Biden stimulus not a dud

Morgan Stanley with a note that I agree with:

In our view, the announcement of a bipartisan infrastructure plan doesn’t augur a more modest price tag for fiscal spending. Rather, it underscores that the fiscal policy is better described as ‘all or nothing’. We note that several key Democratic Senators have already described their support for the bipartisan plan as conditional on the coincident passage of a larger, Democrats-driven reconciliation package that would include environmental, social, and tax provisions. This process would also, in our view, fold in much of the planned spending that does not have sufficient backing to be included in the bipartisan plan. This dynamic linking the partisan and bipartisan efforts into a simultaneous ‘dual path’ strategy drives a key observation: no deal is likely without it adding up to a more sizeable deal overall vs. the reported bipartisan proposal. Hence, our base case for deficit expansion and tax changes remains, but risks are skewed toward in action.

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