Webinar on US government spending and potential economic and market scenarios based on the outcome of President Biden's infrastructure and Build Back Better legislative push.

1. GOVT SPENDING
28 OCT 2021

2. WAR ROOM
Idea Generation
Macro Coaching
Scenario Updates
HiddenLevers runs on SCENARIOS like Instagram runs on PHOTOS
Fed Underwrites Economy
Climate Disasters
Real Estate “Post” Covid
COVID 2.0

3. SCENARIO PULSE CHECK
FED TAPER – Earnings beats abound, taper starts in Nov
CHINA RECKONING – Evergrande paying bills

4. sources: HiddenLevers, FRED, FRED
GOVT SPENDING DEBT / GDP
Debt/GDP +0.7% annually from 2013-2020
--> both parties are spenders
Pandemic increased Debt/GDP by 28% in Q1 2020
GDP recovery now taking Debt/GDP back down
Federal Debt
USD Trillions
+6%
US GDP Growth
+12.2%
-9.5%
+28%
US DEBT / GDP
+14%

5. sources: HiddenLevers, USASpending.gov, OMB.gov, Political Tourist
GOVT SPENDING 2021 vs 2019 SNAPSHOT
24% INCOME SECURITY
SOCIAL SECURITY
HEALTH
DEFENSE
MEDICARE
17%
12%
11%
10%

6. sources: HiddenLevers, Senate, WhiteHouse, Politico
GOVT SPENDING BIDENOMICS
Infrastructure Bill Build Back Better Bill
• $1.2 Trillion
• $550 Billion in New Govt Spending
• ROI more certain
• ROI less certain after 2020-21 UBI experiments
• Tax incentives for renewable energy investment
• Universal pre-kindergarten
• Extend child tax credits ($3,600 per child)
• Affordable Care Act Expansion
• Expand in-home care for seniors
Item Cost
Renewable Energy $555B
Pre-K (2 years) $400B
Child Tax Credit (1 year) $200B
Housing $150B
Home Care $150B
Biggest Line Items

7. sources: HiddenLevers, WhiteHouse, Whitehouse
GOVT SPENDING WHO PAYS?
4.046
T
0
6.818
T
2.772
T
OUTLAYS
DEFICIT
FY 2021 Federal Budget
New Spending Price Tag
$550B Infrastructure
$1.85T Build Back Better
$240B per year in funding needed ($2.4T over 10 years)
TAX HIKES STILL ON THE TABLE REVENUE
15% min corporate income tax $325B
Stock buybacks tax $125B
Outsourcing reform $350B
5% Surcharge on $10M + earners $230B
Close Medicare tax loopholes $250B
Limit Business Losses for Wealthy $170B
IRS Enforcement $400B
Prescription drugs rebate repeal $145B
TOTAL $ 2 Trillion
REVENUES
$2.4
Trillion

8. sources: HiddenLevers, Fox News,
GOVT SPENDING INFLATION vs STIMULUS
2009 – funds used to backstop financial system, no velocity or demand increase
Fed + Treasury borrowing heavily since GFC but why no inflation until now?
2021 – funds used to put money in people’s pockets, increases demand

9. sources: HiddenLevers, NY Times
GOVT SPENDING INFLATION vs STIMULUS
Climate-related infrastructure
line items eliminated, now
grouped with social spending
BIPARTISAN PLAN – $1.2 TRILLLION
BIDEN PROPOSAL – $2.6 TRILLLION

10. GOVT SPENDING GRIDLOCK = GOOD
Bush 41 / Clinton / Obama / Trump – All experienced Year 3 gridlock and positive market returns
H.W Bush / Dem House
+ 49%
Clinton / GOP House
+ 112%
Obama / GOP House
+ 97%
sources: HiddenLevers, Wikipedia
What happened when there was no gridlock?
POTUS No Gridlock Era Crazy Spending
BIDEN 2021-22 TBD
TRUMP 2017-18 Tax Cut Deficits
OBAMA 2009-10
$985B USD stimulus
Obamacare
GW BUSH 2003-07
Homeland Security
Iraq + Afghanistan
CLINTON 1993-94 Nada
Trump / Dem House
+ 38%

11. GOVT SPENDING GOOD
No reason for
infrastructure stall
$2.4 trillion is 10%
boost to US economy
Inflation not
correlated with deficit
Bidenomics
Drives Growth

12. GOVT SPENDING BASELINE
Senator Manchin gutting
social + climate package
Senator Sinema gutting
Biden tax proposals
Dem unity on
15% corp min tax
No Tax Changes
for HNW

13. GOVT SPENDING BAD
Progressives risking
whole Biden agenda
Infrastructure bill delays
already causing harm
Cyclicals + Alt Energy
rally comes unglued
Infrastructure
Cancelled
THE REAL
POWER

14. GOVT SPENDING BLACKSWAN
Debt Ceiling
Default
Technical default not
unprecedented
No resolution in sight
10y yields
likely decrease
sources: WashingtonPost, WSJ
US defaulted,
leaving gold
standard
1862
1933
1968
1971
1979

15. GOVT SPENDING HISTORICAL COMP
S&P Downgrade
Egan-Jones
Downgrade
-18.8%
+31.5%
US Equities
-18.8%
7 months to recover
20-Year Bonds
+31.5%
Global flight to safety
Downgrade
Ratings agencies criticized US
politicians AFTER bringing
USA to brink of default on
debt ceiling showdown.
US Treasury yields went
lower, as demand increased
despite the downgrade.
sources: HiddenLevers, Wikipedia
US Debt Downgrade
10 Years On

16. GOOD
S+P 500
3860
-15 %
S+P 500
5000
+10 %
S+P 500
4800
+5%
UGLY
PROGRESSIVES DON’T GIVE
WAY, CYCLICALS + ALT
ENERGY SECTORS UNWIND
$2.4T IN INFRASTRUCTURE +
SOCIAL PROGRAMS PROVIDE
10% GDP BOOST
BIDEN TAX HIKES KILLED BY
SWING STATE DEMS
GOVT SPENDING MACRO RISK PARITY
BASELINE
No Tax Changes
for HNW
CPI
5.38
FLAT
CPI
6.15
+.77
CPI
4.0
-1.38
Bidenomics
Drives Growth
Infrastructure
Cancelled
GDP
2.5%
+0.5 %
GDP
3%
+1.0 %
GDP
0.5%
-1.5 %

17. Climate Spending is Infrastructure, not inflationary
Most pre-election tax hikes are off the table
Debt/GDP falling as economy recovers
Individual politicians have tons of power in razor
thin majorities
GOVT SPENDING WHAT TO SAY

18. NOVEMBER FUTURE OF ENERGY