Wednesday, June 2, 2021

Very Haruspicious

A Roman haruspex examines the entrails of a sheep. By Mary Evans Picture Library.

Me earlier today (not to mention 10 days ago):

And guess who agrees with me, give or take a month or so and a few hundred billion dollars—a team of economists from Goldman Sachs, predicting that Biden's negotiations will break down and the big plan (Jobs plus Families proposals) will be passed with Democratic votes alone, per Ben Winck/Insider:

Negotiations have so far been fairly bipartisan, with Republicans meeting with Biden in recent weeks to mull over their respective plans. Yet Goldman sees the White House eventually ditching the GOP and pushing forward with Democratic support only.

"Although bipartisan discussions on an infrastructure package are continuing, the already low odds of success appear to be dwindling further," the team led by Jan Hatzius said in a note to clients....

The House will probably pass the reconciliation bill in July, and while the Senate could start working on the bill later next month, it's more likely that Senate Democrats don't approve the measure until September or October, the team said.

Using the reconciliation process will also force Democrats to combine Biden's American Families Plan with his infrastructure package, the economists added. The package will cost sightly more than $3 trillion, and half of the spending will be offset with tax increases, according to Goldman.

I don't mind saying I was starting to get worried about this as Biden broke his Memorial Day deadline to take another GOP meeting, this afternoon, with Moore Capito, but that's basically part of the necessary theater. I shouldn't put it that way—Biden, unlike certain former real estate magnates, doesn't bluff, and when he makes an offer he's prepared to go with it—nevertheless, as I'd hoped, he was never going to waver on the tax question, raising some very large portion of the cost with taxes on earners over $400,000 and corporations and none of it on regressive collections, and Republicans were never going to accept that, and he (and Schumer) must have been pretty confident of that.

Offsetting only half the spending, because, as I was explaining last week, interest rates on federal paper will be expected to stay close to zero through something like 2024 and we might as well keep borrowing while the borrowing's good, but the tax reform will come, and with it a whole lot of those really good things (not all of them: Republicans will be given another chance to jump on board, and there's also that other reconciliation opportunity coming up with the raising of the debt ceiling). And not until fall because the Senate's job in meeting its own requirements for a reconciliation bill is going to be extremely complicated (unlike March's Covid relief bill it's going to have these massive tax provisions, and will have to make projections 10 and 15 years into the future). But it can be done.

Do I really believe Goldman? They're not always right. But they've been doing exceptionally well so far this year, and the other thing is I'm certain they came to their conclusion in a totally different way from the way I did, and if they get the same results all the same, that's a good sign.

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