Skip to main content
logo
  • Investment Strategies

    Investment Options

    • Alternatives
    • Beta Strategies
    • Equities
    • Fixed Income
    • Multi-Asset Solutions

    Capabilities & Solutions

    • Pension Strategy & Analytics
    • Global Insurance Solutions
    • Outsourced CIO
    • Sustainable Investing
  • Insights

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Guide to Alternatives
    • Market Updates

    Portfolio Insights

    • Portfolio Insights Overview
    • Alternatives
    • Asset Class Views
    • Currency
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Sustainable Investing Insights
    • Strategic Investment Advisory Group
  • Resources
    • Center for Investment Excellence Podcasts
    • Events & Webcasts
    • Insights App
    • Library
    • Market Volatility
    • NEW Morgan Institutional
  • About Us
  • Contact Us
  • English
  • Role
  • Country
  • Morgan Institutional
    Search
    Search
    Menu
    You are about to leave the site Close
    J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
    CONTINUE Go Back
    On the Minds of Investors
    • LinkedIn Twitter Facebook
    12/23/2021
    Is Build Back Better dead?

    Despite harsh words exchanged on BBB earlier this week, it seems unlikely that it is completely dead, and likely that in early 2022 the Democrats could arrive at a compromise to implement some degree of fiscal spending and tax reform.

    Meera Pandit

    Global Market Strategist

    Listen to On the Minds of Investors

    2021-12-23

    This week, hopes of passing the Build Back Better (BBB) Act, the climate and social spending package, were dashed when Senator Joe Manchin of West Virginia said he would not vote for it due to concerns over further stoking inflation and increasing the national debt. Although BBB might be dead in its current form, Senator Manchin proposed his own $1.8 trillion version to the Administration, which still contains funding for universal pre-K, climate measures, and health care enhancements. However, several key elements would be altered, most notably:

    • No extension of the enhancements to the child tax credit (CTC), which provides families with a fully refundable payment of up to $3,600 per year per child. The CTC would revert to a maximum of $2,000 per year per child.

    • Permanent rather than temporary budget scoring. Temporary budget scoring implies a lower price tag, even though many popular items would eventually get extensions, resulting in higher costs. Permanent scoring would give a more realistic estimate, which would likely be grounds to reduce scope of bill.

    •  The substance, although not necessarily the price tag, of climate measures would change to ensure what Senator Manchin calls a more orderly, gradual energy transition.

    These changes could pose headwinds to economic growth. The enhanced child tax credit, implemented as part of the American Rescue Plan, supported consumption, particularly from low income families with higher propensities to spend. More broadly, even though BBB was intended to be deployed over several years, less spending next year in the event that a new version does not pass would exacerbate the fiscal cliff looming. The budget deficit as a share of GDP in 2020 was -14.9%, followed by -12.4% in 2021. The estimate for 2022 from the Congressional Budget Office falls to -4.7%. While this is an improvement in federal finances, these deficits financed the fiscal spending that supported growth during this period. The projected drop in spending serves as a drag on future growth. Yet, a healthy consumer, strong corporate profits, and an inventory rebuild should cushion the cliff effects to some extent.

    One upshot would be that tax reform would be tossed out with fiscal spending as well, which would be a tailwind for earnings for large corporations. It would help the wealthiest households, although would hurt those that could have benefited from an increased SALT deduction included in BBB. However, Senator Manchin did not appear to be against tax reform, and in fact noted he was eager to implement it and roll back provisions from the 2017 Tax Cut and Jobs Act.

    Despite harsh words exchanged on BBB earlier this week, it seems unlikely that it is completely dead, and likely that in early 2022 the Democrats could arrive at a compromise to implement some degree of fiscal spending and tax reform.

    Federal budget surplus/deficit
    % of GDP, 2019 – 2031

    A chart displaying the deferal budget surplus/deficit.

    Source: Congressional Budget Office, J.P. Morgan Asset Management. Estimates are based on the Congressional Budget Office (CBO) July 2021 Update to the Budget and Economic Outlook. Estimated Budgetary Effects of H.R. 5376, the Build Back Better Act, as posted on the website of the House Committee on Rules. Data are as of December 21, 2021.

    09v2212212172323

    EXPLORE MORE

    On the Minds of Investors

    What investment questions are on the minds of investors? Explore the questions investors ask frequently and find answers at J.P. Morgan Asset Management.

    Read more

    Guide to the Markets

    The J.P. Morgan Guide to the Markets illustrates a comprehensive array of market and economic histories, trends and statistics through clear charts and graphs.

    Read more

    Asset Class Views

    Get quarterly commentary and in-depth analysis on equities, fixed income and other asset classes, written by our senior investment teams.

    Read more
    • Economy
    J.P. Morgan Asset Management

    • About us
    • Investment stewardship
    • Privacy policy
    • Cookie policy
    • Binding corporate rules
    • Sitemap
    • Conflicts of interest disclosure
    Opens LinkedIn site in new window
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

    The value of investments may go down as well as up and investors may not get back the full amount invested.

    Copyright 2022 JPMorgan Chase & Co. All rights reserved.