Episode 5

June 9, 2021

Three infrastructure package questions for James 

Steve sits down with James Slotnick, Head of Government Relations at Sun Life, to discuss uncertainty around the U.S. infrastructure package, including the likelihood that it will pass this summer and how it might be financed.

Steve Peacher: Hi everybody thanks for listening in this is Steve Peacher, head of SLC Management, and this is “Three in Five,” where we ask our experts around SLC Management and Sun Life three interesting, relevant questions. And today I'm joined by James Slotnick who's Head of Government Relations at Sun Life. James, thanks for joining me today.

James Slotnick: Yeah, Steve thanks for having me on.

Steve Peacher: The topic today is the infrastructure package that has been introduced by the Biden administration. James, with Congress in session so few days in the summer, do you see that this infrastructure package can actually pass before the August recess?

James Slotnick: Steve it's a tough question and I think really even over the last week or so we've seen movement on this that that shows us no Congress is not going to be able to pass both bills before the August recess, and really the main reason for that is the Senate parliamentarian has recently ruled that Democrats are not going to be able to use the budget reconciliation process again in fiscal year 2021. And so, that means any legislation that wants to move for the rest of this fiscal year through the end of September is going to have to go through regular order, which means you're going to need at least 10 Republicans that want to end debate on a piece of legislation before it can move to that to that for vote. So that the next steps on infrastructure really are can Democrats and Republicans come together on a bipartisan American Jobs Plan version. That is something that the Biden Administration would like to do we've seen Republicans, particularly send our capital really leading the Senate delegation or Senate republican delegation on what they'd like to see for infrastructure and so we'll see over the next few weeks if Democrats and Republicans can come together on that more traditional infrastructure package. But it doesn't appear that Republicans are as interested in the American Family Plan at this point. So I think you know a good goal for the Senate, would be to have a bipartisan American Jobs plan passed by the August recess again it's going to be very tough but if we don't see any bipartisan action on that it's not going to be until into October, November once we get into fiscal year 2022 and that budget reconciliation process opens up again that we're going to see infrastructure have a chance to move.

Steve Peacher: Of course, there's a lot of discussion on how you pay for whatever the bill is that passes So what do you think this means for corporate and individual tax increases?

James Slotnick: Sure, well, certainly if the Republicans, are able to work out a bipartisan package, it is, is not going to include either corporate or individual tax increases. They've proposed a number of ideas of how to find money from previous packages, or maybe things like indexing the gas tax, but if things break down, which is unfortunately a likely possibility, you are going to see Democrats look to increase taxes and again when you think about the most likely part of the package that's able to pass and that's the more traditional package, the American Jobs Plan, that's financed through corporate income tax increases. So it's more likely that we would see corporate income tax rate probably not 28% probably more closer to 25% rate, maybe some changes to multinationals, but those individual income tax rate increases, those right now are tied to the American Families Plan that the more human infrastructure part, so it feels like if you were trying to game plan what's most likely to go through, a corporate income tax increase seems more likely than individual income tax increase least at this point.

Steve Peacher: You know legislation rarely happens in a vacuum, so are there other agenda items floating out there that could impact infrastructure?

James Slotnick: Yeah, I hate to scare all of us to go back in time, but unfortunately we are going to see the debt ceiling return we haven't debt ceiling return, we haven’t had to deal with that for the last few years. You may remember Congress and President Trump essentially suspended it for two years, which, which is not abnormal it's been suspended in the past as well, but that is that is going to come back this summer. Treasury has some maneuvers that they can that they can use to increase the amount of time before we hit that but at some point, this summer, this fall we're going to need to see the debt ceiling increase. And that, as you remember there's a lot of theater and high in debt ceiling increases and right or wrong Republicans have already signaled particularly Senate Republicans, that they are not going to be as fast to raise the debt ceiling and they'd like to see some offsetting cuts to if they're going to put push that forward. So, what's interesting is, if you think back to 2011, you know seems like a million years ago, but then a Vice President Biden was very involved in increasing the debt ceiling. And that's when we saw the S&P downgrade the debt rating for the U.S., so hopefully we won't have a repeated that but, again, President Biden and Vice President Biden has a lot of experience in negotiating debt ceiling increases, but that certainly is going to have an impact, as we get closer to that August recess the sentence trying to finish up their infrastructure package, the debt ceiling hanging over everyone's head is going to make it interesting, to say the least.

Steve Peacher: Well, I was just thinking about that episode in the markets around that downgrade of the U.S. and the debt ceiling in 2011 as you're making those comments. Well, James thanks for that. One personal question that we like to end with so over the last year we've all been dreaming about where we would go if we could just get out from under the pandemic. So as you've been dreaming about vacations during the pandemic, where is the one place that you wanted to go once everything lifts.

James Slotnick: So, I have two young kids, a nine-year-old daughter Hannah seven-year-old son Henry. And you know they've been amazing and they've had they've had a very difficult year with you know virtual schooling and all those things. And so maybe, this isn't my dream vacation, but one place they absolutely want to go back to is Disney World and, I think, as things settle down, maybe not this summer, but hopefully very, very soon, we can we can take them there again.

Steve Peacher: Oh, you're good man for prioritizing their dream vacation over yours.

James Slotnick: Just in case my wife's listening to this, I have to say that.

Steve Peacher: James thanks so much for your insights and thanks everybody for listening in.

James Slotnick: Thanks Steve.


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