What now for Biden's stimulus proposal?
It will be a major test for Biden to see if he can gather bipartisan support in the weeks ahead
Now that we've gotten what we need to know about the $1.9 trillion proposal. What is next on the agenda for the market to look forward to?
The key timeline to watch here will be the end of March - that is when a number of special unemployment benefits in the US will expire. Hence, the market will have many more weeks and months to focus on all this stimulus talk in Congress.
First off, the package should at least pass the House rather easily but it will prove to be more of a challenge in the Senate as the Democrats hold the slimmest of majorities there (50-50 with the tie broken by US vice president-elect, Kamala Harris).
A good summary of the situation via ING (h/t @ AWMCheung):
The package should get through the House relatively smoothly, but there will be more issues in the Senate.
Given the hostility in the Republican party for money for state and local government, which won't be calmed in any way by the additional acrimony generated by impeachment proceedings, this part could struggle. Many Republicans have also shifted to a more fiscally conservative stance since the election, with some likely to question the size of the unemployment benefit payments and additional cheques.
Key planks of the program will therefore come up against the Senate filibuster. This requires 60 members to approve ending a debate and moving to a vote on a piece of legislation and if there aren't ten Republicans prepared to back the package it may have to be broken into component parts.
There is a route around the filibuster. Some of the package would pass on a majority vote in the Senate if it is put through the more tortuous budget reconciliation process. However, this procedure is not available for everything, including the money for local and state governments. Consequently, it may need to be amended or diluted to get enough Republican support.