Moneybeat - The Democrats’ political emergency

MYRNA BROWN, HOST: Next up on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: Financial analyst and adviser David Bahnsen joins us now for our weekly conversation and commentary on markets and the economy.

David, good morning.

DAVID BAHNSEN, GUEST: Good morning, Nick, good to be with you.

EICHER: It is worth starting out with what’s happening in Congress? It seems as though there’s been a good bit of intrigue around what might happen with the spending and tax plan. I mean, this thing was supposed to be done by September and we keep reading that key parts are falling by the wayside.

BAHNSEN: Yeah, I mean, I think it's a fascinating week. The concessions that the moderates have gotten out of the White House that the White House is now having to sell the progressives really indicates where this thing ended up going, it's become a political emergency, that they have to get some deal done. Every focus right now is on face saving. And there isn't a single sacred cow that hasn't been sacrificed, apparently, from what we're hearing, some of which are sources I have on the hill, and others are things in the press and things they're actually explicitly saying. They're not going to raise taxes on companies, they're not going to raise taxes on high net worth individuals or on investment. If you think about where we were, for most of this process, and the things people were afraid of with the corporate tax, or the capital gain tax, the child tax credit will only be extended one year, they were talking about making it permanent, they were talking about a huge burdensome climate bill around electricity production, that entire thing has been scrapped. So we will have to wait for the ultimate version, they're gonna get a price tag of over a trillion. And I am quite sure there will be plenty of stuff to complain about and criticize and not like, but there's just no way that the conclusion of this is anything other than James Madison and Thomas Jefferson and Alexander Hamilton did us a great favor, because the way in which our government works, the separation of powers, the organizational formation of the legislature really served to limit what could have been an incredibly abusive expansion of government.

EICHER: I picture Republicans in the Senate with a bowl of popcorn watching all this play out. They have zero role here. It’s all about the various factions among Democrats, and we’re seeing open hostility between, for example, Bernie Sanders, the Senate budget chairman, trying to pressure the West Virginia moderate Democrat Joe Manchin by writing an op-ed in the biggest newspaper in the state, in West Virginia. And Manchin just blew Sanders off. Manchin issued a statement that “no op-ed from a self-declared … socialist” is going to make him drop his objection to a quote-unquote “reckless expansion” of government. Manchin’s really bold, he seems to have the upper hand.

BAHNSEN: You know, what's interesting, for our listeners, Kristen Sinema really kind of became more important in this negotiation than Manchin. Now, as a matter of technicality, anybody with 50 votes, when you have 50 senators, and you need all 50, anyone is a swing vote, if they so choose to be. It's just that other moderates who had certain things they wanted, were either willing to kind of go along to get along, or they lobbied for their case behind the scenes. But Sinema was far more influential in the bill on reforming some of the tax abusiveness that they had planned and Manchin was more influential on some of the environmental aspects. So they each kind of had different parts to the bill. Manchin also really helped to get the overall price tag down. But I think there's just both interesting parts of both of them played the warfare between Sanders and Manchin is not much of a story because there's nobody in West Virginia who cared who is fond of the more progressive Vermont side and and then nobody in Vermont who would like Manchin anyways, they weren't really meant to be a kind of coalition so to speak. They're they're already at odds just demographically and electorally, but they Yeah, they had a little spat that played out a bit in the public there. That's not going to change. There's a lot of wounds from this that are going to impact that party. And really, quite candidly, the Virginia Governor race, I can't say enough. I don't think by the way it needs to be ‘Oh, the only outcome that really ends up mattering is if the Republican candidate wins’. That is huge. It's an earthquake in American political atmosphere. But even if the Democrat wins by one or two points in a state that Joe Biden just won by over 10 points, I still think that represents a signal through the national political mood that will have a lot of impact in 2022, as a lot of House Democrats have to run for reelection next year.

EICHER: Before we go here, David, I know you wanted to wait for November, but can you say there are some early signs that the jobs picture really has improved since the extended government unemployment benefits came to an end?

BAHNSEN: I don't know if you caught my vine in my investment writing this week, but I said, I'm gonna wait one more week to fully claim victory on this. The idea that the Federal supplement rolling off clearly had unbelievable impact, because now there's no question that the average week by week of the initial jobless claims, and especially those continuing claims, is in fact really starting to drop right around the time period that we sort of forecasted it would - with the federal supplement coming off. You know, you always want to make sure after two or three weeks of data, it's good to get one more week to just kind of verify the trend we're seeing. But yes, the claims on initial jobless and the continuing claims have definitely been going down. And I think it's in the exact time pattern you would have expected after the September roll off.

EICHER: David Bahnsen, financial analyst and adviser. He writes at dividendcafe.com. You can sign up there for his good email newsletter, David, thanks!

BAHNSEN: Good as always, Nick. Thanks so much.

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