Big CARES Act 3.0 is not 100% guaranteed as few Centrist Democrats may oppose it

calendar 10/01/2021 - 20:21 UTC

As a harsh reality, under only one Democratic simple/slim majority in the Senate (VP Harris-tie breaking vote), even one Democrat or any of the two DNC supporting independents may cause a policy paralysis for a small bill by deciding not to vote for it along with party line. Overall, at a glance four centrist/moderate (fiscal hawks) Democrat Senators Manchin (West Virginia), Sinema and Mark Kelly (Arizona), Tester (Montana), and Bennet (Colorado) will be under watch to vote with fellow Democrats on key legislation that can pass with 51 votes (simple majority instead of the 60-vote threshold required to pass most legislation-filibuster proof).

A major filibuster-proof policy/bill (under special Senate rules) will also require 60 Senate members' support; i.e. at least 10-Republican Senators have to support it, even after all Democrat supports. And Democrats (Biden admin) may also gain a few RNC supports including Romney, who may officially ‘flips’ to DNC. The Senate filibuster rule remains in place under Biden admin, providing a Republican minority with a powerful tool to block Democratic bills. Democrats will likely try to work around the filibuster, either by using a special budget procedure known as reconciliation that lowers the voting total required for passage to 51 votes or by unilaterally ridding the Senate of the 60-vote threshold altogether.

Now if Democrats will try to end the Senate filibuster rule, it may be opposed by the above four moderate/centrist Democrat Senators and they may oppose various Liberal proposals on a case-to-case basis like additional $1400 (~$2000) stimulus checks, medicare for all or green stimulus. These centrist Democrat Senators are insisting on the age-old bipartisan agreement, considering the reality of the 50-50 Senate.

The next Senate Majority Leader Schumer (Democrat) also virtually admitted the reality of slim Senate Majority and the present filibuster rule and said: "For too long, much-needed help has been stalled or diluted by a Republican-led Senate and President Trump. That will change with a Democratic Senate, Democratic House, and a Democratic president. We are united wanting big, bold change. And we are going to sit down as a caucus and discuss the best ways to get that done”.

Even after Biden trifecta, the U.S. politics and policies will be under suspense as at least four centrist Democrat Senators may not support each & every agenda of Biden including the CASH Act ($2000 stimulus checks) and CARES Act 3.0. This may keep the runaway rally for stimulus-addicted Wall Street (Dow) as-well-as Gold in check.

For Biden admin, these centrist Democrats may also help in fiscal prudence and to keep a balance in excessive fiscal spending and discipline (political aspirations and fiscal reality). Politician Biden may have called for huge fiscal stimulus, tax hikes on riches at the time of the election campaign, but as President, he also needs to keep a balance on everything, considering the reality of surging U.S. fiscal deficit/debts and pandemic unemployment.

During Trump, Senate Majority Leader McConnell did the job of centrist by rejecting a huge CARES Act 2.0 and the need for $2000 stimulus checks for almost all Americans, even if they don’t deserve it. Thus under Biden admin, some of his Senators and most of the Republican Senators may continue to oppose the idea of a needless big CARES Act 3.0. Even some moderate/centrist House Democrats may oppose any big fiscal spending or other liberal policy measures. So, ultimately, Biden has to go for bipartisan legislation for every major policy/stimulus.

news banner

Bottom line:

The Biden trifecta does not mean a 100% guarantee of another big CARES Act for over $1T and CASH Act for around $465B (including $2000 stimulus checks) amid a fragile majority. Even some Senate Democrats including independent ally Sanders can switch positions in the Senate with filibusters. As the Biden majority is wafer-thin, he may prefer bipartisan agreement in all major policy matters to balance everything between COVID reliefs, fiscal prudence, re-regulations, and employment.

And to balance the fiscal side along with any big fiscal stimulus, Biden may try to fund that with some increase in corporate taxes (MAT-minimum alternate tax), additional tax on the super-rich, some types of tariffs on fossil fuel (carbon tax), and even digital tax. Also, apart from limited/small CARES Act 3.0 and a bipartisan infra stimulus (including green stimulus), there may not be any major fiscal stimulus by Biden admin in the foreseeable future amid progress of COVID vaccinations. Team Biden also expects Republican cooperation (after Trumpexit) for the U.S. economic recovery.

The materials contained on this document are not made by iFOREX but by an independent third party and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.