Democrats look ready to abandon their plans to pass President Biden’s flagship Build Back Better (BBB) plan this year.
Democrats will reportedly focus on voting rights legislation in lieu of the ambitious social spending plan. They simply don’t have the 50 votes in the Senate that they need (mostly because the pesky senators from Arizona and West Virginia are not jazzed about its potential impacts on inflation.) 📈 📈
There are fair odds that the Democrats will revisit the social spending bill later. That is, after they change Senate rules, whip their party into shape on other bills, and pass a budget that doesn’t suck. However, these changes strain the possibility of passing BBB during this Congressional term — much to the amusement of Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who advocated against BBB.
For most investors, this situation means it’s probable that the current tax regime will be unaffected for tax year 2022. It also means that a controversial change to the wash sale rule (which would have involved crypto and commodities) might get pushed back, allowing scores of crypto maxis to tax loss harvest their 50% losses against 42,000% gains (just saying!)
In a practical sense, the inaction of Democrats has weakened their case to win a majority in the midterms in November 2022. Their odds, which were appraised as a coin-toss by users on PredictIt just weeks ago, have diverged. Bettors put their odds at re-securing both houses of Congress at just 12%:
Though bettors aren’t necessarily the most meaningful indicator of who will win or lose an election, it’s a classic example of “put your money where your mouth is” … and it’s easy to see why bettors wouldn’t be bullish on Democrats. They have inherited a tenuous sociopolitical situation, struggled to pass meaningful legislation, and have been unable to respond to Americans’ concerns about inflation and sky-high energy costs. Not all of that is their problem (JPow is really making or breaking their election odds here, huh?), but a large portion of it is.
Ultimately, when you pair bettor sentiment with popular opinion polls, the factors that exist (including rising Covid cases) make it look like Democrats stand to lose in 2022. That means that changes to the tax regime, and effective progressive legislation, might not come to fruition after all.