20.12.2021 – Build Back Better (BBB) is history for now: Democratic Senator Joe Manchin refuses to follow the Democrats. This means the Dems no longer have a majority in the Senate. U.S. futures dive.
Goldman downgrades GDP forecast
Goldman Sachs reacted immediately, cutting its forecast for U.S. gross domestic product after the no vote on BBB: 2 percent in Q1 (versus 3 percent previously), 3 percent in Q2 (versus 3.5 percent) and 2.75 percent in Q3 (versus 3 percent previously).
Manchin cross-posted yesterday to, of all places, Fox News television, the nemesis of the left-wing cultural chic. The man hails from West Virginia, we mean: in this lonely, remote state in the Appalachians, people have no sympathy for expensive government programs that primarily benefit the woken middle class on the East and West coasts. Official reading in our truth press: The planned $1.75 trillion for “Build Back Better” was intended to expand the social sector, the health and education systems, and climate protection. And a cross-reference: coal is mined in West Virginia and Manchin is said to have a stake in an energy company.
Boost for inflation
Now the rather less illuminated interpretation in this country: Manchin judged the actual cost of Build Back Better would be more like $4.5 trillion, citing the Congressional Budget Office. Proponents of the spending would obscure those numbers. The University of Pennsylvania also concludes in its Wharton Budget Model that the cost over a decade is $4.6 trillion. And the conservative nonprofit Citizens for Self-Governance sees even closer to $5 trillion. Manchin and opposition Republicans argue that the government money will further fuel inflation and also increase the tax burden precisely because the thing is not soundly financed. Incidentally, the U.S. Internal Revenue Service (IRS) is currently looking for thousands of new tax investigators.
Gifts for the eco-industry
Some details: The deal includes a maximum subsidy of $12,500 for the purchase of an e-car – which only the green middle class can afford anyway. Car manufacturers are likely to raise their prices in a hurry. There will also be a $320 billion tax break for companies and individuals who install solar panels. Here, too, prices are likely to rise and, as always, a government stimulus will fizzle out. Further, a so-called Civilian Climate Corps is to be created, employing some 300,000 people to take care of the environment.
Stoking inflation
Manchin, for one, opposes the woken program, saying, “I cannot take that risk with a staggering debt of more than $29 trillion and inflation taxes that are real and harmful to every hard-working American at the gasoline pumps, grocery stores and utility bills with no end in sight.” He also pointed to energy dependence on foreign countries if all the green programs were enforced.
Our conclusion: the stock market is taking cover for now. However, nothing is ever ruled out forever in the Washington, D.C., quagmire – it’s quite possible that Manchin will be swayed in parts. Moreover, Wall Street could quickly come to the conclusion that bad news is good news – and that the Federal Reserve did not have the failure of BBB on its radar. In which case the Fed would have to pump more money into the market. Bernstein Bank keeps an eye on the matter for you!
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