Summary

James Lucier and Kim Monk of Capital Alpha Partners focused their discussion on what is to be expected from Washington throughout 2021. Joe Biden is the ‘$6 trillion man’, with previous COVID relief bills passed and upcoming plans directed to jobs, families, and other necessary parts not yet specifically outlined. Looking forward, James believes Congress will pass one bill of less than $2 trillion net by Thanksgiving in November, during the hard break when Congress is able to force action. Alternatively, Congress will pass one bill of less than $2 trillion net by its August recess, and attempt another in November, however that would be likely to fail. Given this will be passed as a fiscal package, the biggest component will be tax credits-- split between clean energy, grid and EVs, low income and paid leave and ACA premiums. Hard spending directly from the government will cover hard infrastructure (water, power, transport), schools and public buildings, affordable housing and broadband. $600 billion is estimated for new revenue to be raised, to partially offset the program cost.

James moved on to discuss the budget rules in the US. Well-meaning reforms now statutory law have turned the process of reducing deficits through spending cuts and tax increases onto its head, with massive fiscal spending in part down to impatience with the old system. Moving on, the differences between the COVID relief bill and the expected infrastructure package were noted. Whilst at a similar price, the COVID bill was passed quickly through Congress due to a feeling that something had to be done. The infrastructure package covers a wide range of topics, with not all possible to achieve, leading to discussions on what will actually be feasible. The COVID bill had little opposition, centered around giving money away whereas this upcoming package involves increasing taxes, particularly corporate tax, more likely to provoke opposition. James envisions a corporate tax increase to 25% is highly likely as well as a global minimum tax. Individual income tax and capital gains are far more controversial compared to the sum they would raise and so are not as guaranteed.

Kim went on to talk about healthcare, beginning by stating that Biden will not attempt a big healthcare reform. In Biden’s $215 billion American Families Plan he has a plan for Bernie Sanders-esque healthcare expansion but in reality, the American Families Plan only offers a fairly modest ACA expansion, with Kim calling this Biden’s healthcare head fake. Expectations are for Congress to repeal the Medicare rebate rule in order to pay for this plan, leaving savings of up to $200 billion. Biden’s calls for drug pricing reforms but not putting it in his plan resembles having his cake and eating it too – without 50 Democrats in the Senate, a draconian drug pricing reform is far-fetched and unrealistic. An expansive healthcare coverage bill closer to $350 billion as well as passing HR3 are to be expected in the House, but it will likely die in the Senate. Kim concludes by saying she sees fairly incremental healthcare coverage expansion, offset with fairly incremental to almost irrelevant healthcare offsets.

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