Make no mistake, Biden’s $2.3 Trillion “infrastructure” spending program and $1.8 Trillion “American Families” spending program will pass Congress. That’s bad news for Americans and small business and good news for Amazon (AMZN) and Walmart (WMT).
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- First: we would not be having this conversation if the Federal Reserve was willing to push back against profligate fiscal spending. No large fiscal spending program would be possible without a complicit Federal Reserve. However, as we have previously written the Federal Reserve has become an appendage of the U.S. Treasury.
- Second: the GOP has indicated it is on-board with $800 billion of the $2.3 Trillion Infrastructure spending program. That means the real number the GOP is on-board with is $1 Trillion or more. The delta that remains between the $2.3 Trillion and the approximately $1 Trillion can pass the Senate through budget reconciliation (reconciliation requires a simple majority rather than 60 votes). The same is true of Biden’s $1.8 Trillion American Families plan.
- Third: the risk to the Democrat party in forcing through these spending programs is that current price inflation and the price inflation that is certain to follow is likely to have adverse consequences (our opinion), at the Mid-Term ballot box in November 2022 and in the 2024 General Election.
- Bad for Americans, Good for Amazon (AMZN) and Walmart (WMT): Americans of course have been hit by the inflation tax and will continue to be hurt by it (taxation without representation), until the Fed demonstrates courage and allows rates to climb and/or demonstrates a willingness to say “no” to subsidizing fiscal spending. Amazon and Walmart of course will benefit at the expense of small businesses. Small business margins have compressed as small businesses are not able to pass on 100% of the costs they have had to absorb due to wage inflation created by illogical Federal Unemployment benefits. That of course assumes that a given small business has been able to hire staff.