Washington Insider Greg Valliere On Controlling Inflation, Deficit Spending, the Biden Agenda, and the Road to 2024
Now that one of the most contentious presidential elections in history is behind us, it’s finally time to start thinking about … the next round of elections!
According to our longtime friend Greg Valliere, Washington’s political pros are already looking ahead to the 2022 midterms. And that long-term perspective is already having a major impact on Joe Biden’s agenda for the first hundred days of his presidency, as well as the financial markets and the battle against COVID-19.
We’re so happy to welcome Greg Valliere back for this episode of Keen on Retirement. Greg is the Chief U.S. Policy Strategist at AGF Investments, a global asset management firm headquartered in Toronto. He’s also a frequent guest on CNN, Fox Business, Bloomberg Radio and TV, and CBS Radio News, and is frequently quoted in The Wall Street Journal, Barron's and The Washington Post.
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1. “You can't continue this forever.”
While negotiations are ongoing for President Biden’s COVID-19 stimulus package, Greg says that the floor for the bill is probably $1.5 trillion. However, Greg also believes that many Democrats in Congress want to follow that bill with a large green infrastructure bill and perhaps another round of stimulus spending. I wrote a blog post recently about proponents of Modern Monetary Theory (MMT), who would argue that countries like the U.S. that control their own currency shouldn’t worry about printing more money, especially in a crisis. But Greg worries about taking this idea too far.
“We could overdo it on both monetary and fiscal stimulus,” Greg warns. “And I think that could have implications for inflation, for interest rates, and for GDP growth. I think the deficit in this year could be way over $3 trillion. When you start looking at numbers like that, you have to worry that by the middle of this decade, our total debt as a country will be well over $30 trillion. That may be accommodated now by the Federal Reserve, but we can't continue at this pace. I think that you could overheat the economy. I think at some point in the spring or summer, there's going to be a very vigorous debate on whether the country can accommodate that. It's true deficits are benign right now, but you can't continue this forever because at some point, as the country gets older, we'll have a demographic issue. And at some point, we're going to have to service the debt. And I think that servicing cost by the end of this decade is going to be a problem.”
2. “The one to watch for is fossil fuels.”
Greg believes that the early days of the Biden Administration are going to be so focused on COVID-19 vaccination and stimulus relief that we might not see as many radical changes as some folks were predicting. Don’t expect any big breakthroughs on trade with China or easing tensions with Iran. Greg also believes that if the conversation in Congress does roll around to taxes this summer, proposed increases probably won’t be as burdensome as many pundits feared.
Greg also doesn’t think that President Biden and the Democratic Congress are going to break up big tech companies any time soon, although they might be tougher on antitrust issues if a Google or Facebook tries to buy a smaller upstart. But he does expect more aggressive action on energy policy, which we’ve already seen via some executive orders from President Biden.
“When it comes to tough regulations, the one to watch for is fossil fuels,” Greg says. “We've already seen the Biden administration re-enter the Paris Climate Accord. We've seen them kill the Keystone Pipeline, which was very controversial in Canada. We've seen the Biden administration banning all new drilling on federal land or water. And I think that will persist. So, you see an administration that's really going to go after fossil fuels, coal, oil, natural gas, and if there's any money for energy, it's going to be for renewable energies.”
3. “We could have a red-hot economy.”
Until the dust settles on some of President Biden’s proposals and actual legislation starts working through Congress, we remain in an uncertain moment. Greg notes that while he’s worried about inflation in the long run, right now things appear to be holding steady. He does suggest that the housing markets in some pockets of the country are worth monitoring. And while the financial markets could be running a bit hot at the moment, Greg believes that the eventual stimulus package and reopening of the country will be good for economic growth, especially in the second half of the year.
“We're starting to make real progress on inoculations,” Greg says. “I'd be naïve to say we've defeated COVID-19 decisively, but I think by the time we get into the summer things will look a lot more promising. I think this economy could be just gangbusters. We could have a red-hot economy with the vaccine in place, with an exceptionally accommodating Federal Reserve, and with Congress spending money like there's no tomorrow.”
Whenever we discuss current events on our show, we caution folks against making any big moves with their portfolios because of things that could happen. And that’s even true when we’re hearing from an expert of Greg Valliere’s stature. I hope that this conversation cuts through the noise a little bit and gives you information you can trust. And I also hope it gives you some perspective on the issues and data that we’re constantly monitoring at Keen Wealth so that we can help our clients make the best decisions for the finances, their families, and their futures.
Thanks again to Greg, I hope we can have him back on the show soon.
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Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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