Christmas Grinch Alert: There’s Nothing Under the Tree

BAH HUMBUG !! Democrats hit the wall yesterday, conceding that their $2 trillion-plus social spending bill is virtually dead. Even if Sen. Joe Manchin agrees to a compromise, there’s probably not time to get the Senate version finalized; parts of it have not even been written.

PLAN B seems to be a last-ditch attempt to change the subject — working on a voting reform bill, but the Democrats’ other dissenter, Kyrsten Sinema, indicated that she would not approve any deal that requires changing filibuster rules.

THIS LEAVES PRESIDENT BIDEN perilously close to failing on two of his major legislative goals as the Christmas break begins within a week. The issue has shifted — it isn’t whether these bills can pass before the recess; it’s whether anything can pass when lawmakers return in January.

WE’VE HEARD THE SAME REFRAIN from Chuck Schumer — the Senate is close to passing the Build Back Better bill, and he will pledge to get the package enacted later this winter. But the basic obstacle won’t change next month — Manchin has huge issues with specific provisions, the bill’s cost, and its contribution to inflation.

THIS ISN’T SIMPLY A POLITICAL FIGHT — it potentially will remove fiscal stimulus just as the Fed is taking away the monetary punch bowl, and this will coincide with rising concern about the omicron variant — which may chill traveling, universities and professional sports; the latter may become a major development in coming days.

FAILURE TO PASS BIDEN’S SOCIAL SPENDING BILL jeopardizes the child tax credit, which expired yesterday. Unless there’s a separate bill in the next few days, monthly checks of several hundred dollars per child will not go out in early January, which unquestionably would be an economic headwind.

STILL ANOTHER HEADWIND could come early next year if the White House doesn’t extend the student loan moratorium, which would reimpose payments starting on Feb. 1 that would affect 41 million people.

AS WE WROTE YESTERDAY, Washington has over-done it on the stimulus; could we next over-do it on the restraint just as economic growth may be moderating? Yesterday’s limp retail sales report may have been a warning.

BELEAGUERED JEROME POWELL, who has been behind the curve on inflation, is counting on two shaky premises as the Fed turns hawkish: we’ve turned the corner on Covid, and Congress will provide more stimulus. But neither of those premises are certain, are they?

Related: Learning to Live With the Variants

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