political dynam-
are rushing to spend $3.5 trillion.” “are seeking a wide range of controver- ics broadly supporting less expansive
Published reports stated that Manchin sial taxes that would be a nightmare for impact, however negotiations remain
said he won’t support a spending bill the financial services industry — a tax highly fluid.”
that is more than $1.5 trillion. on stock buybacks, curbs on executive Maya MacGuineas, president of the
Manchin’s floor, Valliere said, “enraged compensation, a dramatic hike in Biden’s Committee for a Responsible Federal
progressives in the House, who will not capital gains tax, plus a potential carbon Budget, said on Sept 7 in a statement
agree to a measly $1.5 trillion. Thus we tax,” Valliere said. that “to meet the President’s goal of
think that a ‘pox on both your houses’ Manchin hasn’t weighed in on this fully paying for his legislative priori-
mood may prevail, with the massive $3.5 “trial balloon,” Valliere continued, “but ties, it is important lawmakers not take
trillion social spending bill gridlocked we’d guess he would be opposed, along reasonable pay-fors off the table. Rather,
for weeks to come — a source of uncer- with Sen. Kyrsten Sinema,” D-Ariz. “If they should work to find more offsets
tainty for the markets, which and scale back the reconcili-
want to see more stimulus as the While Sen. Joe Manchin’s ation package as necessary to
economic outlook turns cloudy avoid adding to the already high
because of Delta.” call on Sept. 2 for lawmakers national debt.”
In the op-ed, Manchin said to “pause” the budget She noted the opposition to
he couldn’t back “a $3.5 trillion “ideas to increase corporate taxes,
bill, or anywhere near that level reconciliation process likely lower prescription drug costs,
of additional spending, with- won’t delay its passage, [he] and close the step-up basis loophole
out greater clarity about why that allows people to avoid capital
Congress chooses to ignore the other Democrats will demand a gains taxes, tax carbon emissions,
serious effects inflation and debt and even improve tax compli-
have on existing government reconciliation bill that includes ance. And the political pledge not
programs. This is even more pared-down tax measures — to increase taxes on any family
important now as the Social making less than $400,000 per
Security and Medicare Trustees setting up weeks of debate. year stands squarely in the way
have sounded the alarm that of a number of sensible policies.”
these life-saving programs will be insol- tax hikes are pared back, the second To make matters worse, MacGuineas
vent and benefits could start to be reduced infrastructure bill would be in trouble continued, “some politicians are actu-
as soon as 2026 for Medicare and 2033, a because there’s no way to pay for it.” ally talking about cutting taxes for very
year earlier than previously projected, for Raymond James’ analysts said that high earners by repealing the cap on the
Social Security.” Manchin’s call for a pause on reconcilia- state and local tax deduction.
tion legislation is “largely consistent with “Politically, it is much easier to say
PELOSI TO PUSH RECONCILIATION his political position on the total level of what things you won’t do when it comes
House Speaker Nancy Pelosi, D-Calif., spending, which will accelerate efforts by to pay-fors than what things you will —
hoped she could get a House vote on the lawmakers to scale back the overall pack- but with a debt as large as ours, we just
infrastructure and budget reconciliation age. While [Manchin’s] more public posi- don’t have that luxury. If politicians
bills by Sept. 27, Valliere said, but “the tion may add tension to negotiations and can’t agree to $3.5 trillion in offsets, they
Senate version will look much different.” delay the timeline, effectively we see the certainly shouldn’t enact $3.5 trillion of
Friedman added that he doubts that topline moving down to match expected spending and tax breaks.”
Manchin’s concerns will “affect Pelosi’s revenue along the lines of the desire of MacGuineas: “Develop a plan to gradu-
The right approach, according to
lawmakers to have a ‘fully paid for’ bill.”
decision to go forward with the House
Al Drago/Bloomberg vote as she has promised her members.” es? “Expect a broad range of policy ally improve our debt situation before
What does this mean for tax increas-
Senate Majority Leader Chuck
enacting new spending or tax cuts.”
proposals ... consistent with our view
Schumer, D-N.Y., has said he wanted a
reconciliation bill done by Sept. 15.
that early negotiating dynamics will
Washington Bureau Chief Melanie Waddell
President Joe Biden’s $3.5 trillion
present a ‘menu’ of options rather than
can be reached at [email protected].
OCTOBER 2021 INVESTMENT ADVISOR 11