Biden’s ‘Morning in America’ moment carries risks – Politico

biden’s-‘morning-in-america’-moment-carries-risks-–-politico

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Biden’s “Morning in America” moment — I write here about the nearly $2 trillion stimulus package about to pass the House and head to President Biden’s desk, the largest injection of federal cash into a growing economy in U.S. history. And it follows $4 trillion already approved. Oh and the White House still wants trillions more in stimulus spending this year through a sweeping infrastructure package.

What comes next is now the subject of fevered economic debate … It could be a Morning in America moment that further turbocharges an economy already primed to pop, reduces economic inequality and lofts Biden to the kind of economic hero status enjoyed by the likes of Franklin Delano Roosevelt after the Depression and Ronald Reagan in the boom-time 1980s.

The downside risk — Or it could be a fiery accelerant for global markets as gas prices surge, home prices jump, speculative assets soar and investors increasingly fear the kind of sharp inflation spike that can hit with remarkable speed if the government pours too much gasoline on an already warming economy.

Len Burman, a Syracuse University economist and co-founder of the Tax Policy Center, tells me: “If it works out well, Biden will be viewed as a hero and he’ll deserve it… This is the first time that we’ve ever really provided enough stimulus, and the risk is that it will be too much. And inflation is a real risk. But if it works out badly, at least we’ll know the result of a grand experiment like this.”

Markets could take a hit … but so what — Moody’s Mark Zandi tells me: “There really is no choice but to provide this kind of support, and we’ve been living with sub-optimal inflation for almost two decades … Bring on the inflation. Let’s see it before we worry about it. And interest rates are too low, anyway. Investors are not at all prepared for higher rates and inflation.”

“Markets are frothy .. And it would not be bad to take some starch out of them sooner rather than later before these bubbles can inflate much further.” That is the most sanguine view of the new shower of cash about to cascade down on America: A gentle readjustment in markets, slightly higher interest rates in the economy and much lower unemployment alongside a sharp reduction in economic inequality. It’s the Biden dream scenario.

GOOD WEDNESDAY MORNING — Happy Humpday and welcome to spring-like weather! Email me on [email protected] and follow me on Twitter @morningmoneyben.

House is expected to approve Biden’s Covid stimulus plan and send it to the president’s desk … In the afternoon, Biden will host an event with the CEOs of Johnson & Johnson and Merck … House Financial Services has a hearing at 10: 00 a.m. on “Justice for All: Achieving Racial Equity Through Fair Access to Housing and Financial Services” …

Senate Banking expected to vote on nominates of Gary Gensler for SEC and Rohit Chopra for CFPB … Senate Budget expected to vote on Shalanda Young to be deputy OMB director … Consumer Prices at 8: 30 a.m. expected to rise 0.4% headline and 0.2% core …

COVID’S GENERATIONAL IMPACT — Via Morning Consult data out this a.m.: “12 months into the pandemic, the generational divide in consumer confidence has grown even larger: the virus posed a greater economic and health risk to baby Boomers than to GenZers or Millennials.

“Low income consumers were slowest to rebound in confidence: The CARES Act set the foundation for economic recovery over the summer, but job and pay losses remain concentrated among low income Americans, limiting the rebound in confidence.”

BITCOIN’S GREEN PROBLEM — NYT’s Andrew Ross Sorkin: “‘Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing.’ That was what Bill Gates recently told me.

“At a time when companies and investors increasingly say they are focused on climate and sustainability issues, some of them may be about to collide with the reality of another financial trend, one currently worth about $1 trillion: Bitcoin. … [D]epending on which study you read, the annual carbon emissions from the electricity required to mine Bitcoin and process its transactions are equal to the amount emitted by all of New Zealand. Or Argentina.”

OCC PICK IMPACT — Cowen’s Jaret Seiberg: “Biden is increasingly likely to name Mehrsa Baradaran as Comptroller. We are not expecting a major different in how banks are regulated relative to Michael Barr, who was expected to get the job. That means tougher oversight and bigger penalties for violations.

“This is a progressive win, but could pave way for a moderate as Fed vice chair. … Both are progressive voices who will be tougher on the big banks. We expect she will grab a bigger spotlight than Barr so she can be a leading voice within the Biden administration on economic inclusion.”

MORE PROGRESSIVE WINS ON TECH — Our Leah Nylen: “Biden is elating progressive Democrats by filling two key positions with critics of the tech industry — a pair of legal scholars that Republicans have long derided as the founders of a ‘hipster antitrust’ movement.

“But some opponents of the big tech companies are prepared to be disappointed by Biden’s next moves, when he chooses the most powerful players in his antitrust orbit.”

ASIA FOLLOWS U.S. HIGHER — Reuters: “Asian stocks were set to track U.S. gains on Wednesday, as falling bond yields eased concerns about surging inflation, although focus will shift to Chinese markets amid worries about policy tightening in the world’s second-largest economy.

“With eyes on the $120 billion auctions of 3-, 10- and 30-year Treasuries this week, U.S. Treasury yields fell after a weak 7-year note sale that prompted a spike in yields two weeks ago was followed by another soft auction last week.”

TURMOIL IN SPAC-LAND — WSJ’s Amrith Ramkumar: “Shares of technology firms and special-purpose acquisition companies surged on Tuesday, bouncing back after a weekslong streak of declines that pushed some popular SPACs down 20% or more in a month.

“The Nasdaq Composite surged 3.7% for its biggest advance since November, trimming a recent slide that just one day earlier dragged it more than 10% below the high it reached in February. Shares of electric-car company Tesla Inc. rebounded 20%, adding more than $100 billion to the company’s market value, or roughly twice the value of Ford Motor Co.”

TECH STORMS BACK — FT’s Leke Oso Alabi, Aziza Kasumov and Colby Smith: “US stocks rallied strongly on Tuesday as big tech names such as Tesla and Apple roared higher after a sell-off the previous day. The technology-heavy Nasdaq Composite gained 3.7 per cent, a day after the benchmark slumped into correction territory.

“Tuesday’s rise was the index’s best one-day performance since November. Wall Street’s benchmark S&P 500 rose 1.4 per cent, giving the blue-chip index its second gain in six sessions. Some analysts said the big move higher on Tuesday was propelled by so-called short covering, when investors who have bet on a stock falling need to purchase shares to close their trades.”

MORE PPP PROBLEMS — Our Zachary Warmbrodt: “Banks and other businesses are pressing the Biden administration and Congress to keep the government’s largest small business aid program running beyond its March 31 expiration date, warning that struggling employers need more time to obtain the economic lifeline.

“Banks responsible for doling out billions of dollars in loans under the Paycheck Protection Program are already beginning to close down their application portals early so they can process requests and ensure they can clear new government fraud checks. Bank of America, the No. 2 PPP lender by dollar volume, planned to stop taking applications on Tuesday so it can help customers meet the deadline.”

TRUMP TIGHTENS MONEY GRIP ON GOP — Our Alex Isenstadt: “Donald Trump is tightening his grip on the Republican Party in the most painful way possible — he’s threatening to starve the GOP of funding.

“Just in the past few weeks, Trump declared at the Conservative Political Action Conference that the ‘only’ way to give to Trump-aligned candidates was through Save America, his leadership political action committee, circumventing the party campaign arms devoted to electing Republicans. He has criticized the party for how it spends donor money, and his attorneys have sent cease-and-desist letters to GOP committees demanding they stop using his name in fundraising appeals.”

DIVERSITY IN FOCUS AT FED — Reuters’ Ann Saphir: “Over more than a century of the Federal Reserve’s existence, the critical job of controlling the cost of money and the availability of credit has fallen mostly to white men, even though women and minorities have for decades made up a majority of the workforce in an increasingly diverse economy.

“Inside the Fed there is a move to change that, made more urgent in the wake of last year’s pandemic downturn that hit women and people of color particularly hard. To that end the central bank is remaking an important part of its leadership structure – the 108 people who serve as directors at its regional banks – to look more like America.”

RESTAURANTS BOUNCE BACK — FT’s Taylor Nicole Rogers: “In December, Justine Masters let go a third of the staff at her Jamaican and British fusion restaurant The Edge Harlem ‘in order to survive’.

“But now she is one of an increasing number of restaurant owners expanding their workforces as warmer weather boosts demand for al fresco eating while the return of indoor dining brings the promise of more customers. Restaurants and bars added 285,900 jobs in February … a massive increase over the 17,000 added in January.”

TRANSITIONS — Addar Levi has been hired as deputy general counsel at Treasury. She most recently was general counsel for the Obama Family Office and the Barack Obama Foundation and was former President Obama’s lawyer on his deals with Netflix and Spotify.

    • Mark McQuillian @mcqdc
    • Ben White @morningmoneyben
    • Aubree Eliza Weaver @aubreeeweaver
    • Victoria Guida @vtg2
    • Katy O’Donnell @katyodonnell_
    • Zachary Warmbrodt @Zachary
    • Kellie Mejdrich @kelmej

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