Confounding and Confusing Events 12/6/21
The Infrastructure Investment and Jobs Act which was recently signed into law provides roughly 1.2 trillion of funding, of which 550 billion is new money which will be directed 51% towards modernizing and making improvements to transportation and infrastructure, with the majority of that funding reserved for highways, roads and bridges. Other areas which will receive significant funding are the power grid, rail services, broadband, water infrastructure, and a large number of other potential sectors that will receive funding. It is interesting to note that environmental remediation received a relatively small sum of $21 billion, as did electric and low emission vehicles - about $15 billion. Obviously, we need to make sure that these funds get to our district and its surrounding communities, as these could have important short and long-term employment impacts.
The Justice Department has announced it will ramp up prosecutions of unruly airline passengers. Given what we see on the news and what we hear from friends and neighbors about the goings on in airports and on airlines, this is an important move by the Justice Department. My recommendation is – don’t argue with the crew and keep your cool.
The GOP, in a not unusual bit of irony, have fought mask and vaccine mandates vigorously, both at the local, state, and federal level. They then turn around and blame President Biden because the CORONA virus continues to spread, cause hospitalizations, and deaths. The fact they see no causal relationship between these factors never ceases to amaze me. Then again, many Republicans who voted against various funding bills, including our own Congresswoman Stefanik, nonetheless, find it totally acceptable to take credit for the funds that their constituents receive. Not only did they not vote for the bills, but they have no control over how these funds are dispersed. If you don’t see the irony in this, then we are all in big trouble.
One relatively hidden aspect of the recent market retreat is, of course, the exposure that this creates for those who operate off a margin account, or other borrowed funds. This is a practice used not infrequently where you take monies other than your own in order to increase your investments with the risk that if those investments go south, then you are under water, and thus, the repayment will cost you funds from your principal. This is how many market crashes have started, in particular one can point to 1929 as maybe the most dramatic example, but it also happened in 2008, in a more sophisticated fashion. Nonetheless, many of the banking institutions and investors were all over leveraged in 2008 which accelerated and deepened the crash. This is truly a situation in which the axiom “buyer beware” is appropriate.
As the Omicron variant spreads with little factual information currently available, and scientists saying it will take approximately two weeks to gather sufficient data to be able to analyze the impact of the variant, countries are being very cautious. In New York, Governor Hochul has declared a state of emergency, maybe a bit of over reaction, but given what we know about these variants and the potential to cause significant numbers of hospitalizations and deaths, maybe it is appropriate. Unfortunately, the question can’t be answered until we get 2 or 3 or weeks down the road to see exactly how it plays out. I think it is important, as I have said many times in my commentaries, that people use common sense and remain vigilant in terms of social distancing, mask wearing and, of course, getting vaccinated.
On the inflation front, the Eurozone authorities believe that the consumer price inflation has at least temporarily peaked, and therefore, the European Central Bank will not likely to raise interest rates next year. Our inflation continues, but as pointed out in last week’s commentary, there are a number of reasons for this which are essentially being ignored by the media and the public in general. I think it is worth going back and doing a thorough analysis before one takes the step of being hypercritical of either the Fed or the President, many of these inflationary trends were in place before Mr. Biden took office. Let me just remind you, that housing prices went up 13% in the period May of 2020 to May of 2021, if that is not the cause of significant inflation, then I think our definitions must be incredibly confused.
Auto content rules appear to be the next flash point for the USMCA. Canada appears to be tiring of what they see as US protectionism. It is a difficult line to walk with your largest trading partner and next-door neighbor, that said we have gone from free trade to obnoxious protectionism.
Congress reaches another temporary funding deal to avoid a shutdown until February 18, 2022. This allows the games to continue as demonstrated by the Senate vote where Republican Senators wanted to stop vaccine mandates. There is some indication that vaccinations are increasing due to Omicron. Anti-vaxxers may be relenting and exercising common sense and not their Constitutional Right to ignorance.
Bob Dole passed and a caption in the New York Times found his essence. He quote “embodied shared values in Washington.” We need to be mature enough to see that as a value.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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