- House Committees wrap up work on pandemic aid bill ahead of next week’s Congressional recess
- Feb U.S. consumer sentiment expected to improveÂ
- Covid infections fall another notch
House Committees wrap up work on pandemic aid bill ahead of next week’s Congressional recess — House Committees are expected to wrap up their work on the $1.9 trillion pandemic aid bill as soon as today. The House is scheduled to be in recess next week.
The House will return to Washington on February 22 and vote on the $1.9 trillion pandemic aid bill as soon as February 23.
In the Senate, the Trump trial could end as soon as this weekend. As soon as the trial is over, the Senate will leave Washington for next week’s previously-scheduled recess.
When the Senate returns to session on February 22, its two main jobs will be to confirm more Biden administration officials and to work on the pandemic aid bill after it is passed by the House. Democrats want to get final approval of the pandemic aid bill before unemployment benefits expire in mid-March.
There is still some uncertainty about whether the bill’s final size will be the full $1.9 trillion, or whether the Senate will whittle it down. Democrats in the Senate cannot afford to lose a single vote, meaning any single Democratic Senator could force a cutback in the size of certain areas of the bill. Goldman Sachs recently forecasted that the final bill will be $1.5 trillion.
Meanwhile, President Biden is already looking ahead to the infrastructure bill that he promised during his campaign. Mr. Biden on Thursday met with bipartisan Senators for early discussions on an infrastructure bill. Republicans are not likely to be enthusiastic about the bill since they refused to pass an infrastructure ill even when they had full control of Washington.
In all likelihood, Democrats will be forced to use the budget reconciliation process again to pass an infrastructure bill. Since Democrats can use the budget reconciliation process only once per fiscal year, the markets will be watching carefully to see how much spending gets stuffed into that bill and whether tax increases are attached to that bill.
The only way Democrats will get any tax increases passed is through reconciliation, bypassing the Republican filibuster power for regular legislation. Mr. Biden has said he does not want to raise taxes during the pandemic, but tax increases could be timed to take effect next year when the pandemic is likely to be over and the economy should be mostly back on its feet.
Mr. Biden during his campaign proposed a hike in the minimum corporate tax rate to 28% from 21% and a tax hike on people making more than $400,000 per year. The U.S. stock market might get more worried about a corporate tax hike later this year as the second budget reconciliation bill starts to come together.
Feb U.S. consumer sentiment expected to improve — The consensus is for today’s preliminary-Feb University of Michigan U.S. consumer sentiment index to rise by +1.8 to 80.8, more than reversing January’s -1.7 point decline to 79.0.
U.S. consumer sentiment in early February is expected to improve somewhat since the pandemic statistics improved and some areas started to ease restrictions. In addition, political uncertainty started to decline after the presidential transfer of power took place on January 20 as scheduled.
However, U.S. consumer sentiment in general remains in poor shape and has shown a lackluster recovery from last April’s 9-year low. U.S. consumers continue to be hemmed in by the pandemic, which is still hurting restaurant, travel, and entertainment spending.
In addition, the U.S. labor market remains in disastrous shape, with a net 10 million jobs still lost due to the pandemic. The unemployment rate remains extremely high at 6.3%, and would be even worse if that figure included the many people who have left the labor market for pandemic reasons such as to care for children.
U.S. consumer sentiment is not likely to fully recover until the pandemic is over and life has returned nearly to normal. Based on current trends, that is not likely to happen until next year.
Covid infections fall another notch — The 7-day average of new U.S. Covid infections on Thursday fell to a new 3-1/4 month low of 100,983, according to data compiled by Bloomberg.
In some excellent news, the number of Covid deaths has finally started dropping, as that lagging figure responds to reduced initial infections and hospitalizations. The 7-day average of Covid deaths on Thursday fell to a 5-week low of 2,758.
The sharp decline in the new-infection rate is due to (1) continued public restrictions, mask requirements, and social distancing measures, (2) the fact that as much as 20% of the U.S. population now has some Covid immunity from either having recovered from the disease or having had at least one vaccination dose, and (3) the possibility that Covid is seeing a seasonal drop such as that seen for flu around this time of year. However, the wildcard continues to be the Covid variants, which could spread quickly and evade current vaccines.
