Today Pelosi has upped the rhetoric against Senate and the Trump administration rushing to appoint a new justice. “We have our options. We have arrows in our quiver that I’m not about to discuss right now, but the fact is we have a big challenge in our country." What are these quivers? What implications might it have on the markets next week?
Quiver 1 (Government Shut Down): Last week negotiations over congressional funding fell through, leaving the Congress vulnerable to a shut down on Oct 1. Pelosi has the option to stall negotiations and allow congress to shut down preventing the senate from appointing a new justice.
- Impact if used: Very Bear. Government shutdown would severely hamper the likelihood of getting a stimulus bill passed in Sept or Oct. With no recourse for fiscal aid from congress, the onus will be put back to Fed.
- Likelihood: Very Low. This morning Pelosi was asked precisely this scenario. She responded: "None of has interest shutting down the government. That has such a harmful and painful impact on so many people in our country. So, I hope we can just proceed with that (the negotiations). There is some enthusiasm from some exuberant, the leftist say 'let's use that', but we're not going to be shutting down government."
- My take: I think it is unlikely and undesirable. Consider this: Pelosi shuts government down --> Trump + republicans up the rhetoric against Democrats for shutting down government during such dire times like the pandemic --> Pelosi has two options at this point A. Negotiate with Trump to give him a relief bill with direct stimulus checks but no new justice appointee B. Keep government closed while republicans get ahead with lambasting the democrats who shut congress down during an election year. Not in her best interest.
Quiver 2 (Impeach Trump again): Impeachment is initiated in the House and finalized in the Senate. Lots of fresh news have come up since last year's impeachment proceedings, most notable were the Woodward testimony where it was revealed Trump new about the deadliness of Coronavirus but deliberately told the American people to not wear masks and not worry. Nancy Pelosi can start an impeachment hearing to delay all congressional processes and muddle the appointment timeline.
- Impact if used: Bear. The government won't be shut down at the very least. A possibility for a relief bill, therefore, is not zero. That being said, lots of political good-will will fall between Trump administration, Senate Republicans, and House Democrats. Spirit of compromise will go down and logistically, things will move much slower in congress. Will congress act pragmatically or falter in their political battles?
- Likelihood: Very Low. When questioned about impeaching the president, Pelosi replied: "Well, we have our options." She doesn't seem ardently opposed to the idea as shutting down congress, but note it doesn't seem like she's leans positively regarding that course of action.
- My take: Last impeachment cycle, what did the democrats gain? President wasn't removed. Trump's base became more energized and emboldened. Polls were neutral to lower for Democrats. Granted, there's new information possibly worthy of impeachment, but impeachments are a political tool. Even if the facts align, if political wills do not align it will get nowhere. BUT, the goal isn't to remove Trump, it is to slow down congress. This will come at a political toll, give fresh new ammo to the Republicans to use going into the race (Democrats use impeachment to just stall, they're unfair, sore-losers etc). Pelosi likely knows a second impeachment of Trump with an obvious end-result and even more obvious political aim that isn't actual removal will not leave the Democrats unscathed. Does she want that risk going into the election? I think not.
Quiver 3 (Impeach Barr): Lots of accusations against Barr has come up, and this could be the prime time to impeach him. Kill two birds with one stone. Like impeaching trump, this will stymie congress and likely halt the appointment of a new justice, but the stalling won't be as effective as Quiver 2.
- Impact if used: Slightly Bear. Less intense. Less work. Less stalling. It's Quiver 2 Lite. As such, it won't hamper relief bill process as much as the first two quivers.
- Likelihood: Neutral. Definitely less effective but less of a gamble. It's worth a shot with huge upside (no new appointee) with low downside. The only thing we should consider is the opportunity cost: is there a better use for their political capital?
- My take: If Pelosi has no better option to take, she might consider this. I believe she might do this just to signal to the voting base the democrats are trying something. It might work, and if it doesn't they'll deal with it post-election with a (hopefully) Democratic white house and congress.
Quiver 4 (Leverage Relief Bill Negotiations): Trump wants direct checks before the election, so much so he has noted he is willing to pass an executive action for just the stimulus checks with the remaining funds from the first stimulus bill. Luck would have it, a bi-partisan caucus (the problem-solvers caucus) created a 1.5 billion relief package with 2-3 stimulus checks. Pelosi was supposed to negotiate this this weekend. Perhaps Pelosi will leverage this to prevent Trump from appointing a new justice?
- Impact if used: Neutral. Pelosi has already signaled her unwillingness to come down from 2.2 trillion dollars Heroes Act, so if this leverage doesn't go through, not much would change. Perhaps they put a new justice appointment on the table for negotiations, but the scale is just too different.
- Likelihood: Low. You have to ask, will Trump forgo appointing a new judge for a few democratic concessions on a relief bill? No way. The backlash from his base would be political suicide. You can't negotiate a prize like appointing a new SCOTUS for something like a better relief bill. Heck, Trump still has the option to attempt to provide stimulus checks via executive action (harder and considerably less impactful without other provisions a relief bill would provide).
- My take: Currently, I don't see this happening. But I gave it a "Low" rating because there is a real scenario that could change the chances of this: market crash, depression, or recession. Trump has tied the success of his presidency with the success of the economy, with that in jeopardy the relief bill might rise to the same importance as appointing a new SCOTUS. This could make him more willing to trade tit-for-tat. Still, I take it as a very unlikely scenario.
Quiver 5 (Nothing): Doing nothing to prevent the nomination beyond the bare minimum (attempt to convince 2 more republicans to vote against and censure the hypocrisy of the republicans) is a real option here. Take the high road, breed fear into their voting base about how key rights are in danger: abortion rights, obamacare, affirmative action, etc. Instead of fixing it now, they profit from the political fear to win the election and change it once Biden is elected. (edited) 3:41
- Impact if used: Neutral. This situation won't make it any more likely to pass a relief bill, but it won't hurt it either beyond the already-fraught tensions brought on by Ginsberg's death.
- Likelihood: High. The democrats have quite a bit to gain from this. They can make displays of objection with no real teeth behind it to signal they are trying, while spelling out the liberal-Armageddon that will ensue if Trump wins and gets to keep the SCOTUS majority conservative. I can see them shift the narrative to them increasing the SCOTUS justice count or try and repeal the appointees once Biden gets elected. This is high risk, moderate reward. Risk - they allow conservative nominee and if Trump wins this will be catastrophic / Reward - they use the fear to get an extra edge in elections and make necessary changes post Biden.
- My take: This is what I think is likely to happen. These "other quivers" don't seem too politically pragmatic. Whether you like Pelosi or not, she is a seasoned politician with a powerful support staff. They know it is unlikely they will be able to stop the nomination without some huge political pushback, and the risk might not be worth it.
Final Thoughts: This morning interview with Pelosi was supposed to be an update on relief bill negotiations with the white house, instead the entire interview was about Ginsberg. This signals where congress is likely to invest the bulk of their political capital in the upcoming weeks. With the relief bill taking a back seat, political tensions further exacerbated, and a very contentious election year, I am not too hopeful Congress will pass something before the elections. The buck was passed to Congress when JPowell last spoke, now with Ginsberg's death it is likely back in his court. If anything, September/October is looking quite volatile, with likely bearish pressure.
Submitted September 20, 2020 at 07:23PM by LudoSum https://ift.tt/2ZS2ciI
