Wall Street urges investors to prepare

Major Wall Street brokerages are urging clients to look past Democratic infighting and prepare for a torrent of new government spending as House Speaker Nancy Pelosi brings two historic measures up for a vote.

Strategists say that moderate Democrats hoping to persuade Pelosi, D-Calif., to vote on the bipartisan infrastructure bill before a $3.5 trillion budget resolution will ultimately concede for fear of risking their reelection chances in 2022.

“Our base case has been and remains that Congress will approve” a significant expansion of fiscal policy, Morgan Stanley’s head of public policy, Michael Zezas, wrote in a note published Monday.

“Democratic leadership is behaving as if they’ve made the calculation that neither bill has the votes to pass independently of the other one,” he added. “Our base case assumes that this reality ultimately persuades the group of House moderates to support the budget resolution vote and allow the dual track process to continue, though perhaps not without some attendant headlines and/or modest concession.”

Cornerstone Macro, another Wall Street research firm, reinforced Morgan Stanley’s optimism on both Democratic initiatives with some early-week humor.

“Trivia question. Name a top Democratic presidential priority House Democratic moderates have killed in the last four decades?” Cornerstone’s strategists asked their clients. “It’s a trick question. There aren’t any.”

Both firms say it’s unlikely a group of nine centrist Democrats will follow through on a threat to hold up President Joe Biden’s $3.5 trillion package of health-care, education and climate provisions currently being drafted.

Those bets will be tested later Monday, when Pelosi is expected to hold a key procedural vote that would advance both plans according to a specific, but undisclosed, timeline. Representatives return to Washington this week after a brief August break to consider both bills, which the Senate approved earlier this month.

The latest standoff between moderate and progressive Democrats comes after the nine centrists penned a letter last week that informed Pelosi that they wouldn’t support the $3.5 trillion budget resolution plan before the chamber passes the infrastructure bill. 

Rep. Josh Gottheimer, one of the lawmakers who called for an expedited vote on the bipartisan plan, said Monday that lawmakers shouldn’t wait weeks for House progressives to finalize the budget framework to vote on improvements to the nation’s highways.

The New Jersey Democrat reiterated that he’s in favor of a reconciliation package but said that he would rather enact projects to fix infrastructure before being bogged down for months as the chamber haggles over a bill that combats climate change and poverty.

“We’ve got to get infrastructure done. The…