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Enron Mail |
Based on meetings in Washington and New York through yesterday and updates early this morning, here is what we know on the stimulus bill debate. The prominence of the is debate will increase and intensify throughout the month and is quickly shaping up to be a critical measure of post-9/11 bipartisanship and a prelude to the 2002 mid-term elections. Contact Brendan Fitzsimmons at x5-4763 for follow-up.
Enron Global Markets Competitive Analysis HILL STIMULUS BILL UPDATE: 11/02/01 SUMMARY Timing: Bush wants a stimulus bill by Thanksgiving, but that is looking highly unlikely without a major (and unlikely) capitulation on the Hill; even a bill by Christmas is less likely than it was just a few days ago, meaning any rebate checks wouldn't come until well into '02; and there remains a risk that nothing is done this year Next Week - Fed and Senate: Sources report that pessimism concerning passage of fiscal stimulus increases the likelihood that Greenspan pushes for a 50bp cut on Tuesday. Expect a partisan mark-up from Baucus' Senate Fin. Committee next Tuesday or Wednesday, setting the stage for stalemate and very public political recriminations. Data Pressure: It is too early to tell whether the massive jump in unemployment rate to 5.4% will change the atmospherics surrounding this week's talks, but before the number it was clear that the extreme partisanship will delay passage and make the final cost of the package more expensive as all sides try to "buy-in" votes during final Conference Committee negotiations Conference Outlook: If a compromise bill is reached, expect final numbers to run higher than $100B as more of each bill gets into the final conference bill REPORT Hill and White House Bush's speech on Wednesday was the opening move in the White House's plan to pressure for a compromise stimulus bill; but WH message and the Republican chorus that followed have only provoked stronger resistance from Daschle and the Dems on core healthcare, unemployment provisions Yesterday's White House discussions with Senators Baucus and Grassley went nowhere. The White House is now refusing to meet with them prior to Senate action. Senate Finance Committee leadership is planning for a "highly partisan" session on Tuesday or Wednesday next week in attempt to pass the bill that Senator Baucus drafted and released last week. Bush must spend more political capital and give stimulus greater visibility, priority in order to get House and Senate compromise; expect Treasury to join the fray against Daschle warning of minimal stimulus and maximum danger for future budgets well into the future Daschle is digging-in (and with Senate Finance chair Baucus still standing loyal), buoyed by focus groups and polling showing that standing up to the House Republicans' tax-cut weighted bill is a winning message The Senate bill has several elements that are strongly rejected by the White House and the House Republicans including the extended health care facilities under COBRA. This was the key to administration attempts to find a compromise and that has now failed. Although there may be legislation passed by the Senate Finance Committee during next week's mark-up, it will be passed on an exceptionally rigid party line vote and the entrenched positions on all sides will be further reinforced. Macroeconomy Fed Tuesday: Treasury's announced plans to end 30yr bonds and today's employment report will strengthen pricing of 50bp on Tuesday and a further 25bp December 11 and will continue to direct attention back to the back and forth between the Hill and WH. After Fed meeting focus will be on O'Neill and Lindsey within the Administration Waiting on Washington: Heightened sense of immediacy as US macro data continues to confirm recession: with a $100B stimulus bill already priced in to the market, delay or failure in passing a bill could have strong negative effects. This week's raft of weak data, particularly today's confirmed weak employment report, will increase the pressure for movement on a stimulus bill
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